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Exam 13: The Costs of Production

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Question 51

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Scenario 13-13 Christine is an artist who creates custom cookie jars. Her annual revenue from selling the cookie jars is $90,000. The annual explicit costs of the materials used to make the cookie jars are $54,000. -Refer to Scenario 13-13. Christine used $5,000 from her personal savings account to buy pottery tools for her business. The savings account paid 1% annual interest. Christine could earn $6,000 per year as a tax preparer. What is the annual accounting profit of her cookie jar business?

A) $36,000
B) $35,950
C) $30,000
D) $29,950

E) None of the above
F) A) and C)

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Question 52

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Table 13-18 -Refer to Table 13-18. What is the average fixed cost of producing 450 units of output?

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AFC = FC/Q...

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Question 53

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For a firm, the production function represents the relationship between

Economies of scale often arise because higher production levels allow specialization among workers.

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. William can arrange 18 bouquets per day. What would be the total daily output of Kate's firm if she hired her husband?

Accounting profit is equal to

Describe the difference between the short run and the long run.

The marginal-cost curve intersects the average-total-cost curve at the minimum point of the average-total-cost curve.

If the marginal cost of producing the tenth unit of output is $3, and if the average total cost of producing the tenth unit of output is $2, then at ten units of output, average total cost is rising.

Tsintah weaves traditional Navaho rugs. She weaves and sells 50 rugs. Her average cost of production per rug is $50. She sells each rug for a price of $65. Tsintah's total revenues are

Table 13-6 Wooden Chair Factory -Refer to Table 13-6. Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is$20 per day regardless of the number of chairs produced. Assume the number of machines does not change. If the factory produces at a rate of 78 chairs per hour, what is the total machine cost per day?

Table 13-6 Wooden Chair Factory -Refer to Table 13-6. Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. If the factory produces at a rate of 35 chairs per hour, what is the total labor cost per hour?

Scenario 13-11 Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each. -Refer to Scenario 13-11. An accountant would calculate the total cost for one birdhouse to be

Average total cost will increase if .

Scenario 13-8 Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each. -Refer to Scenario 13-8. What are Wanda's total economic profits?

Adam Smith describes a visit to a car factory when discussing economies of scale in his book An Inquiry into the Nature and Causes of the Wealth of Nations.

Table 13-6 Wooden Chair Factory -Refer to Table 13-6. Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. If the factory produces at a rate of 70 chairs per hour and operates 8 hours per day, what is the factory's total labor cost per day?

There is general agreement among economists that the long-run time period exceeds one year.

The Big Blue Sky jet company has long-run total costs of $20 million if it produces 5 jets and long-run total costs of $24 million if it produces 6 jets. The Big Blue Sky jet company is experiencing

A second or third worker may have a higher marginal product than the first worker in certain circumstances.