Exam 7: Technology, Production and Costs

Sally quit her job as an auto mechanic earning $50 000 per year to start her own business.To save money,she operates her business out of a small building she owns which,until she started her own business,she had rented out for $10 000 per year.She also invested her $20 000 savings (which earned a market interest rate of 5% per year)in her business.You are given the following information about the first year of her operations. Total revenue $120 000 Cost of labour 40 000 Cost of materials 15 000 Equipment rental 5000 a.Calculate her economic costs. b.Calculate her accounting costs. c.Calculate her implicit costs. d.Sally tells you that she would really like to move to a location closer to town but she decided against it because 'right now I don't pay any rent and it will cost me $10 000 a year to rent near town.' Do you agree with her reasoning?

Figure 7-13 -Refer to Figure 7-13.The lines shown in the diagram are isocost lines.If the price of labour is $50 per unit,what is the price of capital along the isocost CE?

A change in the slope of an isocost line is due to a change in

Economies of scale occur when

Which of the following explains why the marginal cost curve has a U shape?

Average fixed cost is equal to

An isocost line shows

The long run refers to a time period

The marginal product of labour is defined as

The production function shows

Which of the following is not a reason why firms experience economies of scale?

Which of the following equations is incorrect?

Figure 7-4 -Refer to Figure 7-4.What happens to the average fixed cost of production when the firm increases output from 150 to 200?

If fixed costs do not change,then marginal cost

Table 7-3 -Refer to Table 7-3.The table above refers to the relationship between the quantity of workers employed and the number of cardboard boxes produced per day by Manny's House of Boxes.The capital used to produce the boxes is fixed.Diminishing returns to labour are first observed in this example after Manny hires the ________ worker.

Table 7-3 -Refer to Table 7-3.The table above refers to the relationship between the quantity of workers employed and the number of cardboard boxes produced per day by Manny's House of Boxes.The capital used to produce the boxes is fixed.The highest value of the average product of labour is ________ when Manny hires ________ workers.

If production displays increasing marginal returns,then

As output increases,

Which of the following is an implicit cost of production?

If,when a firm doubles all its inputs,its average cost of production decreases,then production displays