Exam 7: Technology, Production and Costs

Explain whether each of the following is a fixed cost or a variable cost for Damian Dandridge's tattoo parlor. a.The payment he makes to buy tattoo ink. b.The wages he pays his employees. c.The $500-per-month payment he makes to advertise his shop on highway billboards. d.The lease payment he makes to the landlord who owns the building where his shop is located. e.The payment he makes on his liability insurance policy.

A firm's short-run average total cost curve is parallel to its short-run average variable cost curve.

The explicit cost of production is also called

Average variable cost can be calculated using any of the formulas below except

If production displays diseconomies of scale,the long-run average cost curve is

Figure 7-7 Figure 7-7 shows the cost structure for a firm. -Refer to Figure 7-7.When the output level is 100 units,average fixed cost is

If 11 workers can produce 53 units of output while 12 workers can produce 56 units of output,what is the marginal product of the 12th worker?

Suppose the total cost of producing 40 000 flash drives is $120 000,and the fixed cost is $30000. a.What is the variable cost? b.When output is 40 000,what are the average variable cost and the average fixed cost? c.Assuming the cost curves have the usual shape,is the dollar difference between the average total cost and the average variable cost greater when the output is 40 000 flash drives or when the output is flash drives? Explain.

If the average variable cost curve is above the marginal cost curve,then

Suppose Argyle Sachs has to choose between building a smaller sweater factory and a larger sweater factory.In the following graph,the relationship between costs and output for the smaller factory is represented by the curve ATC₁,and the relationship between costs and output for the larger factory is represented by the curve ATC₂. a.If Argyle expects to produce 3600 sweaters per month,should he build a smaller factory or a larger factory? Briefly explain. b.If Argyle expects to produce 5000 sweaters per month,should he build a smaller factory or a larger factory? Briefly explain. c.If the average cost of producing sweaters is lower in the larger factory when Argyle produces 6500 sweaters per week,why isn't it also lower when Argyle produces 4000 sweaters per week?

Which of the following would be categorised as an opportunity cost? A.not being able to spend your $10 000 savings if you sink the money into your business B.the cost of purchasing supplies for your house-cleaning business C.the cost of purchasing auto insurance for your dry-cleaning delivery business

Table 7-4 -Refer to Table 7-4.The table above shows the following relationship between hours spent fishing and the quantity of fish caught for Juan,a commercial fisherman. a.Complete the Marginal Product column in Table 11-4. b.Characterise the production function,i.e.does the production function display increasing marginal returns,diminishing marginal returns,etc. c.Using the data above,graph Juan's marginal product curve.Be sure to label the horizontal and vertical axes.Is your graph consistent with your answer to part (b)? Explain. d.Juan uses the following inputs for fishing - a small wooden boat (B),a fishing pole (P)and of course,his labour (L).Treating the boat and the fishing pole as fixed inputs and using the data above,graph Juan's Total Product of labour curve.Be sure to label the horizontal and vertical axes. e.(Extra Credit)The opportunity cost of Juan's time is $8 per hour.If Juan receives $2 per pound for his fish,what is the optimal number of hours he should spend fishing? Explain how you arrived at your answer.Hint: Recall marginal benefit and marginal cost analysis.

Economic costs of production differ from accounting costs in that

Table 7-1 Table 7-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. -Refer to Table 7-1.What is the marginal product of the 4th worker?

In the long run,all of a firm's inputs are variable.

If the 15th unit of output has a marginal cost of $29.50 and the average cost of producing 14 units of output is $30.23,what will happen to the average cost of production if the 15th unit is produced?

On an isoquant/isocost graph,the least cost input combination of producing a given output is

Which of the following is an example of market 'production,' as used by economists?

In a diagram showing the average total cost and average variable cost curves,the minimum point of the average total cost is

Figure 7-7 Figure 7-7 shows the cost structure for a firm. -Refer to Figure 7-7.If output is 100 units,what is the fixed cost of production?