chapter 11

Question 1

the short run is a period of time during which?

Answer 1

at least one of the firms inputs is fixed

Question 2

which of the following is a variable cost?

Answer 2

raw materials cost

Question 3

which of the following differentiation between costs makes specific reference to the opportunity cost a business firm incurs when it spends money?

Answer 3

implicit versus explicit

Question 4

refer to the graphs below. which graph is a better representation of average total cost?

Answer 4

smiley face!
letter B

Average total cost ;)

Question 5

what is the additional output that a firm produces as a result of hiring one more worker called?

Answer 5

marginal product of labor.

Question 6

when the marginal product of labor is negative, which of the following must be true?

Answer 6

adding more units of labor to the production process causes output to decrease.

Question 7

which of the following statements about the relationship between marginal product and average product is correct?

Answer 7

whenever the marginal product of labor is greater than the average product of labor, the average product of labor must be increasing.

Question 8

based on the relationship between marginal product and average product, which curve appears to be average product?

Answer 8

curve 2 the straighter one

Question 9

what is the marginal cost of producing the first 625 copies?

Answer 9

.08

Question 10

for a certain output range (or quantity produced per day), marginal cost is greater than average cost. which output range is that?

Answer 10

where they meet so the output range after about 2,300 units

Question 11

what measure do we obtain by dividing the fixed cost by the quantity of output produced

Answer 11

average fixed cost

Question 12

which of the following statements is correct?

Answer 12

in the long run, all costs are variable

Question 13

what happens when firms experience economies of scale

Answer 13

the firm’s long run average costs FALL as output INCREASES

Question 14

which bookstore is more likely to experience diseconomies of scale?

Answer 14

the bookstore selling 80,000 books per month

Question 15

which point best illustrated several smaller companies producing a few phone handsets each rather than one large company producing many phone handsets

Answer 15

b

SMILE LONG RUN AVERAGE COST

Question 16

how much is the value of total fixed cost

Answer 16

2,400

alright to find TOTAL fixed cost subtract the differences and multiply by bottom number

Question 17

the process a firm uses to turn inputs into outputs of goods and services is called technology

Answer 17

true

Question 18

if a firm experiences positive technological change, it is able to product more output using the same inputs

Answer 18

true

Question 19

the short run is the time period which a firm has at least one input contraint

Answer 19

true

Question 20

a characteristic of the long run that is not available in the short run is that a firm is free to vary its output

Answer 20

false

Question 21

consider a manufacturing operation that uses specialized machinery and labor to produce its output. in this case, the input that is not fixed in the short run is labor

Answer 21

true

Question 22

accounting costs exclude implicit costs

Answer 22

true

Question 23

average total cost is equal to average variable cost minus average fixed cost

Answer 23

false

Question 24

as output increases, average fixed cost gets smaller and smaller

Answer 24

true

Question 25

in economics what is the difference between the short run and the long run

Answer 25

short run-the period oof time during which at least ONE of a firms inputs in FIXED

long run-period of time in which a firm can vary allllll its inputs, adopt new technology and increase or decrease the size of its physical plant

Question 26

describe the relationship between marginal cost and average total cost

Answer 26

if marginal costs for a given output is below average total cost, average total cost will decrease as output increases. if marginal cost equals average total cost, average total cost is at its minimum value

Question 27

is it possible for technological change to be negative. if so give an example

Answer 27

could be negataive, for instance, when a natural disaster hits, or when a firm hired less experienced workers. in these cases, the firms would produce a lower level of output with the same inputs

Question 28

fill in the missing values in the following table.

Answer 28

fill in first two

then subtract and divide

Question 29

sally quit her job as an auto mechanic earing 50k a year to start her own business. to save money she operates her business out of a small building she owns which, until she started her own business, she had rented out for $10,000 per year. she also invested her $20,000 savings (which earned a market interest rate of 5% per year) in her business. you are given the following information about the first year of her operations.

total rev 120,000
cost of labor 40,000
cost of materials 15,000
equipment rental 5,000

calcualte her economic costs
accounting acosts
implicit costs
sally tells you that she would really like to move to a location closer to town but she decided against it because “right now I dont pay any rent and it will cost me $10,000 a year to rent near town” do you agree with her reasoning

Answer 29

economic costs-labor+materials+equipment+opp. cost+interest rate x20,000+beginning opp. cost
accounting=labor+materials+rental
implicit=second half of opp costs
her opp costs is apart of business.

Question 30

what are economies of scale? what are diseconomies of scale?

Answer 30

occur when a firms long run average costs fall as it increases output. diseconmies of scale occur when a firms long-run average costs rise as the firm increases output.

Question 31

identify the curves
A
B
C
value of FIXED COSTS when the Q=10
VARIABLE COST when Q=10
TOTAL COST when Q=10
AVERAGE FIXED COST when Q=10
AVERAGE TOTAL FIXED COST when Q=10
on the graph identify the area that represents the total variable cost of production when the quantity of output=10
on the graph identify the area that represents the fixed cost of production when the Q=10

Answer 31

marginal cost curve
average total cost curve
average variable cost curve
150
70
220
15
22
the area of the rectangle 
the area of the rectangle