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Exam 13: The Costs of Production

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Question 251

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A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total costs are $3,500. When it produces 101 units of output, its total costs are $3,750. What is the marginal cost of producing the 101st unit of output?

A) $250
B) $275
C) $340.91
D) $350

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

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Question 252

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Figure 13-10 -Refer to Figure 13-10. The firm experiences diseconomies of scale if it changes its level of output from

A) Q₁ to Q₂.
B) Q₂ to Q₃.
C) Q₃ to Q₄.
D) Q₄ to Q₅.

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

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Question 253

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The cost of producing the typical unit of output is the firm's

Describe the relationship between average variable cost and marginal cost.

Table 13-10 -Refer to Table 13-10. What is the marginal cost of producing 280 units of output?

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

At what level of output will average variable cost equal average total cost?

Which of the following expressions is correct?

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

Because of the greater flexibility that firms have in the long run, all short-run cost curves lie on or above the long-run curve.

If marginal cost is below average total cost, then average total cost

Table 13-12 Eileen's Elegant Earrings produces pairs of earrings for its mail order catalogue business. Each pair is shipped in a separate box. She rents a small room for $150 a week in the downtown business district that serves as her factory. She can hire workers for $275 a week. There are no implicit costs. -Refer to Table 13-12. Eileen has received an order for 3,000 boxes of earrings for next week. If she expects that the trend in the marginal product of labor will continue in the same direction, it is most likely that her best decision will be to

If the marginal-cost curve is rising, then so is the average-total-cost curve.

Scenario 13-7 Julia prepares tax returns and does bookkeeping. Last year her revenues from the tax and bookkeeping business were $150,000, and her expenses for the business were $15,000. When she started her tax and bookkeeping business, Julia gave up her supplemental job doing in-home pet sitting. She used to earn $10,000 per year from pet sitting. Assume that she incurred no costs for her pet sitting business. -Refer to Scenario 13-7. Julia's accounting profits are

Explicit costs

Table 13-7 The Flying Elvis Copter Rides -Refer to Table 13-7. What is the value of H?

Figure 13-2 -Refer to Figure 13-2. As the number of workers increases,

Which is greater -- economic profit or accounting profit?

Scenario 13-5 Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000. She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%. -Refer to Scenario 13-5. Emily's annual explicit cost of capital is

Table 13-19 -Refer to Table 13-19. What is the shape of the average-variable-cost curve?