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Exam 13: The Costs of Production

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Question 21

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Total cost can be divided into two types of costs:

A) fixed costs and variable costs.
B) fixed costs and marginal costs.
C) variable costs and marginal costs.
D) average costs and marginal costs.

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

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Question 22

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Economies of scale occur when

A) long-run average total costs rise as output increases.
B) long-run average total costs fall as output increases.
C) average fixed costs are falling.
D) average fixed costs are constant.

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

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Question 23

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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

Average total cost and marginal cost express information that is already contained in a firm's total cost.

What are opportunity costs?How do explicit and implicit costs relate to opportunity costs?

Table 13-8 $\begin{array} { | c | l | l | } \hline \begin{array} { c } \text { Quantity } \\\text { of Output }\end{array} & \begin{array} { l } \text { Fixed } \\\text { Cost } \\\text { (dinar) }\end{array} & \begin{array} { l } \text { Variable } \\\text { Cost (dinar) }\end{array} \\\hline 0 & 20 & 0 \\\hline 1 & 20 & 10 \\\hline 2 & 20 & 40 \\\hline 3 & 20 & 80 \\\hline 4 & 20 & 130 \\\hline 5 & 20 & 200 \\\hline 6 & 20 & 300 \\\hline\end{array}$ -Refer to Table 13-8.What is the average fixed cost of producing 5 units of output?

Table 13-8 $\begin{array} { | c | l | l | } \hline \begin{array} { c } \text { Quantity } \\\text { of Output }\end{array} & \begin{array} { l } \text { Fixed } \\\text { Cost } \\\text { (dinar) }\end{array} & \begin{array} { l } \text { Variable } \\\text { Cost (dinar) }\end{array} \\\hline 0 & 20 & 0 \\\hline 1 & 20 & 10 \\\hline 2 & 20 & 40 \\\hline 3 & 20 & 80 \\\hline 4 & 20 & 130 \\\hline 5 & 20 & 200 \\\hline 6 & 20 & 300 \\\hline\end{array}$ -Refer to Table 13-8.What is the shape of the marginal cost curve for this firm?

Which of the following expressions is correct?

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

When adding another unit of labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor,the firm is experiencing

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

Suppose that a firm has only one variable input,labor,and firm output is zero when labor is zero.When the firm hires 6 workers the firm produces 90 units of output.Fixed costs of production are $6 and the variable cost per unit of labor is 10 dollars.The marginal product of the seventh unit of labor is 4.Given this information,what is the marginal cost of production when the firm hires the 7th worker?

The average-total-cost curve reflects the shape of both the average-fixed-cost and average-variable-cost curves.

Accountants often ignore implicit costs.

Which of the following statements is correct?

Variable costs usually change as the firm alters the quantity of output produced.

For a typical firm,fixed costs increase in direct proportion to the increases in output.

The typical total-cost curve is U-shaped.

When average total cost rises if a producer either increases or decreases production,then the firm is said to be operating at efficient scale.

A firm's total profit equals its marginal revenue minus its marginal cost.