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Exam 12: The Costs of Production

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Question 81

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Economies of scale often arise because higher production levels allow specialization among workers.

A) True
B) False

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Question 82

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The average-fixed-cost curve is constant.

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Question 83

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Average total cost reveals how much total cost will change as the firm alters its level of production.

Scenario 13-5 Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000. She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%. -Refer to Scenario 13-5. Emily's explicit cost of capital is

A dairy produces and sells organic milk. Last year it sold 500,000 gallons of milk at a price of $7 per gallon. For last year, the firm's

If long-run average total cost is rising, then the firm is experiencing economies of scale.

Which field of economics studies how the number of firms affects the prices in a market and the efficiency of market outcomes?

Table 13-19 -Refer to Table 13-19. What is the marginal product of the second worker?

Table 13-18 -Refer to Table 13-18. What is the shape of the firm's total­cost curve?

Scenario 13-5 Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000. She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%. -Refer to Scenario 13-5. Emily's total opportunity cost of capital is

Jane was a partner at a law firm earning $223,000 per year. She left the firm to open her own law practice. In the first year of business she generated revenues of $347,000 and incurred explicit costs of $163,000. Jane's economic profit from her first year in her own practice is

Which of the following statements about a production function is correct for a firm that uses labor to produce output?

Suppose that a firm's long­run average total costs of producing custom wooden picnic tables is $300 when it produces 10,000 tables and $325 when it produces 11,000 tables. For this range of output, the firm is experiencing

When a firm is making a profit-maximizing production decision, which of the following principles of economics is likely to be most important to the firm's decision?

Accountants keep track of the money that flows into and out of firms.

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. Which of the curves is most likely to characterize the short-run average total cost curve of the smallest factory?

Accounting profit is greater than or equal to economic profit.

When a firm's only variable input is labor, then the slope of the production function measures the

Table 13-2 -Refer to Table 13-2. What is the marginal product of the second worker?

Scenario 13-9 Ellie has been working for an engineering firm and earning an annual salary of $80,000. She decides to open her own engineering business. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a $35,000 salary for a secretary/bookkeeper. Ellie will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500. -Refer to Scenario 13-9. Ellie's annual economic costs will equal