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Exam 12: The Costs of Production

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Question 161

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A production function is a relationship between inputs and

A) quantity of output.
B) revenue.
C) costs.
D) profit.

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

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Question 162

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Economists normally assume that the goal of a firm is to earn i) profits as large as possible, even if it means reducing output. Ii) profits as large as possible, even if it means incurring a higher total cost. Iii) revenues as large as possible, even if it reduces profits.

A) i) and ii) only
B) i) and iii) only
C) ii) and iii) only
D) i) , ii) , and iii)

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

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Question 163

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Variable costs equal fixed costs when nothing is produced.

Table 13-6 Wooden Chair Factory -Refer to Table 13-6. Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. If the factory produces at a rate of 35 chairs per hour, what is the total labor cost per hour?

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

Figure 13-3 -Refer to Figure 13-3. Which of the following is true of the production function not pictured) that underlies this total cost function? i) Total output increases as the quantity of inputs increases but at a decreasing rate. Ii) Marginal product is diminishing for all levels of input usage. Iii) The slope of the production function decreases as the quantity of inputs increases.

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

Which of the following is an example of an implicit cost?

Suppose that a firm's long­run average total costs of producing televisions decreases as it produces between 10,000 and 20,000 televisions. For this range of output, the firm is experiencing

Figure 13-10 -Refer to Figure 13-10. The firm experiences diseconomies of scale if it changes its level of output from

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 could earn $6,000 per year preparing taxes. In calculating the economic profit of her cookie jar business, the $6,000 that Christine gives up is counted as part of her business's

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

Figure 13-3 -Refer to Figure 13-3. Which of the following statements best captures the nature of the underlying production function not pictured) ?

Economies of scale occur when a firm's

Describe the difference between the short run and the long run.

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. What is Christine's annual opportunity cost of the financial capital that she invested in her business?

There is general agreement among economists that the long-run time period exceeds one year.

Accounting profit is equal to

An example of an explicit cost would be the wages that a business owner pays her employees.

Scenario 13-6 Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her home-organization services. One spring day, Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce. -Refer to Scenario 13-6. Ziva's accountant would calculate the total cost of farming to equal