Exam 11: Production and Cost Analysis I

A business produces eight items and sells them for $25 each. The total cost of producing the items is $190 for explicit costs and $200 for implicit costs. Accounting profit is:

The law of diminishing marginal productivity implies that the marginal product of a variable input:

Give the definition of marginal product and average product and explain why if the marginal product is smaller than the average product,the average product must be decreasing.

The following graph shows average fixed costs, average variable costs, average total costs, and marginal costs of production. Average variable cost is minimized when output equals:

Define a firm and discuss its roles in the economy.

Refer to the table shown. If the average product is 6, the number of workers could equal: Number of workers Total output 1 4 2 10 3 18 4 28 5 35 6 41 7 45 8 48 9 50 10 49

Which of the following is the best example of a long-run decision?

Long-run decisions are:

If marginal costs are rising, average total costs must be rising.

Mr. Woodard's cabinet shop is experiencing rapid growth in sales. As sales have increased, Mr. Woodard has found it necessary to hire more workers. However, he has observed that doubling the number of workers has less than doubled his output. What is the likely explanation?

Refer to the table shown. If the average product is 8, the number of workers is: Number of workers Marginal product of workers 1 5 2 7 3 8 4 10 5 11 6 7 7 5 8 3 9 0 10 -1

How is accounting profit different from economic profit? How are they the same?

Short-run decisions are:

The following graph shows average fixed costs, average variable costs, average total costs, and marginal costs of production. The average fixed cost curve is represented by which curve?