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Exam 13: The Costs of Production

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Question 191

Multiple Choice

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Suppose Jan started up a small lemonade stand business last month. Variable costs for Jan's lemonade stand now include the cost of

A) building the lemonade stand.
B) hiring an artist to design a logo for her sign.
C) lemons and sugar.
D) All of the above are correct.

E) A) and B)
F) None of the above

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Question 192

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The market value of the inputs a firm uses is called

A) total cost.
B) variable cost.
C) marginal cost.
D) fixed cost.

E) None of the above
F) B) and C)

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Question 193

Multiple Choice

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Figure 13-2 -Refer to Figure 13-2. The graph illustrates a typical

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 economic profits are

The marginal cost curve crosses the average total cost curve at

Riva crafts and sells hard cider as a part-time job. She can bottle and sell four cases in a week. She is considering hiring her friend Atul to help her. Together, Riva and Atul can bottle and sell seven cases per week. What is Atul's marginal product?

How can the average-fixed-cost curve be declining when fixed cost is constant?

The Big Blue Sky jet company has long-run total costs of $20 million if it produces 5 jets and long-run total costs of $24 million if it produces 6 jets. The Big Blue Sky jet company is experiencing

Marcus sells 300 candy bars at $0.50 each. His total costs are $125. His profits are

Bubba is a shrimp fisherman who catches 4,000 pounds of shrimp per year. He can sell the shrimp for $5 per pound. His average total cost of catching shrimp is $3 per pound. Bubba's annual total profit is

Table 13-19 -Refer to Table 13-19. What is the shape of this firm's total-cost curve?

Scenario 13-12 Ariana withdrew $400,000 out of her personal savings account and used it to start her new Internet cafe. The savings account pays 3 percent interest per year. During the first year of her business, Ariana sold 2,000 cups of coffee for $2.50 per cup and 4,000 hours of Internet time, also at $2.50 per hour. During the first year, the business made monetary outlays of $9,000. You may assume that there is no opportunity cost to Ariana's time. -Refer to Scenario 13-12. Ariana's economic profit for the year was

In the long run a company that produces and sells dog beds incurs total costs of $1,200 when output is 30 beds and $1,600 when output is 40 beds. Firm A exhibits

Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's profit.

If marginal cost is rising,

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

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that when four units of output are produced, the total cost is $175, and the average variable cost is $33.75. What would the average fixed cost be if ten units were produced?

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

An example of an explicit cost for the owner of a tattoo parlor would be the wages that she could earn if she worked as a graphic artist for an advertising agency.

Describe the general shape of the average-fixed-cost curve.