Exam 11: Output and Costs

In 2008, Precision Pattern Interiors, which makes high-end aircraft interiors, began a $1 million renovation of a building at the Hutchinson Air Base Industrial Tract south of Yoder, Kansas. The company will also add some $400,000 in new equipment and triple its Yoder work force. Why would the long run decisions be riskier than the short run decisions?

-The above table gives some cost data for Peter's Pickles. Peter's fixed cost is $20. The average total cost (ATC) when 5 barrels of pickles are produced is

All the production points that lie above the total product curve are inefficient.

-Based on the production data for Pat's Pizza Parlor in the above table, which of the following pair of workers have the same average product?

Which of the following factors is fixed in the long run?

The vertical distance between a firm's total cost (TC) and its total variable cost (TVC) curves

-In the table above, the marginal product of the 5th worker is ________ units per week.

Angel Rodriguez pulls up in his 24-foot panel truck in front of Sezz Medi Brick Oven Pizza in Upper Manhattan. Even though it's the middle of the summer, he's delivering- firewood. He says even though fuel costs have doubled in the past year, it's still worth the premium he gets delivering ash and cherry to the captive and growing market in NYC. How does the doubling of fuel costs affect Angel's short run costs?

What is the law of diminishing returns? Why is this proposition called a "law"?

-The above (incomplete) table provides information about the relationships between labor and various product measures. The total product that can be produced with 6 units of labor is

-The table above shows the short-run product schedule for Virginia's Tee-Shirts. What is the average product associated with hiring the fourth worker?

What are economies of scale? What is the main source of economies of scale?

Minneapolis business Rogue Chocolatier sells specialty chocolate bars with a high cocoa content. Most chocolate companies use already processed chocolate to craft their sweets. But Rogue buys raw cocoa beans, and roasts and grinds them until they're in a liquid state and then runs the chocolate through a big squat machine with rollers. Which statement is true for Rogue?

-The above table gives some production and cost information for Flaming Fernando's, a restaurant that sells Fiery Frijoles. What is the average variable cost of producing 1,000 frijoles?

"Marginal cost eventually increases because of the law of diminishing returns." True or false? Explain.

A firm's total product curve shows

Over the range of output for which the marginal product of labor curve is negatively sloped, the marginal cost curve is negatively sloped.

-Silvio's Pizza is a small pizzeria. The firm's production function is shown in the table above. Suppose that Silvio's costs include only the cost of renting ovens, which is $100 per oven per week, the labor cost, $280 per worker per week, and the opportunity cost of Silvio's entrepreneurship, $1,000 per week. With Plant 2, Silvio's average product per worker is highest if ________ workers per week are employed.

Cost schedule -In the above table, the average total cost of producing 14 units of output is

The law of diminishing returns states that as a firm increases