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Exam 7: The Costs of Production

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Question 21

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$\begin{array}{l}\begin{array} { | l | r | r | r | r | } \hline \text { Output (units per day) } & 0 & 10 & 20 & 30 \\\hline \text { Total cost (dollars per day) } & \$ 40 & \$ 54 & \$ 62 & \$ 80 \\\hline\end{array}\\\text { Table } 21.2\end{array}$ At 20 units of output in Table 21.2, the average variable cost is

A) $1.10 per unit.
B) $1.75 per unit.
C) $2.00 per unit.
D) $3.10 per unit.

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Question 22

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Diminishing returns occur because

A) Of inefficiency in the production process.
B) Of the use of inferior factors of production.
C) A firm increases the amount of a variable input without changing a fixed input.
D) Of lower opportunity costs of the factors of production.

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Question 23

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The long-run ATC curve is simply a composite of the best short-run ATC possibilities.

Profit is

Total output may continue to rise even though marginal physical product is declining.

$\begin{array}{l}\begin{array} { | l | r | r | r | r | } \hline \text { Output (units per day) } & 0 & 10 & 20 & 30 \\\hline \text { Total cost (dollars per day) } & \$ 40 & \$ 54 & \$ 62 & \$ 80 \\\hline\end{array}\\\text { Table } 21.2\end{array}$ At 10 units of output in Table 21.2, the total fixed cost is

The difference between the accountant's and the economist's measurement of cost equals implicit costs.

When a firm produces at a technically efficient output level, it is

Accounting costs and economic costs differ because

In economics, the long run is considered to be

The average variable cost curve slopes upward with a higher rate of output in the short run because of

The marginal cost curve intersects the minimum of the average total cost curve and also the minimum of the average variable cost curve.

What is the average fixed cost when output is 120 units in Figure 21.2?

Explain the concept of economies of scale.Identify two reasons why economies of scale exist.

Marginal physical product is the change in total output associated with one additional unit of input.

What is the total cost of 120 units in Figure 21.2?

$\begin{array}{l}\begin{array} { | c | c | } \hline \text { Units of Labor } & \text { Units of Output } \\\hline 0 & 0 \\\hline 1 & 15 \\\hline 2 & 35 \\\hline 3 & 45 \\\hline 4 & 52 \\\hline\end{array}\\\text { Table 21.1 }\end{array}$ If workers are paid $10, what is the labor cost per unit of output in Table 21.1 when output is increased from 15 to 35 units of output?

According to the World View article titled "United States Gains Cost Advantage," during the last decade, unit labor costs in the United States declined

Which of the following is a long-run concept?

Complete Table 21.3 below: $\begin{array}{l}\begin{array} { l l l } \text { Units of } & \text { Units of } \\\text { Labor } & \text { Output } & \text { MPP } \\0 & 0 &\underline{\quad\quad} \\1 & \underline{\quad\quad} & 30 \\2 & 66 & \underline{\quad\quad}\\3 &\underline{\quad\quad} &30 \\4 & 116&\underline{\quad\quad}\end{array}\\\text { Table } 21.3\end{array}$ What is the marginal physical product of the fourth unit of labor in Table 21.3?