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Exam 13: The Costs of Production

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Question 31

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Table 13-3 Consider the following firm which makes high-performance racing bicycles.All costs are given in dollars.Output is shown on a monthly basis.The firm's fixed costs include a rent of $800 and a lease cost of $400 per month. -Refer to Table 13-3.How many bicycles are produced when marginal cost is $321?

A) four
B) seven
C) nine
D) 10

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

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Question 32

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Economies of scale arise when:

A) workers are able to specialise in a particular task
B) an economy is self-sufficient in production
C) individuals in a society are self-sufficient
D) fixed costs are large relative to variable costs

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

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Question 33

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Graph 13-5 The set of curves above reflect information about the cost structure of a firm.Use this graph to answer the following question(s) . -Refer to Graph 13-5.This particular firm is necessarily experiencing increasing marginal product when curve:

The cost of producing an additional unit of a good is not the same as the average cost of the good.

Graph 13-5 The set of curves above reflect information about the cost structure of a firm.Use this graph to answer the following question(s) . -Refer to Graph 13-5.Curve A is necessarily U-shaped because of:

Average variable cost and marginal cost are two ways for economists to say the same thing.

Total revenue equals:

Harry Hoarder runs a small street vendor service which contracts to produce and sell moulded plastic souvenirs (key chains, commemorative plastic coins, plastic animals, etc.) at small theatre shows.As owner of the firm, Harry must decide how much of each product to produce.The key element of this decision is:

Which of the following would be categorised as an opportunity cost? (i) wages of workers (ii) fixed costs already incurred (iii) forgone investment opportunities

Graph 13-5 The set of curves above reflect information about the cost structure of a firm.Use this graph to answer the following question(s) . -Refer to Graph 13-5.Which of the curves is most likely to represent marginal cost?

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

Complete the following formulae: TVC = costs TC = total AVC = costs AC = costs TFC = costs AFC = average MC = costs TC = TFC + AC = + AVC MC = ∆TC/ = /∆Q AFC = TFC/ AVC = /Q AC = TC/Q

According to the information provided, what is the total opportunity cost that Amy incurred to spend her time developing photographs?

Implicit costs are costs that do not require an outlay of cash by the firm.

Marginal cost equals which of the following? (i) the average fixed cost of the current unit (ii) the change in total costs divided by change in quantity produced (iii) the change in variable costs divided by change in quantity produced

Diseconomies of scale occur when:

Fixed costs can be defined as costs that:

Table 13-3 Consider the following firm which makes high-performance racing bicycles.All costs are given in dollars.Output is shown on a monthly basis.The firm's fixed costs include a rent of $800 and a lease cost of $400 per month. -Refer to Table 13-3.What is the average fixed cost for the month if 10 bicycles are produced?

The marginal cost curve crosses the average total cost curve at:

According to the information provided, Jack's production function will: