Exam 5: Production and Cost Analysis in the Short Run

Scenario 1: The following is a hypothetical short-run production function: -Refer to Scenario 1. What is the marginal product of the third hour of labor?

So long as marginal cost is greater than average variable cost, both average variable cost and average total cost must increase as output is increased.

In the context of a production function, the remote order takers in the fast food industry would be classified as:

The marginal product of a variable input is calculated by dividing total product by the change in the variable input.

Use the following table to answer questions a-c. a. What is the average fixed cost of producing 4 units of output? b. What is the marginal cost of producing the third unit of output? c. At what level of output does the firm encounter diminishing marginal returns? How do you know?

The amount of money a firm pays to lease a building it uses for office space is called:

The payment of wages by a firm is an example of:

Which of the following statements concerning the relationships among the firm's total cost functions is false?

Assume a factory that currently employs 25 workers is considering adding another 5 workers to its payroll. Economists would classify this as:

Suppose a sole proprietorship is earning total revenues of $100,000 and is incurring explicit costs of $75,000. If the owner could work for another company for $30,000 a year, we would conclude that:

If a firm experiences constant returns to the variable input in the short run,

Marginal product equals 0 when:

Complete the table below, which represents the production costs for a typical firm. Round numbers to the nearest tenth.) At what level of output do diminishing returns set in? How do you know?

Scenario 1: The following is a hypothetical short-run production function: -Refer to Scenario 1. The production function illustrated in the table:

-Refer to Scenario 2. The marginal cost of the sixth unit of output is:

For a particular production function, over the range of output where marginal product rises as units of the variable input are added to the fixed input, marginal cost will be:

By definition, in the typical firm's short-run production function all inputs are fixed in amount.

Assume that at the current level of output a firm's marginal cost and average variable cost of production are both decreasing. Based on this, we can conclude that the marginal product and average product of the firm's variable inputs) are both increasing.

The "long run" is defined as a period of time long enough for the quantities of all of the inputs to production to vary.

In the general textbook treatment, the firm's short run average variable and average total cost curves are U-shaped, while the average fixed cost curve is downward sloping over the entire range of output. Explain why.