ecn production costs - Assignment Essays

question

Economists distinguish between the short run and the long run as follows:

answer

In the long run, all resources are variable; in the short run, at least one resource is fixed

question

Interest payments are ________.

answer

explicit costs

question

Economies of scale may arise from which of the following activities?

answer

Doubling promotional expenses to expand sale more than proportionately.

Having a larger retail space can expand sales more than proportionately.

question

Which of the following is most likely to be a fixed cost?

answer

Mortgage payments

question

Which of the following are forms of labor?

answer

the natural ability of a worker

the skills a worker has acquired

question

Capital is a factor of production that has been produced for use in the production of other goods and services. Which of the following are examples of capital?

answer

airports

computer software

question

If average total cost is declining, ________.

answer

The marginal cost must be less than average total cost

question

Implicit costs are ________.

answer

a foregone opportunity to do something else with your resources

question

What are three of factors of production?

answer

labor, capital and natural resources

question

Which is (are) an example of a fixed cost?

answer

Rental costs for a dance studio

(only received partial credit)

question

The upward sloping portion of a long-run cost curve illustrates:

answer

diseconomies to scale

question

A firm had sales revenue of $1 million last year. It spent $600,000 on labor, $150,000 on capital and $200,000 on materials. What was the firm's accounting profit?

answer

$50,000

question

Which of the following are examples of a company's fixed costs:

answer

monthly rent for factory or retail space

question

________ include all of the costs of production that increase with the quantity produced.

answer

Variable costs

question

________ occur when the marginal gain in output diminishes as each additional unit of input is added.

answer

Diminishing marginal returns

question

When a long-run average cost curve illustrates economies to scale it will be:

answer

Downward sloping

question

The term ________ describes a situation where the quantity of output rises, but the average cost of production falls.

answer

economies of scale

question

Economies to scale refers to the ________ where all inputs are being allowed to increase together.

answer

long-run average cost curve.

question

Except for one point, the short run average cost must always be ________ the long run average cost.

answer

greater than

question

Suppose a computer manufacturer is producing in the short run when capital is fixed and the only variable factor of production is labor. The change in the quantity of production with the increase in labor is shown in the table below. What does the production function given represent?
L | Q
0 0
1 15
2 28
3 38
4 46
5 52

answer

Decreasing diminishing marginal returns to labor

question

The marginal cost curve is generally ________, because diminishing marginal returns implies that additional units are ________.

answer

upward-sloping; more costly to produce

question

When an owner uses resources they own in a business, that usage should be considered

answer

an implicit cost

question

Salary payments are ________.

answer

explicit costs

question

The WipeOut Ski Company manufactures skis for beginners. Fixed costs are $30. Fill in Table for total cost, average variable cost, average total cost, and marginal cost. Complete the chart by filling in the missing numbers: What is the average variable cost in A?
Q = 2
VC = $25
FC = $30

answer

$12.50

question

Suppose you own a profitable tailoring company that hires two workers. The combined production of the two workers is ten shirts per day. You decide to double the amount of capital and labor and see that the total number of shirts produced each day has increased to 22. This implies that your company is exhibiting ________.

answer

constant returns to scale (incorrect)

question

Which of the following are true statements about natural resources?

answer

natural resources can be used by people to produce goods and services

question

In order to determine ________, the firm's total costs must be divided by the quantity of its output.

answer

average total costs

question

The marginal product of labor is known to be greater than the average product of labor at a given level of employment. The Average Product at this point would be ________.

answer

increasing

question

A production function describes how firms

answer

combine capital, labor and other inputs to create products.

question

Exhibit 7-12 Cost schedule for producing pizza
What is the AVC of 3 pizzas?
Q FC VC TC
0 $ $ $
1 48
2 17
3 27
4 78
5 40
6 64
7 80

answer

question

A firm's opportunity cost of using resources provided by the firm's owners is called:

answer

implicit costs

question

A farm can produce 10,000 bushels of wheat per year with 5 workers and 13,000 bushels with 6 workers. The marginal product of the sixth worker for this farm is:

answer

3,0000 bushels

question

Implicit costs are:

answer

the opportunity costs of using resources owned by the entrepreneur in his/her own business.

question

Diseconomies of scale exist over the range of output for which the long-run average cost curve is:

answer

rising

question

Exhibit 7-12 Cost schedule for producing pizza
What is the ATC of 4 pizzas?
Q FC VC TC
0 $ $ $
1 48
2 17
3 27
4 78
5 40
6 64
7 80

answer

$19.50

question

Which of the following must be true if average total cost is rising?

answer

Marginal cost must be greater than average total cost.

question

The short run is a period of time:

answer

in which a firm uses at least one fixed input.

question

A large aircraft manufacturer, like Boeing, may have a cost advantage over a new smaller manufacturer because of:

answer

economies of scale

question

Exhibit 7-12 Cost schedule for producing pizza
What is the AVC of 4 pizzas?
Q FC VC TC
0 $ $ $
1 48
2 17
3 27
4 78
5 40
6 64
7 80

answer

$9.50

question

Marginal product measures the change in:

answer

the firm's output brought about by employing one additional unit of input.

question

What is the shape of the average fixed cost curve for a firm in the short run?

answer

A curve that declines as output expands and approaches the horizontal-axis when output is large.

question

Exhibit 7-8 Costs schedules for producing pizza
What is the ATC of producing 5 pizzas?
Q FC VC TC MC
0 $ $ $ $
1 5
2 13
3 10
4 100 140
5 20
6 85
7 215

answer

$32

question

Exhibit 7-5 Workers and output data
What is the marginal product of the second worker?

Laborers Total Product
0 0
1 8
2 20
3 25
4 28
5 29

answer

question

Which of the following is true at the point where diminishing returns set in?

answer

Marginal product is at a maximum and marginal cost at a minimum.

question

Which of the following is an implication of the law of diminishing returns?

answer

In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost.

question

A firm has $200 million in total revenue and explicit costs of $190 million. If its owners have invested $100 million in the company at an opportunity cost of 10 percent interest per year, the firm's accounting profit is:

answer

$10 million

question

The long run is a period of:

answer

sufficient length to allow a firm to alter its plant size and capacity and all other factors of production.

question

Exhibit 7-9 Cost schedule for firm X
Output TFC TVC
Quantity
0 $100 $ 0
1 50
2 84
3 108
4 127
5 150

answer

$24

1 of 48

question

Economists distinguish between the short run and the long run as follows:

answer

In the long run, all resources are variable; in the short run, at least one resource is fixed

question

Interest payments are ________.

answer

explicit costs

question

Economies of scale may arise from which of the following activities?

answer

Doubling promotional expenses to expand sale more than proportionately.

Having a larger retail space can expand sales more than proportionately.

question

Which of the following is most likely to be a fixed cost?

answer

Mortgage payments

question

Which of the following are forms of labor?

answer

the natural ability of a worker

the skills a worker has acquired

question

Capital is a factor of production that has been produced for use in the production of other goods and services. Which of the following are examples of capital?

answer

airports

computer software

question

If average total cost is declining, ________.

answer

The marginal cost must be less than average total cost

question

Implicit costs are ________.

answer

a foregone opportunity to do something else with your resources

question

What are three of factors of production?

answer

labor, capital and natural resources

question

Which is (are) an example of a fixed cost?

answer

Rental costs for a dance studio

(only received partial credit)

question

The upward sloping portion of a long-run cost curve illustrates:

answer

diseconomies to scale

question

A firm had sales revenue of $1 million last year. It spent $600,000 on labor, $150,000 on capital and $200,000 on materials. What was the firm's accounting profit?

answer

$50,000

question

Which of the following are examples of a company's fixed costs:

answer

monthly rent for factory or retail space

question

________ include all of the costs of production that increase with the quantity produced.

answer

Variable costs

question

________ occur when the marginal gain in output diminishes as each additional unit of input is added.

answer

Diminishing marginal returns

question

When a long-run average cost curve illustrates economies to scale it will be:

answer

Downward sloping

question

The term ________ describes a situation where the quantity of output rises, but the average cost of production falls.

answer

economies of scale

question

Economies to scale refers to the ________ where all inputs are being allowed to increase together.

answer

long-run average cost curve.

question

Except for one point, the short run average cost must always be ________ the long run average cost.

answer

greater than

question

answer

Decreasing diminishing marginal returns to labor

question

The marginal cost curve is generally ________, because diminishing marginal returns implies that additional units are ________.

answer

upward-sloping; more costly to produce

question

When an owner uses resources they own in a business, that usage should be considered

answer

an implicit cost

question

Salary payments are ________.

answer

explicit costs

question

answer

$12.50

question

answer

constant returns to scale (incorrect)

question

Which of the following are true statements about natural resources?

answer

natural resources can be used by people to produce goods and services

question

In order to determine ________, the firm's total costs must be divided by the quantity of its output.

answer

average total costs

question

The marginal product of labor is known to be greater than the average product of labor at a given level of employment. The Average Product at this point would be ________.

answer

increasing

question

A production function describes how firms

answer

combine capital, labor and other inputs to create products.

question

Exhibit 7-12 Cost schedule for producing pizza
What is the AVC of 3 pizzas?
Q FC VC TC
0 $ $ $
1 48
2 17
3 27
4 78
5 40
6 64
7 80

answer

question

A firm's opportunity cost of using resources provided by the firm's owners is called:

answer

implicit costs

question

A farm can produce 10,000 bushels of wheat per year with 5 workers and 13,000 bushels with 6 workers. The marginal product of the sixth worker for this farm is:

answer

3,0000 bushels

question

Implicit costs are:

answer

the opportunity costs of using resources owned by the entrepreneur in his/her own business.

question

Diseconomies of scale exist over the range of output for which the long-run average cost curve is:

answer

rising

question

Exhibit 7-12 Cost schedule for producing pizza
What is the ATC of 4 pizzas?
Q FC VC TC
0 $ $ $
1 48
2 17
3 27
4 78
5 40
6 64
7 80

answer

$19.50

question

Which of the following must be true if average total cost is rising?

answer

Marginal cost must be greater than average total cost.

question

The short run is a period of time:

answer

in which a firm uses at least one fixed input.

question

A large aircraft manufacturer, like Boeing, may have a cost advantage over a new smaller manufacturer because of:

answer

economies of scale

question

Exhibit 7-12 Cost schedule for producing pizza
What is the AVC of 4 pizzas?
Q FC VC TC
0 $ $ $
1 48
2 17
3 27
4 78
5 40
6 64
7 80

answer

$9.50

question

Marginal product measures the change in:

answer

the firm's output brought about by employing one additional unit of input.

question

What is the shape of the average fixed cost curve for a firm in the short run?

answer

A curve that declines as output expands and approaches the horizontal-axis when output is large.

question

Exhibit 7-8 Costs schedules for producing pizza
What is the ATC of producing 5 pizzas?
Q FC VC TC MC
0 $ $ $ $
1 5
2 13
3 10
4 100 140
5 20
6 85
7 215

answer

$32

question

Exhibit 7-5 Workers and output data
What is the marginal product of the second worker?

Laborers Total Product
0 0
1 8
2 20
3 25
4 28
5 29

answer

question

Which of the following is true at the point where diminishing returns set in?

answer

Marginal product is at a maximum and marginal cost at a minimum.

question

Which of the following is an implication of the law of diminishing returns?

answer

In the short run, expansion of output will eventually lead to increases in marginal cost and average total cost.

question

answer

$10 million

question

The long run is a period of:

answer

sufficient length to allow a firm to alter its plant size and capacity and all other factors of production.

question

Exhibit 7-9 Cost schedule for firm X
Output TFC TVC
Quantity
0 $100 $ 0
1 50
2 84
3 108
4 127
5 150

answer

$24

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