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Exam 12: The Costs of Production

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Question 1

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Shelley's Salsa produces and sells organic salsa. Last year it sold 3 million tubs of salsa at a price of $3 per tub. For last year, the firm's

A) accounting profit was $9 million.
B) economic profit was $9 million.
C) total revenue was $9 million.
D) explicit costs were $9 million.

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

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Question 2

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On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

A) The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers.
B) The farmer is able to produce 5,800 bushels of wheat when he hires 4 workers.
C) The farmer is able to produce 6,000 bushels of wheat when he hires 4 workers.
D) Any of the above could be correct.

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

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Question 3

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A difference between explicit and implicit costs is that

The marginal product of labor is equal to the

Table 13-19 -Refer to Table 13-19. What is the shape of the average-fixed-cost curve?

Scenario 13-2 Chelsea wants to start her own Christmas ornament business. She can purchase a suitable factory that costs $100,000. Chelsea currently has $150,000 in the bank earning 3 percent interest per year. -Refer to Scenario 13-2. Suppose Chelsea purchases the factory using $50,000 of her own money and $50,000 borrowed from a bank at an interest rate of 6 percent. What is Chelsea's annual opportunity cost of purchasing the factory?

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

Foregone investment opportunities are an example of

When calculating a firm's profit, an economist will subtract only

The average-total-cost curve is unaffected by diminishing marginal product.

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 70 chairs per hour and operates 8 hours per day, what is the factory's total labor cost per day?

Table 13-1 -Refer to Table 13-1. What is total output when 3 workers are hired?

Bubba is a shrimp fisherman who used $2,000 from his personal savings account to buy a boat and equipment for his shrimp business. The savings account paid 2% interest. What is Bubba's annual opportunity cost of the financial capital that he invested in his business?

The nature of a firm's cost fixed or variable) depends on the

When a firm experiences constant returns to scale,

If Danielle sells 300 wrist bands for $0.50 each, her total revenues are

If the marginal cost of producing the tenth unit of output is $2.50, and if the average total cost of producing the tenth unit of output is $3, then at ten units of output, average total cost is rising.

In the long run the local coffee shop incurs total costs of $625 when output is 1,250 cups of coffee and $750 when output is 1,500 cups of coffee. For this range of output, the coffee shop exhibits

Scenario 13-7 Julia prepares tax returns and does bookkeeping. Last year her revenues from the tax and bookkeeping business were $150,000, and her expenses for the business were $15,000. When she started her tax and bookkeeping business, Julia gave up her supplemental job doing in-home pet sitting. She used to earn $10,000 per year from pet sitting. Assume that she incurred no costs for her pet sitting business. -Refer to Scenario 13-7. Julia's implicit costs are

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