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

A firm produces 15 units of output from the last dollar it spends on labor and 10 units from the last dollar spent on capital. The firm should

Refer to Scenario 7.8 below to answer the question(s) that follow. SCENARIO 7.8: A swimming pool cleaning company has the following production possibilities. With one, two, three, and four workers, the company can clean 5, 12, 17, and 20 pools per day, respectively. -Refer to Scenario 7.8. The marginal product of the fourth worker is

Refer to Scenario 7.6 below to answer the question(s) that follow. SCENARIO 7.6: Upon graduating with an accounting degree, you open your own accounting firm of which you and your assistant are the only employees. To start the firm you passed on a job offer with a large accounting firm that offered you a salary of $50,000 annually. Last year you earned a total revenue of $120,000. Rent and supplies last year were $50,000. Your assistant's salary is $30,000 annually. -Refer to Scenario 7.6. Your annual economic profit 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 Scenario 7.4 below to answer the question(s) that follow. SCENARIO 7.4: You own and are the only employee of a company that sells custom embroidered pet sweaters. Last year your total revenue was $120,000. Your costs for equipment, rent, and supplies were $30,000. To start this business you invested an amount of your own capital that could pay you a $50,000 a year return. -Refer to Scenario 7.4. Your accounting profit last year was

Refer to the information provided in Figure 7.9 below to answer the question(s) that follow. Figure 7.9 -Refer to Figure 7.9. The slope of isocost CE is

Refer to Scenario 7.1 below to answer the question(s) that follow. SCENARIO 7.1: You are the owner and only employee of a company that writes computer software that is used by gamblers to collect sports data. Last year you earned a total revenue of $90,000. Your costs for equipment, rent, and supplies were $60,000. To start this business you invested an amount of your own capital that could pay you a return of $40,000 a year. -Refer to Scenario 7.1. A yearly normal return for your computer software firm would be

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 $30 per unit and its cost of labor is $60 per unit, the isocost line represents a total cost of

Related to the Economics in Practice on page 155: Which of the following is the best analysis of the question of how fast delivery truck drivers should drive in order to reduce costs?

Isoquants are downward sloping because

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 $15 per unit and its cost of labor is $30 per unit, the isocost line represents a total cost of

The ________ to produce any given level of output is indicated by the point of tangency between an isocost line and the isoquant corresponding to that level of output.

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. The slope of the isocost line (in absolute value) is

Assume the total product of three workers is 60 and the total product of four workers is 80. The four worker's average product is ________ while the fourth worker's marginal product is ________.

The equation (MP_L/P_L) = (MP_K/P_K) represents

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 general formula for the slope of any of the isocost lines is

The Cakery Bakery sells 200 muffins at a price of $2 per muffin. Its explicit costs for producing 200 muffins are $350. If the bakery is earning a normal rate of return, then its implicit costs must be

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. The firm's level of total cost is represented by the given isocost line. At the optimal combination of capital and labor, the firm produces ________ units of output.

A key decision that all firms make is which technology to use in the production of their products.

The total cost curve for a firm can be derived from isoquants and isocost lines by