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Exam 13: The Costs of Production

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Question 61

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Variable cost divided by the change in quantity produced is

A) average variable cost.
B) marginal cost.
C) average total cost.
D) None of the above is correct.

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

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Question 62

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Table 13-15 -Refer to Table 13-15. What is average variable cost when output is 50 units?

A) $3.60
B) $4.00
C) $4.40
D) $4.80

E) B) and D)
F) C) and D)

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Question 63

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Scenario 13-13 Christine is an artist who creates custom cookie jars. Her annual revenue from selling the cookie jars is $90,000. The annual explicit costs of the materials used to make the cookie jars are $54,000. -Refer to Scenario 13-13. Christine used $5,000 from her personal savings account to buy pottery tools for her business. The savings account paid 1% annual interest. Christine could earn $6,000 per year as a tax preparer. What is the annual accounting profit of her cookie jar business?

Table 13-7 The Flying Elvis Copter Rides -Refer to Table 13-7. What is the value of O?

What might cause diseconomies of scale?

Describe the relationship between average variable cost and marginal cost.

Scenario 13-6 Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her home-organization services. One spring day, Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce. -Refer to Scenario 13-6. Ziva's accounting profit from farming equals

Sonia opened a yoga studio where she teaches classes and sells yoga clothing. Fixed costs for Sonia's yoga studio include the cost of the (i) tank tops. (ii) wages paid to the other yoga instructors. (iii) lease on the studio space. (iv) insurance that the landlord requires Sonia to carry for the studio.

The marginal product of an input in the production process is the increase in

The average-total-cost curve is unaffected by diminishing marginal product.

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

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm C is experiencing economies of scale.

Harry's Hotdogs is a small street vendor business owned by Harry Huggins. Harry is trying to get a better understanding of his costs by categorizing them as fixed or variable. Which of the following costs are most likely to be considered fixed costs?

The Wacky Widget company has total fixed costs of $100,000 per year. The firm's average variable cost is $10 for 10,000 widgets. At that level of output, the firm's average total costs equal

Scenario 13-17 If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost. -Refer to Scenario 13-17. Farmer Brown's marginal cost of producing 9 units of output (using 2 bags of seed) is

Pete owns a shoe-shine business. Which of the following costs would be implicit costs? (i) shoe polish (ii) rent on the shoe stand (iii) wages Pete could earn delivering newspapers (iv) interest that Pete's money was earning before he spent his savings to set up the shoe-shine business

Table 13-14 -Refer to Table 13-14. What is the fixed cost of production for this firm?

Table 13-15 -Refer to Table 13-15. What is the total fixed cost for this firm?

Table 13-18 -Refer to Table 13-18. What is the total output of four workers?

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?