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Exam 12: The Costs of Production

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Question 201

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The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is

A) an explicit cost.
B) an accounting cost
C) an implicit cost.
D) forgone accounting profit.

E) None of the above
F) A) and D)

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Question 202

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When a firm's long­run average total costs do not vary as output increases, the firm exhibits

A) economies of scale.
B) constant returns to scale.
C) diseconomies of scale.
D) an efficient use of resources.

E) A) and C)
F) A) and D)

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Question 203

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Scenario 13-1 Korie wants to start her own business making custom furniture. She can purchase a factory that costs $400,000. Korie currently has $500,000 in the bank earning 3 percent interest per year. -Refer to Scenario 13-1. Suppose Korie purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Korie's annual opportunity cost of purchasing the factory?

Figure 13-3 -Refer to Figure 13-3. The graph illustrates a typical

If the average total cost curve is falling, what is necessarily true of the marginal cost curve? If the average total cost curve is rising, what is necessarily true of the marginal cost curve?

Table 13-19 -Refer to Table 13-19. What is the average total cost of producing 425 units of output?

Briefly describe why measuring a firm's costs is more complicated than measuring its revenues.

If the total cost curve gets steeper as output increases, the firm is experiencing

Suppose that a worker can produce 100 units of output in 7 hours. In the 8th hour, he can produce 12 units of output. The worker can produce 112 units of output in 8 hours.

Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Murphy can paint five houses per week. What is the maximum total output possible if Eldin hires Murphy?

Trevor's Tire Company produced and sold 500 tires. The average cost of production per tire was $50. Each tire sold for a price of $65. Trevor's Tire Company's total profits are

Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 181 units of output per day when 16 workers are hired, holding other inputs fixed. The marginal product of the 16th worker is

If the marginal cost of producing the fifth unit of output is higher than the marginal cost of producing the fourth unit of output, then at five units of output, average total cost must be rising.

At low levels of production, the firm

For a firm, the relationship between the quantity of inputs and quantity of output is called the

Anya has decided to start her own hair-styling salon. To purchase the necessary equipment, Anya withdrew $10,000 from her savings account, which was earning 3% interest, and borrowed an additional $5,000 from the bank at an interest rate of 8%. What is Anya's annual opportunity cost of the financial capital that has been invested in the business?

Table 13-19 -Refer to Table 13-19. What is the average fixed cost of producing 430 units of output?

Profit is defined as total revenue

Describe how a study group of economics students could experience economies of scale as they study for an economics exam.

Table 13-17 Consider the following table of long-run total cost for four different firms: -Refer to Table 13-17. Which firm has diseconomies of scale over the entire range of output?