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Exam 13: The Costs of Production

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Question 111

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Figure 13-1 ​ ​ ​ -Refer to Figure 13-1. As the number of workers increases,

A) marginal product decreases.
B) total output decreases.
C) marginal product increases but at a decreasing rate.
D) total output increases at an increasing rate.

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

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Question 112

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Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's

A) total revenue.
B) explicit costs.
C) implicit costs.
D) marginal costs.

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

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Question 113

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Scenario 13-3 Diamond is an organic brocolli farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Diamond helps people organize their houses. Due to the popularity of her home-organization services, Farmer Diamond has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Diamond charges $45 an hour for her home-organization services. One spring day, Diamond spends 8 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of brocolli. -Refer to Scenario 13-3. What is the total opportunity cost of the day that Farmer Diamond spent in the field planting brocolli?

The field of industrial organization addresses how the number of firms affects prices in a market and the efficiency of the market outcome.

Omar's Car Wash has average variable costs of $4 and average fixed costs of $5 when it produces 200 units of output (car washes) . The firm's total cost is

Describe the relationship between average variable cost and marginal cost.

Table 13-9 ​ ​ $\begin{array} { | c | c | c | c | } \hline \begin{array} { c } \text { Labor } \\\text { (Number of w orkers) }\end{array} & \begin{array} { c } \text { Output } \\\text { (Units) }\end{array} & \begin{array} { c } \text { Fixed Cost } \\\text { (Dollars) }\end{array} & \begin{array} { c } \text { Variable Cost } \\\text { (Dollars) }\end{array} \\\hline 0 & 0 & 30 & 0 \\\hline 1 & 100 & 30 & 15 \\\hline 2 & 180 & 30 & 30 \\\hline 3 & 240 & 30 & 45 \\\hline 4 & 280 & 30 & 60 \\\hline 5 & 300 & 30 & 75 \\\hline\end{array}$ -Refer to Table 13-9. For the firm whose production function and costs are specified in the table, its average-variable-cost curve is

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

Average total cost is very high when a small amount of output is produced because

Table 13-15 $\begin{array} { | l | l | l | l | l | } \hline \text { Labor } & \text { Output } & \begin{array} { l } \text { Marginal } \\\text { Product }\end{array} & \begin{array} { l } \text { Variable } \\\text { Cost }\end{array} & \begin{array} { l } \text { Fixed } \\\text { Cost }\end{array} \\\hline 0 & 0 & - & \$ 0 & \$ 5 \\\hline 1 & 100 & 100 & \$ 5 & \$ 5 \\\hline 2 & 250 & & \$ 10 & \$ 5 \\\hline 3 & 350 & & \$ 15 & \$ 5 \\\hline 4 & & 50 & \$ 20 & \$ 5 \\\hline 5 & & 25 & \$ 25 & \$ 5 \\\hline 6 & 430 & & \$ 30 & \$ 5 \\\hline\end{array}$ -Refer to Table 13-15. What is the shape of the marginal-cost curve?

Table 13-15 $\begin{array} { | l | l | l | l | l | } \hline \text { Labor } & \text { Output } & \begin{array} { l } \text { Marginal } \\\text { Product }\end{array} & \begin{array} { l } \text { Variable } \\\text { Cost }\end{array} & \begin{array} { l } \text { Fixed } \\\text { Cost }\end{array} \\\hline 0 & 0 & - & \$ 0 & \$ 5 \\\hline 1 & 100 & 100 & \$ 5 & \$ 5 \\\hline 2 & 250 & & \$ 10 & \$ 5 \\\hline 3 & 350 & & \$ 15 & \$ 5 \\\hline 4 & & 50 & \$ 20 & \$ 5 \\\hline 5 & & 25 & \$ 25 & \$ 5 \\\hline 6 & 430 & & \$ 30 & \$ 5 \\\hline\end{array}$ -Refer to Table 13-15. What is the marginal product of the sixth worker?

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

Tiana sells 275 candy bars at $0.50 each. Her total costs are $125. Her profits are

Figure 13-4 ​ Figure 1 Figure 2 Figure 3 Figure 4 ​ ​ -Refer to Figure 13-4. Which of the figures represents the total cost curve for a typical firm?

How would a production function that exhibits decreasing marginal product affect the shape of the total cost curve? Explain or draw a graph.

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

Total revenue equals

Figure 13-2 ​ -Refer to Figure 13-2. Curve D represents which type of cost curve?

Describe the relationship between average total cost and marginal cost.

The fact that many inputs are fixed in the short run but variable in the long run has little impact on the firm's cost curves.