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Exam 13: The Costs of Production

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Question 51

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If a business is profitable from an accountant's point of view, then:

A) it is always profitable from an economist's point of view
B) it is never profitable from an economist's point of view
C) economic profit will be higher than accounting profit
D) we cannot say without more information

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

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Question 52

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In reference to setting the production level, a firm's cost curves:

A) dictate what decisions the firm will make
B) have no bearing on what decisions the firm will make
C) by themselves do not tell us what decisions the firm will make
D) none of the above are true

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

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Question 53

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Fill in the following table's missing values.

Consider the following graph of a firm in the short-run. Identify the average fixed cost curve, the marginal cost curve, the average variable cost curve and the average total cost curve.

The production function depicts a relationship between which two variables? Draw a production function that exhibits diminishing marginal product.

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

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.One week, Adrienne exactly breaks even.If her revenue for the week is $1525, how many boxes of chocolate did she produce?

When trying to understand the decision making process of different firms, economists assume that people think at the margin.

Average total cost reveals how much total cost will change as the firm alters its level of production.

Average total cost is:

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.What is the average variable cost for the month if six bicycles are produced?

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

Average variable cost is equal to the quantity of output divided by the total variable cost.

Bob Edwards owns Bob's Bagels.He hires an economist who assesses the shape of the bagel shop's average total cost (ATC) curve as a function of the number of bagels produced.The results indicate a U-shaped average total cost curve.Bob's economist explains that the ATC curve is U-shaped for two reasons, the first being the existence of diminishing marginal product, which causes it to rise.What would the second reason be? Assume that the marginal cost curve is linear.(Hint: The second reason relates to average fixed cost.)

Which of the following statements are true? When marginal cost exceeds average total cost: (i) average total cost must be rising (ii) average variable cost must be rising (iii) average fixed cost must be rising

Harry's Hotdogs is a small street vendor business owned by Harry Huggins.Harry is trying to get a better understanding of his costs by categorising them as fixed or variable.Which of the following costs are most likely to be considered fixed costs?

According to the information provided, which of the following statements is(are) true? (i) farmer Jack experiences decreasing marginal product (ii) farmer Jack's total cost curve is linear (iii) farmer Jack's production function is nonlinear

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

Marginal cost equals:

According to the information provided, Amy's economic profit is: