Question 1

Describe the relationship between average variable cost and average total cost. How are the general shapes of the AVC and ATC curves related?

Accepted Answer

ATC = AVC + AFC, so the vertical distanc...

Question 2

Scenario 13-22
Suppose that a small hair styling salon had revenues of $150,000 in a given year. The owner spent $10,000 on utilities, $60,000 on supplies shampoo, conditioner, hair coloring and other chemicals, etc.), and $50,000 on equipment mirrors, chairs, scissors, curling irons, etc.), including maintenance. The owner could have earned $50,000 working at another salon.
-Refer to Scenario 13-22. What is the economic profit for the hair styling salon?

Accepted Answer

Economic profit = Total revenu...

Question 3

Table 13-18
 
-Refer to Table 13-18. What is the shape of the average-total-cost curve?

Accepted Answer

ATC = TC/Q, where TC is graphed on the v...

Question 4

Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles. 
-Refer to Figure 13-9. The firm experiences constant returns to scale at which output levels?

Accepted Answer

A)   output levels less than M
B)   output levels between M and N
C)   output levels greater than N
D)   All of the above are correct as long as the firm is operating in the long run.E) A) and D)
F) A) and C)

Question 5

Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles. 
-Refer to Figure 13-9. The firm experiences economies of scale at which output levels?

Accepted Answer

A)   output levels less than M
B)   output levels between M and N
C)   output levels greater than N
D)   All of the above are correct as long as the firm is operating in the long run.E) A) and B)
F) B) and C)

Question 6

An entrepreneur's motivation to start a business arises from

Accepted Answer

A)   an innate love for the type of business that he or she starts.
B)   a desire to earn a profit.
C)   an altruistic desire to provide the world with a good product.
D)   All of the above could be correct.E) A) and B)
F) A) and C)

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

Bubba is a shrimp fisherman who can catch 4,000 pounds of shrimp per year. Bubba is considering hiring his cousin Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per year. If Bubba hires Bobby, what will be the total output of his shrimp business?

Accepted Answer

A)   7,000 pounds
B)   3,500 pounds
C)   3,000 pounds
D)   1,000 poundsE) A) and D)
F) A) and C)

Question 9

Stick Storage manufactures and sells computer flash drives. Last year it sold 2 million flash drives at a price of $10 each. For last year, the firm's

Accepted Answer

A)   accounting profit was $20 million.
B)   economic profit was $20 million.
C)   total revenue was $20 million.
D)   explicit costs was $20 million.E) B) and C)
F) A) and B)

Question 10

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

Accepted Answer

A)   15 students
B)   20 students
C)   22.5 students
D)   25 studentsE) A) and B)
F) None of the above

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Table 13-3
 
-Refer to Table 13-3. The marginal product of the third worker is

Accepted Answer

A)   230 units.
B)   100 units.
C)   77 units.
D)   60 units.E) A) and C)
F) B) and C)

Question 13

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 revenue is

Accepted Answer

A)   $8,000.
B)   $12,000.
C)   $20,000.
D)   $32,000.E) All of the above
F) C) and D)

Question 14

Figure 13-1 
-Refer to Figure 13-1. Which of the following could explain why the total product curve would shift from TP2 to TP1?

Accepted Answer

A)   There is additional capital equipment available to the firm.
B)   Labor skills have become rusty and outdated in the firm.
C)   The firm has developed improved production technology.
D)   The firm is now receiving a higher price for its product.E) B) and C)
F) A) and D)

Question 15

According to the mathematical laws that govern the relationship between average total cost and marginal cost, where must these two curves intersect?

Accepted Answer

The two curves will ...

Question 16

In the long run a company that produces and sells covers for cell phones incurs total costs of $2,500 when output is 1,250 covers and $4,000 when output is 1,500 covers. For this range of output, the cell phone cover company exhibits

Accepted Answer

A)   economies of scale.
B)   constant returns to scale.
C)   diseconomies of scale.
D)   efficient scale.E) B) and C)
F) B) and D)

Question 17

The shape of the total-cost curve is inversely related to the shape of the production function.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A)   $55,200.
B)   $75,200.
C)   $80,500.
D)   $165,700.E) A) and C)
F) None of the above

Question 19

Total cost is the

Accepted Answer

A)   amount a firm receives for the sale of its output.
B)   fixed cost less variable cost.
C)   market value of the inputs a firm uses in production.
D)   quantity of output minus the quantity of inputs used to make a good.E) A) and B)
F) A) and D)

Question 20

Scenario 13-14
If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost.
-Refer to Scenario 13-14. Farmer Brown's total­cost curve is

Accepted Answer

A)   increasing at an increasing rate.
B)   increasing at a decreasing rate.
C)   increasing at a constant rate.
D)   decreasing.E) A) and C)
F) B) and C)

Exam 12: The Costs of Production

According to the mathematical laws that govern the relationship between average total cost and marginal cost, where must these two curves intersect?

Correct Answer
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The two curves will ...
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Describe the relationship between average variable cost and average total cost. How are the general shapes of the AVC and ATC curves related?

Correct Answer
verified
ATC = AVC + AFC, so the vertical distanc...
View Answer

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. The firm experiences economies of scale at which output levels?

Correct Answer
verified

Table 13-3 -Refer to Table 13-3. The marginal product of the third worker is

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

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

Correct Answer
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Correct Answer
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Economic profit = Total revenu...
View Answer

Total cost is the

Correct Answer
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In the long run a company that produces and sells covers for cell phones incurs total costs of $2,500 when output is 1,250 covers and $4,000 when output is 1,500 covers. For this range of output, the cell phone cover company exhibits

Correct Answer
verified

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.

Correct Answer
verified

Correct Answer
verified

An entrepreneur's motivation to start a business arises from

Correct Answer
verified

Bubba is a shrimp fisherman who can catch 4,000 pounds of shrimp per year. Bubba is considering hiring his cousin Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per year. If Bubba hires Bobby, what will be the total output of his shrimp business?

Correct Answer
verified

Stick Storage manufactures and sells computer flash drives. Last year it sold 2 million flash drives at a price of $10 each. For last year, the firm's

Correct Answer
verified

The shape of the total-cost curve is inversely related to the shape of the production function.

Correct Answer
verified

Figure 13-1 -Refer to Figure 13-1. Which of the following could explain why the total product curve would shift from TP2 to TP1?

Correct Answer
verified

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. The firm experiences constant returns to scale at which output levels?

Correct Answer
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Correct Answer
verified

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 revenue is

Correct Answer
verified

Table 13-18 -Refer to Table 13-18. What is the shape of the average-total-cost curve?

Correct Answer
verified
ATC = TC/Q, where TC is graphed on the v...
View Answer

Exam 12: The Costs of Production

According to the mathematical laws that govern the relationship between average total cost and marginal cost, where must these two curves intersect?

Correct AnswerverifiedThe two curves will ...View AnswerShow Answer

Describe the relationship between average variable cost and average total cost. How are the general shapes of the AVC and ATC curves related?

Correct AnswerverifiedATC = AVC + AFC, so the vertical distanc...View AnswerShow Answer

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. The firm experiences economies of scale at which output levels?

Correct AnswerverifiedShow Answer

Table 13-3 -Refer to Table 13-3. The marginal product of the third worker is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedEconomic profit = Total revenu...View AnswerShow Answer

Total cost is the

Correct AnswerverifiedShow Answer

In the long run a company that produces and sells covers for cell phones incurs total costs of $2,500 when output is 1,250 covers and $4,000 when output is 1,500 covers. For this range of output, the cell phone cover company exhibits

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An entrepreneur's motivation to start a business arises from

Correct AnswerverifiedShow Answer

Bubba is a shrimp fisherman who can catch 4,000 pounds of shrimp per year. Bubba is considering hiring his cousin Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per year. If Bubba hires Bobby, what will be the total output of his shrimp business?

Correct AnswerverifiedShow Answer

Stick Storage manufactures and sells computer flash drives. Last year it sold 2 million flash drives at a price of $10 each. For last year, the firm's

Correct AnswerverifiedShow Answer

The shape of the total-cost curve is inversely related to the shape of the production function.

Correct AnswerverifiedShow Answer

Figure 13-1 -Refer to Figure 13-1. Which of the following could explain why the total product curve would shift from TP2 to TP1?

Correct AnswerverifiedShow Answer

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. The firm experiences constant returns to scale at which output levels?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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 revenue is

Correct AnswerverifiedShow Answer

Table 13-18 -Refer to Table 13-18. What is the shape of the average-total-cost curve?

Correct AnswerverifiedATC = TC/Q, where TC is graphed on the v...View AnswerShow Answer

Correct Answer
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The two curves will ...
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Correct Answer
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ATC = AVC + AFC, so the vertical distanc...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Economic profit = Total revenu...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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ATC = TC/Q, where TC is graphed on the v...
View Answer