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Exam 13: The Costs of Production

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Question 201

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For a construction company that builds houses, which of the following costs would be a fixed cost?

A) the $50,000 per year salary paid to a construction foreman
B) the $30,000 per year salary paid to the company's bookkeeper
C) the $10,000 per year premium paid to an insurance company
D) All of the above are correct.

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

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Question 202

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Jaxon borrows $10,000 from a bank and withdraws $20,000 from his personal savings to open a tattoo parlor. The interest rate is 3 percent for both the bank loan and his personal savings. Jaxon also quit his job as a waiter, which paid $20,000. According to an economist, Jaxon's opportunity cost of opening the tattoo parlor equals $20,900.

A) True
B) False

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Question 203

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

The value of a business owner's time is an example of

A difference between explicit and implicit costs is that

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm A is experiencing economies of scale.

Table 13-17 Consider the following table of long-run total cost for four different firms: -Refer to Table 13-17. Which firm's long-run marginal cost decreases as output increases?

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

​Sebastian decides to open a tree farm. When deciding to open his own business, he turned down two separate job offers of $25,000 and $30,000 and withdrew $20,000 from his savings. Sebastian's savings account paid 3 percent interest. He also borrowed $20,000 from his brother, whom he pays 2 percent interest per year. He spent $15,000 to purchase supplies and earned $50,000 in revenue during his first year. What are Sebastian's implicit costs from running his own business?

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 explicit costs are

Since the 1980s, Wal-Mart stores have appeared in almost every community in America. Wal-Mart buys its goods in large quantities and, therefore, at cheaper prices. Wal-Mart also locates its stores where land prices are low, usually outside of the community business district. Many customers shop at Wal-Mart because of low prices. Local retailers, like the neighborhood drug store, often go out of business because they lose customers. This story demonstrates that

Table 13-11 -Refer to Table 13-11. The total cost of producing 1 poster is

Table 13-4 Charles's Math Tutoring -Refer to Table 13-4. What is the marginal product of the second worker?

What might cause diseconomies of scale?

​Table 13-16 -Refer to Table 13-16. What is the total cost of producing 2 units of output?

Table 13-13 Teacher's Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts. The owner rents several small rooms in an office building in the suburbs for $600 a month and has leased computer equipment that costs $480 a month. -Refer to Table 13-13. What is the average fixed cost for the month if 9 instructional modules are produced?

Scenario 13-13 Christine is an artist who creates custom cookie jars. Her annual revenue from selling the cookie jars is $90,000. The annual explicit costs of the materials used to make the cookie jars are $54,000. -Refer to Scenario 13-13. Christine used $5,000 from her personal savings account to buy pottery tools for her business. The savings account paid 1% annual interest. Christine could earn $6,000 per year as a tax preparer. What is the annual accounting profit of her cookie jar business?

The marginal product of labor is equal to the

Thirsty Thelma owns and operates a small lemonade stand. When Thelma is producing a low quantity of lemonade she has few workers and her equipment is not being fully utilized. Because she can easily put her idle resources to use,