Chp 8 Flashcards
A firm has successfully adopted a positive technological change when
it can produce more output using the same inputs.
The difference between technology and technological change is that
technology refers to the processes used by a firm to transform inputs into output while technological change is a change in a firm’s ability to produce a given level of output with a given quantity of inputs.
Which of the following is an example of a long-run adjustment?
Walmart builds another Supercenter.
Which of the following is the best example of a short-run adjustment?
Your local Walmart hires two more associates.
Academic book publishers hire editors, designers, and production and marketing managers who help prepare books for publication. Because these employees work on several books simultaneously, the number of people the company hires will not go up and down with the quantity of books the company publishes during any particular year. The salaries and benefits of people in these job categories will be included in
fixed cost and total cost but not variable cost.
Which of the following is an implicit cost of production?
rent that could have been earned on a building owned and used by the firm.
Jayanthi moves her yoga studio from her home to a space she rents in Oakland, California. Holding everything else constant, as a result of this move,
her implicit cost falls and her explicit cost rises.
Golda Rush quit her job as a manager for Home Depot to start her own hair dressing salon, Goldilocks. She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest) and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year. In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 in expenses on equipment and hairdressing material. Based on this information, what is the amount of her explicit costs for the first year?
$45,500
Red Stone Creamery currently hires 5 workers. When it added a 6th worker, its output actually fell. Which of the following statements is true?
The marginal product of the sixth worker must be negative.
The law of diminishing marginal returns states
that at some point, adding more of a variable input to a given amount of a fixed input, will cause the marginal product of the variable input to decline.
When a firm produces 50,000 units of output, its total cost equals $6.5 million. When it increases its production to 70,000 units of output, its total cost increased to $9.4 million.
Within this range, the marginal cost of an additional unit of output is
$145
Average fixed costs of production
falls as long as output is increased.
When deciding on how much oil to pump from a well, oil companies look at the extra cost of producing an additional barrel of oil. This extra cost is known as
marginal cost.
If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm’s total variable cost at that level of output is
$700
