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Exam 13: The Costs of Production

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Question 131

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Scenario 13-19 Doreen's Dairy produces and sells Swiss cheese. Last year, it produced 7,000 pounds and sold each pound for $6. In producing the 7,000 pounds, the dairy incurred variable costs of $28,000 and a total cost of $40,000. -Refer to Scenario 13-19. Suppose the owner of the business had an offer to work for another firm for $25,000. The firm's economic profit for the year was

A) -$26,000.
B) -$23,000.
C) $2,000.
D) $14,000.

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

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Question 132

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The length of the short run

A) is different for different types of firms.
B) can never exceed 3 years.
C) can never exceed 1 year.
D) is always less than 6 months.

E) B) and D)
F) None of the above

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Question 133

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Table 13-2 -Refer to Table 13-2. At which number of workers does diminishing marginal product begin?

At all levels of production higher than the point where the marginal cost curve crosses the average variable cost curve, average variable 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 economic profit from farming equals

Table 13-14 -Refer to Table 13-14. What is the average variable cost of producing 6 units of output?

The fundamental reason that marginal cost eventually rises as output increases is because of

Trevor's Tire Company produced and sold 500 tires. The average cost of production per tire was $50. Each tire sold for a price of $65. Trevor's Tire Company's total profits are

Larry's Lunchcart is a small street vendor business. If Larry makes 15 pretzels in his first hour of business and incurs a total cost of $16.50, his average total cost per pretzel is

The difference between accounting profit and economic profit relates to

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

Patrice owns a travel agency. Her accountant most likely includes which of the following costs on her financial statements?

Figure 13-6 -Refer to Figure 13-6. Which of the following can be inferred from the figure above? (i) Marginal cost is increasing at all levels of output. (ii) Marginal product is increasing at low levels of output. (iii) Marginal product is decreasing at high levels of output.

Foregone investment opportunities are an example of

The shape of the marginal cost curve tells a producer something about the marginal product of her workers.

Table 13-3 -Refer to Table 13-3. The marginal product of the third worker is

When marginal cost is greater than average cost, average cost is

The Wacky Widget company has total fixed costs of $100,000 per year. The firm's average variable cost is $5 for 10,000 widgets. At that level of output, the firm's average total costs equal

Table 13-11 -Refer to Table 13-11. What is the variable cost of producing 0 posters?

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