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

The table below gives data on output for a firm in the short run. The firm is able to hire labor and its TPP is given. Compute the APP, MPP, and MRP for labor if the price of the good is fixed at $12 per unit.

Give a short concise definition for the following terms and explain their relationship to the study of economics. a. Marginal physical product b.Marginal revenue product c. Law of diminishing returns d. Economies of scale

Figure 7-11   Figure 7-11 shows an average cost curve with points on it that correspond to three quantity levels. Which of the following statements must be wrong?

A firm produces 2,000 high-quality bicycles per year.   At this output, AVC $300 and the firm's fixed costs are $200,000.   The firm's total costs are

Figure 7-8   Of the graphs in Figure 7-8, which represents total cost?

The short-run average cost curve shows the lowest possible average cost corresponding to each output level, assuming that all inputs are variable.

John Amaker owns orange groves and hires pickers for a two-week period as shown in Table 7-3. In Table 7-3, negative returns set in with picker

Cost curves in the long run differ from cost curves in the short run.

Table 7-4 Table 7-4 shows a production relationship. The cost of one day of labor is $65 and the product price is $1 per unit. How much will the labor input increase if the capital stock were increased from 3 to 4?

Figure 7-14   Of the long-run AC curves in Figure 7-14, which displays increasing returns to scale for all levels of output?

If a firm has increasing returns to scale at all levels of output, then the

Figure 7-15   For a firm at equilibrium, at point A in Figure 7-15,

Figure 7-8   Of the graphs in Figure 7-8, which diagram is most likely to be the marginal cost?

The long-run average cost curve

A production indifference curve shows all combinations of input quantities capable of producing a given quantity of output.

USX, a steel company, reduced the number of man-hours required to produce a ton of steel from 10.8 in 1982 to 3.8 in 1990, thereby eliminating 55,000 jobs. Technically, this rise in productivity means the

For most firms, the short run is a one-year period.

Figure 7-1   . In Figure 7-1, which graph best represents total physical product with diminishing returns?

The rule that states that the marginal revenue product equal to price does not hold when there are more than two inputs.

Firms choose the highest production indifference curve they can obtain given the lowest possible budget line.