Exam 11: Output and Costs

"Marginal cost is the increase in total cost that results from a one-unit increase in a variable input." True or false? Explain.

Which of the following is FALSE?

Jefferson's Cleaners -Using the above table, when Jefferson's Cleaners hires three workers,

Total fixed cost

-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. Suppose Silvio's uses Plant 2. If Silvio hires the 4th worker, the firm will experience ________ marginal returns.

All the production points that lie ________ the total product curve are attainable and ________.

Output (pizzas per day) -Tony's Pizza's production function is shown in the table above. Tony hires workers at a wage rate of $50 a day and his total fixed cost is $100 for Plant 1 and $150 for Plant 2. a) Calculate Tony's Pizza's average total costs for Plant 1. Draw the short-run average total cost curve. b) Calculate average total costs for Plant 2. Draw the short-run average total cost curve on the same figure that you used for part a. c) In the figure, illustrate Tony's long-run average cost curve. d) If Tony wants to produce 34 pizzas per day, what plant size should he choose? Over what output range is it efficient to operate Plant 1?

Increasing marginal returns means that as the firm expands its output, its

-Draw an average total cost curve, an average variable cost, and a marginal cost curve all on the same graph. Make sure to correctly label the axes. What relationship must exist between the marginal cost curve and the average total cost and average variable cost curves?

-The above table gives some of the costs of the Delicious Pie Company. What is the average total cost of producing 200 pies?

Output (pizzas per day) -Tony's Pizza's production function is shown in the table above. Tony currently operates Plant 1. He hires workers at a wage rate of $50 a day and his total fixed cost is $100. a) Calculate Tony's Pizza's total variable cost and total cost for each output level. b) Calculate Tony's marginal costs. c) Calculate the average fixed costs, average variable costs, and average total costs. d) Draw Tony's marginal, average variable, and average total cost curves in one figure. What is the relationship between marginal cost and average cost?

Which of the following statements is correct?

What are diseconomies of scale and why might they occur?

Output (pizzas per day) -Tony's Pizza's production function is shown in the table above. Tony currently operates Plant 2. He hires workers at a wage rate of $50 a day and his total fixed cost is $150. a) Calculate Tony's Pizza's total variable cost and total cost for each output level. b) Calculate the marginal costs. c) Calculate the average fixed costs, average variable costs, and average total costs. d) Suppose that total fixed cost increases to $200. Explain what changes occur in the 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. Which of Precision Pattern Interiors' decisions is a long run decision?

When the marginal product of labor is a maximum, the average product of labor is ________.

The range of output over which a firm's average variable cost is decreasing is the same as the range over which its

A firm is operating in its range of economies of scale and is on both its LRAC curve and its short-run ATC curve. At that level of output, the slope of its LRAC curve is

When the total product curve is drawn in a figure that measures employment along the horizontal axis, it is a graph that shows the

-The table above gives a firm's total product schedule. Suppose labor is the only variable factor of production. The price of labor is $500 per week and total fixed costs are $600 per week. What is the total cost of producing 70 units?