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

Refer to Scenario 7.7 below to answer the question(s) that follow. SCENARIO 7.7: A lawn service company has the following production possibilities. With one, two, three, and four workers, the company can mow 4, 9, 12, and 14 lawns per day, respectively. -Refer to Scenario 7.7. The average product of labor with three workers is

Related to the Economics in Practice on page 155: You own a truck and use it to deliver merchandise to retailers and hire a driver to make such deliveries. The speed at which you instruct the driver to drive depends on

The Wax Works sells 500 candles at a price of $5 per candle. The Wax Worksʹ total economic costs for producing 500 candles are $3,000. The Wax Worksʹ economic profit is

If marginal product is greater than average product, then

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 level of total cost is represented by the given isocost line, the firm's optimal combination of capital and labor is given by

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

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. The slope of isocost CD is

If a firm makes an economic profit, it is making at least a normal rate of return.

The slope of the isoquant is

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. A yearly normal return for your company is

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 The firm's isocost line could shift from CD to AB if

Refer to Scenario 7.7 below to answer the question(s) that follow. SCENARIO 7.7: A lawn service company has the following production possibilities. With one, two, three, and four workers, the company can mow 4, 9, 12, and 14 lawns per day, respectively. -Refer to Scenario 7.7. The average product of labor with four workers is

The optimal method of production is the one that

If the first worker produces ten custom picture frames a day, and the second worker produces twelve additional custom picture frames a day, then diminishing marginal returns have not yet set in.

To minimize costs, a firm should use more labor and less capital if the product derived from the last dollar spent on labor is ________ the product derived from the last dollar spent on capital.

If the marginal product of labor equals the average product of labor, then the

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 marginal product of the third worker is

Refer to the information provided in Figure 7.10 below to answer the question(s) that follow. Figure 7.10 -Refer to Figure 7.10. If this firm's cost of capital is $40 per unit and its cost of labor is $20 per unit, the isocost line represents a total cost of

Refer to Scenario 7.7 below to answer the question(s) that follow. SCENARIO 7.7: A lawn service company has the following production possibilities. With one, two, three, and four workers, the company can mow 4, 9, 12, and 14 lawns per day, respectively. -Refer to Scenario 7.7. The marginal product of the third worker is

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. The slope of the isocost line is