Exam 7: Production, Inputs, and Cost: Building Blocks for Supply Analysis

Table 7-4 Table 7-4 shows a production relationship. Assuming the capital stock is fixed at three units and the cost per day of labor is $65, what is the most labor that it is efficient to hire if the product price is $1 per unit?

If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing

For most firms, average total costs will decrease initially due to decreasing marginal physical product for the inputs used in the production process

A roller coaster operator produces thrill-packed rides using electricity and a roller coaster. For the roller coaster operator, electricity is

A Detroit business advertises, "The more we sell, the lower the price, and the lower the price, the more we sell." This statement implies that the firm is experiencing

A production indifference curve is sometimes called "isoquants" since the term implies equal quantities of output.

In most businesses, there is only one way to produce output.

Fixed cost increases when output rises.

Which of the following observations is true?

Figure 7-6   Which of the lines in Figure 7-6 represents a typical average fixed cost curve?

The expansion path of product indifference curves shows the cost-minimizing combination of inputs.

Product indifference curves bow inward toward the origin because of diminishing returns to substitution of inputs.

The principal determinants of total and average cost curves are the firm's technology and the prices of its inputs.

A firm's AC will eventually begin to rise because

If a firm wants to determine total cost, it needs

Total fixed cost

The different points on a cost curve represent alternative production possibilities in the same time period.

The total physical product of an input is the same thing as its

The average cost curve shows the total cost divided by quantity produced for various levels of output.

Explain briefly the following concepts: a.Increasing returns to scale b.Decreasing returns to scale c.Constant returns to scale