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Exam 13: The Costs of Production

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Question 61

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Which of the following measures of cost is best described as "the increase in total cost that arises from an extra unit of production?"

A) Variable cost
B) Average variable cost
C) Average total cost
D) Marginal cost

E) B) and C)
F) C) and D)

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Question 62

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A production function is a relationship between

A) inputs and quantity of output.
B) inputs and revenue.
C) inputs and costs.
D) inputs and profit.

E) B) and C)
F) A) and B)

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Question 63

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Accountants often ignore implicit costs.

Table 13-3 -Refer to Table 13-3.Each worker at Gallo's cork factory costs $12 per hour.The cost of each machine is $20 per day regardless of the number of corks produced.If Gallo's produces at a rate of 35 corks per hour,what is the total labor cost per hour?

Average total cost is equal to

Scenario 13-5 A certain firm produces and sells staplers. Last year, it produced 7,000 staplers and sold each stapler for $6. In producing the 7,000 staplers, it incurred variable costs of $28,000 and a total cost of $45,000. -Refer to Scenario 13-5.The firm's accounting profit for the year was

Implicit costs are costs that do not require an outlay of money by the firm.

Diminishing marginal product exists when the total cost curve becomes flatter as outputs increases.

Figure 13-7 -Refer to Figure 13-7.Which of the figures represents the total cost curve for a firm?

Table 13-9 -Refer to Table 13-9.What is variable cost when output equals 30 units?

Economists assume that the goal of the firm is to maximize

In the short run,a firm incurs fixed costs

Scenario 13-6 Farmer Jack is a watermelon farmer. If Jack plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 30 watermelons. If he plants 2 bags of seeds, he gets 50 watermelons. If he plants 3 bags of seeds he gets 60 watermelons. A bag of seeds costs $100, and the costs of seeds are his only costs. -Refer to Scenario 13-6.Which of the following statements is (are) true? (i) Farmer Jack experiences decreasing marginal product. (ii) Farmer Jack's production function is nonlinear. (iii) Farmer Jack's total cost curve is linear.

The marginal product of labor can be defined as

Figure 13-3 -Refer to Figure 13-3.In this diagram,the shift in the total product curve represents an increase in the firm's

Average total cost is very high when a small amount of output is produced because

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired.In addition,suppose that marginal cost when three workers are hired is $40 and the average total cost when three workers are hired is $50.What is the total cost of production when three workers are hired?

Susan used to work as a telemarketer,earning $25,000 per year.She gave up that job to start a catering business.In calculating the economic profit of her catering business,the $25,000 income that she gave up is counted as part of the catering firm's

Gordon is a senior majoring in computer network development at Smart State University.While he has been attending college,Gordon started a computer consulting business to help senior citizens set up their network connections and teach them how to use e-mail.Gordon charges $25 per hour for his consulting services.Gordon also works 5 hours a week for the Economics Department to maintain that department's Web page.The Economics Department pays Gordon $20 per hour.From this information we can conclude:

Although economists and accountants treat many costs differently,they both treat the cost of capital the same.