Exam 11: Behind the Supply Curve: Inputs and Costs

As production increases and the fixed cost is divided by larger quantities of output, average fixed cost drops. This is referred to as the _____ effect.

Use the following to answer questions: Figure: The Total Product -(Figure: The Total Product) Look at the figure The Total Product. As labor is hired between L₁ and L₂, the total product is _____ and the marginal product is _____.

The change in total cost resulting from a one-unit change in quantity is _____ cost.

A fixed cost:

Use the following to answer questions: Figure: Short-Run Costs II -(Figure: Short-Run Costs II) Look at the figure Short-Run Costs II. At 6 units of output, marginal cost is approximately:

The advantage of specialization in production is one of the primary reasons for decreasing returns to scale.

Use the following to answer questions: -(Table: Cost Data) Look at the table Cost Data. The average variable cost of producing 4 purses is:

Use the following to answer questions: -(Table: Workers and Output) Look at the table Workers and Output. After graduation you achieve your dream of opening an art shop that specializes in selling mud statues. You pay $10 per day on a loan from your uncle, and regardless of how much you produce, you pay $10 per day to each of the workers who make the mud statues. The total cost of producing 48 statues is:

The long-run average cost curve will be upward-sloping when the firm has:

If the average total cost curve and the average variable cost curve are both U-shaped, then the minimum point of the average total cost curve must lie above the minimum point of the average variable cost curve.

Use the following to answer questions: -(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the average variable cost of 2 cakes?

Use the following to answer questions: -(Figure: Marginal Product of Labor) Look at the figure The Marginal Product of Labor. The total product of labor for eight workers is _____ bushels.

When Caroline's dress factory hires two workers, the total product is 50 dresses. When she hires three workers, total product is 60, and when she hires four workers, total product is 75. The slope of the marginal product curve when two to four workers are hired is:

Average total cost is:

Use the following to answer questions: Figure: The Total Product -(Figure: The Total Product) Look at the figure The Total Product. When L₂ labor is hired, the total product is at a _____ and the marginal product of labor is _____.

The slope of a long-run average total cost curve exhibiting increasing returns to scale is:

The average total cost curve has a U shape because the ______ effect is dominant at low levels of output, and the _____ effect is dominant at high levels of output.

Use the following to answer questions: -(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases three mixers and bakes 400 cakes per day, what is her average total cost?

When a firm adds physical capital, labor will become more productive in the short run.

Use the following to answer questions: -(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases two mixers and bakes 200 cakes per day, what is her average total cost?