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Exam 12: The Costs of Production

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Question 101

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When adding another unit of labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor, the firm is experiencing

A) diminishing labor.
B) diminishing output.
C) diminishing marginal product.
D) negative marginal product.

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Question 102

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What are opportunity costs? How do explicit and implicit costs relate to opportunity costs?

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The opportunity cost of an ite...

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Question 103

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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 diseconomies of scale.

Implicit costs

Which is greater -- economic profit or accounting profit?

Adam Smith describes a visit to a car factory when discussing economies of scale in his book An Inquiry into the Nature and Causes of the Wealth of Nations.

Anna borrows $5,000 from a bank and withdraws $1,000 from her personal savings to start a coffee shop. The interest rate is 5 percent for both the bank loan and her personal savings. Her opportunity cost of capital is $250.

Which of the following can be added to profit to obtain total revenue?

Economists normally assume that the goal of a firm is to i) earn profits as large as possible, even if it means reducing output. Ii) earn revenues as large as possible, even if it means reducing profits. Iii) minimize costs, regardless of profits.

The difference between economic profit and accounting profit is that economic profit is calculated based on both implicit and explicit costs whereas accounting profit is calculated based on explicit costs only.

Figure 13-3 -Refer to Figure 13-3. The graph illustrates a typical total cost curve. Based on its shape, what does the corresponding production function look like?

A student might describe information about the costs of production as

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

An example of an explicit cost of production would be the

Table 13-19 -Refer to Table 13-19. What is the total output of five workers?

Scenario 13-11 Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each. -Refer to Scenario 13-11. An accountant would calculate the total cost for one birdhouse to be

Figure 13-10 -Refer to Figure 13-10. The three average total cost curves on the diagram labeled ATC1, ATC2, and ATC3 most likely correspond to three different

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

Figure 13-1 -Refer to Figure 13-1. Suppose the production function shifts from TP2 to TP1. Such a shift in the total product curve is most likely due to a decrease in the firm's

Economists normally assume that the goal of a firm is to