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

Assume the total product of two workers is 80 and the total product of three workers is 90. The average product of three workers is ________, and the marginal product of the third worker is ________.

To determine the optimal method of production for a good or service, a perfectly competitive firm needs to know all of the following except

If capital is a variable input in production, the law of diminishing marginal returns implies that in the short run

When a firm maximizes total product in the short run, average product is

For economic analysis, the long run is any period in which all inputs are variable (regardless of the length of time involved).

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 economic profit last year was

A firm has no fixed factors of production in

Perfectly competitive firms must make all of the following decisions except

Refer to the information provided in Figure 7.5 below to answer the question(s) that follow. Figure 7.5 -Refer to Figure 7.5. Diminishing marginal returns set in after the ________ worker is hired.

The Wax Works sells 400 candles at a price of $6 per candle. The Wax Works' total costs for producing 400 candles are $2,500. The Wax Works' economic profit is

Economists consider the long run as a period of more than one year.

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

A production function shows the greatest amount that a firm will produce given the amount of labor input.

If we assume that labor is the only variable input, the slope of the total product curve in the short run

If the first worker produces five custom picture frames a day, and the second worker produces five additional custom picture frames a day, it is clear that diminishing marginal returns have not yet set in.

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

An act of production, as economists use the term, is demonstrated by which of the following?

Refer to the information provided in Figure 7.6 below to answer the question(s) that follow. Figure 7.6 -Refer to Figure 7.6. The shoe manufacturer currently produces 50 units of output. If this shoe manufacturer increases labor from 15 to 20, the marginal product of the 20th worker

Refer to the information provided in Figure 7.8 below to answer the question(s) that follow. Figure 7.8 -Refer to Figure 7.8. If the price of capital is $20, then along isocost line AB total cost is

A firm's isocost line shifts parallel inward from the original isocost line as its