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Exam 13: The Costs of Production

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Question 51

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Scenario 13-10 Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each. -Refer to Scenario 13-10. An accountant would calculate the total cost for one photo frame to be

A) $10.
B) $5.
C) $15.
D) $25.

E) A) and B)
F) All of the above

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Question 52

Multiple Choice

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Scenario 13-8 Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each. -Refer to Scenario 13-8. What are Wanda's implicit costs per glass?

A) $0.18
B) $0.10
C) $0.08
D) $0.02

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

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Question 53

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Which of the following statements is correct?

Adam Smith used a famous example of what type of firm to illustrate economies of scale?

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

The length of the short run

Economies of scale arise when

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

Scenario 13-12 Ariana withdrew $400,000 out of her personal savings account and used it to start her new Internet cafe. The savings account pays 3 percent interest per year. During the first year of her business, Ariana sold 2,000 cups of coffee for $2.50 per cup and 4,000 hours of Internet time, also at $2.50 per hour. During the first year, the business made monetary outlays of $9,000. You may assume that there is no opportunity cost to Ariana's time. -Refer to Scenario 13-12. Ariana's economic profit for the year was

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 accounting costs will equal

Table 13-6 Wooden Chair Factory -Refer to Table 13-6. Assume the Wooden Chair Factory currently employs 5 workers. What is the marginal product of labor when the factory adds a 6th 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 implicit costs will equal

Diminishing marginal product exists when the production function becomes flatter as inputs increase.

For a typical firm, fixed costs increase in direct proportion to the increases in output.

Describe the relationship between average variable cost and marginal cost.

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

The difference between accounting profit and economic profit is

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.

Table 13-4 Charles's Math Tutoring -Refer to Table 13-4. Suppose that Charles's math tutoring company has a fixed cost of $50 per month for his cell phone. Each worker costs Charles $60 per day. As output increases from 45 to 70 students, Charles's total cost curve

The shape of the total-cost curve is unrelated to the shape of the production function.