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Exam 13: The Costs of Production

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Question 21

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Table 13-1 Measures of Cost for Splashy Cardboard Kayak Factory. -Refer to Table 13-1. The average fixed cost of producing five kayaks is:

A) $8
B) $9
C) $12
D) none of the above

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

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Question 22

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If a firm is operating at an efficient scale, average total cost must:

A) rise as output is increased
B) fall as output is increase
C) be at its maximum
D) none of the above will be true

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

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Question 23

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The average total cost curve is unaffected by diminishing marginal product.

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

Several related measures of cost can be derived from a firm's total cost.

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.

Suppose a firm produced 500 units of output but sold only 400 of the units it produced. The average cost of production for each unit of output produced was $100. Each of the 400 units sold were sold for a price of $80. The total revenue of this firm would be:

The relationship between the quantity of inputs and quantity of output is called the production function.

Those things that must be forgone to acquire a good are called:

A firm's total costs divided by the quantity produced is the:

The marginal cost curve bisects the average total cost curve at the minimum point of the average total cost curve.

The average total cost curve reflects the shape of both the average fixed cost and average variable cost curves.

Diminishing marginal product of labour is NOT likely to be observed when:

Table 13-2 Adrienne's Premium Boxing Service subcontracts with a chocolate manufacturer to box premium chocolates for their mail order catalogue business. Adrienne 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. Costs are in dollars per week. -Refer to Table 13-2. Adrienne has received an order for 3000 boxes of chocolates for next week. If she expects that the trend in the marginal product of labour will continue in the same direction, it is most likely that her best decision will be to:

Table 13-3 Consider the following firm which makes high-performance racing bicycles. All costs are given in dollars. Output is shown on a monthly basis. The firm's fixed costs include a rent of $800 and a lease cost of $400 per month. -Refer to Table 13-3. At what level of output will average variable cost equal average total cost?

Suppose that as a firm expands and notices that its long-run average total costs are declining. The most likely explanation for this is economies of scale.

Economies of scale occur when:

Economists normally assume that the goal of a firm is to maximise revenue.

Graph 13-2 This graph depicts a total cost function for a firm that produces cookies. Use the graph to answer the following question(s) . -Refer to Graph 13-2. Which of the statements below is most consistent with the shape of the total cost curve?

When economists speak of a firm's costs, they are usually excluding the opportunity costs.