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Exam 13: The Costs of Production

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Question 1

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

A) There is less 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B) Labor skills have become rusty and outdated in the firm.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) A) and B)
F) C) and D)

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Question 2

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Jacqui decides to open her own business and earns $50,000 in accounting profit the first year.When deciding to open her own business,she turned down three separate job offers with annual salaries of $30,000,$40,000,and $45,000.What is Jacqui's economic profit from running her own business?

A) $-55,000
B) $-5,000
C) $5,000
D) $20,000

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

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Question 3

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Grace is a self-employed artist.She can make 20 pieces of pottery per week.She is considering hiring her sister Kate to work for her.Both she and Kate can make 35 pieces of pottery per week.What is Kate's marginal product?

Analyzing the behavior of the firm enhances our understanding of

Table 13-2 -Refer to Table 13-2.What is the total output of four workers?

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 the average total cost when 5 units of output are produced is $30,and the marginal cost of the sixth unit of output is $60.What is the average total cost when six units are produced?

Average total cost (ATC) is calculated as follows:

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

The use of specialization to achieve economies of scale is one reason modern societies are as prosperous as they are.

Since the 1980s,Wal-Mart stores have appeared in almost every community in America.Wal-Mart buys its goods in large quantities and,therefore,at cheaper prices.Wal-Mart also locates its stores where land prices are low,usually outside of the community business district.Many customers shop at Wal-Mart because of low prices.Local retailers,like the neighborhood drug store,often go out of business because they lose customers.This story demonstrates that

Table 13-5 -Refer to Table 13-5.Diminishing marginal product begins with the addition of the

Randy is a minor-league baseball player.His current cumulative batting average is 0.270.Randy believes that if he can raise his cumulative batting average to 0.300,he will have a chance to play in the major leagues.Which of the following statements is correct?

Table 13-7 The Flying Elvis Copter Rides -Refer to Table 13-7.What is the value of G?

Diminishing marginal product suggests that the marginal

Table 13-12 Betty's Bakery -Refer to Table 13-12.What is the average variable cost of producing 3 cakes at Betty's Bakery?

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.

Fixed costs are those costs that remain fixed no matter how long the time horizon is.

Can economic profit ever exceed accounting profit?

Table 13-2 -Refer to Table 13-2.What is the marginal product of the fourth worker?

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