Exam 7: The Production Process: the Behavior of Profit-Maximizing Firms

Related to the Economics in Practice on page 150: For pineapple farmers in Ghana, the choice of how much fertilizer to use was highly dependant on social learning, where the farmers based their decisions on

A graph showing all the combinations of capital and labor that can be used to produce a given amount of output is a(n)

Refer to the information provided in Figure 7.3 below to answer the question(s) that follow. Figure 7.3 -Refer to Figure 7.3. The marginal product of the second worker is ________ yards raked.

Refer to the information provided in Figure 7.11 below to answer the question(s) that follow. Figure 7.11 -Refer to Figure 7.11. If the firm's cost of capital is $18 per unit, then its cost of labor is ________ per unit.

The optimal method of production maximizes cost for a given level of output.

Refer to the information provided in Figure 7.3 below to answer the question(s) that follow. Figure 7.3 -Refer to Figure 7.3. The marginal product of the first worker is ________ yards raked.

If the marginal product of labor is less than the average product of labor, then the

The Sweet Success Bakery sells 400 cakes at a price of $10 per cake. Its total economic costs for producing 400 cakes are $500. The Sweet Success Bakery's economic profits are

Firms have an incentive to substitute labor for capital as the

Refer to the information provided in Figure 7.1 below to answer the following question(s). Figure 7.1 -Refer to Figure 7.1. A corn producer's profit is $1,500 and it is producing 500 bushels of output. Then he must have a cost per bushel of

Refer to Scenario 7.5 below to answer the question(s) that follow. SCENARIO 7.5: You own and are the only employee of a company that customizes bicycles. Last year your total revenue was $60,000. Your costs for rent and supplies were $25,000. To start this business you invested an amount of your own capital that could pay you a $45,000 a year return. -Refer to Scenario 7.5. Your accounting profit last year was

The marginal products of the first, second, and third workers are 20, 12, and 8, respectively. If four workers can produce 45 units of output, then the marginal product of the fourth worker is ________.

Assume that the relative prices of capital and labor have not changed. As a firm's expenditures for capital and labor increase, its isocost line

Refer to the information provided in Figure 7.2 below to answer the question(s) that follow. Figure 7.2 -Refer to Figure 7.2. The marginal product of the second worker is ________ lawns mowed.

Refer to the information provided in Figure 7.4 below to answer the question(s) that follow. Figure 7.4 -Refer to Figure 7.4. The average product with six workers is

Refer to the information provided in Table 7.5 below to answer the question that follows. Table 7.5 -Refer to Table 7.5. Suppose output varies, ceteris paribus, with labor input in the manner displayed in the table above. After how many units of labor do diminishing returns set in?

Refer to Scenario 7.3 below to answer the question(s) that follow. SCENARIO 7.3: Upon graduating with an accounting degree, you open your own accounting firm of which you are the sole employee. To start the firm you passed on a job offer with a large accounting firm that offered you a salary of $60,000 annually. Last year you earned a total revenue of $100,000. Rent and supplies last year were $50,000. -Refer to Scenario 7.3. Your annual economic profit is

For economic analysis, the short run is considered less than one year.

Refer to Scenario 7.2 below to answer the question(s) that follow. SCENARIO 7.2: You are the owner and only employee of a company that sets odds for sporting events. Last year you earned a total revenue of $100,000. Your costs for rent and supplies were $50,000. To start this business you invested an amount of your own capital that could pay you a return of $20,000 a year. -Refer to Scenario 7.2. Your accounting profit last year was

One worker produces 10 rocking chairs. If diminishing returns have already set in, a firm will need to hire more than two workers to produce 20 rocking chairs.