hw 8 Flashcards
(20 cards)
Alex works his lemonade stand for two hours. He spends $10 for ingredients and sells the lemonade for $60. In the same two hours, Alex could have mowed his neighbor’s lawn (using the neighbor’s equipment and fuel) for $40. Alex has an accounting profit of _____ and an economic profit of ______.
a.$50, $10
b.$90, $50
c. $10, $50
d.$50, $90
a. $50,$10
Diminishing marginal product explains why, as a firm’s output increases…
a.The production function and the total cost curve both get steeper.
b.The production function gets flatter while the total cost curve gets steeper.
c.The production function and the total cost curve both get flatter.
d.The production function gets steeper while the total cost curve gets flatter.
b. the production functions get flatter while the total curve gets steeper
The Fender guitar company produces 1,000 packs of guitar strings each day at a total cost of $5,000. If it were to increase production to 1,001 units, its total costs would rise to $5,008. What does this information tell you about the firm?
a. Marginal cost is $5 and average variable cost is $8.
b. Marginal cost is $8 and average variable cost is $5.
c. Marginal cost is $5 and average total cost is $8.
d.Marginal cost is $8 and average total cost is $5.
d. marginal cost is $8 and average total cost in $5
Fender produces 20 guitars each day with an average total cost of $350 and a marginal cost of $300. If it were to increase production to 21 guitars, which of the following must occur?
a.Marginal cost would decrease
b.Marginal cost would increase
c.Average total cost would decrease
d. Average total cost would increase
c. average total cost would decrease
Pepe LePew has been making French wine. It’s been a one person company and Pepe has been doing it all. Pepe now hires someone, it is now a two person company, and they divide the work so that they can each specialize and be more productive. Their winery will likely exhibit _________ of scale and ___________ average total cost.
a. Economies, falling
b.Economies, rising
c.Diseconomies, falling
d. Diseconomies, rising
a. economies, falling
The government imposes an annual $1,000 license fee on all pizza restaurants. Which cost curves shift as a result?
a.Average total cost and marginal cost
b.Average total costs and average fixed cost
c.Average variable cost and marginal cost
d.Average variable cost and average fixed cost
b. average total costs and average fixed cost
A firm’s total cost can be divided between fixed costs and variable costs. _____ costs are costs that do not change when the firm alters the quantity of output produced. _______ costs are costs that change when the firm alters the quantity of output produced.
a.Variable, fixed
b.Fixed, variable
c. Modified fixed, variable
d.Straight fixed, variable
b. fixed, variable
_______ total cost is the total cost divided by the quantity of output. _______ cost is the amount by which total cost rises if output is increased by one unit.
a.Average, Marginal
b.Fixed, Variable
c.Marginal, Average
d. Variable, Fixed
a. average, marginal
Which of the following are true?
a.Marginal cost eventually rises with the quantity of output
b.The average total cost curve is always U-shaped.
c. The marginal cost curve crosses the average total cost curve and the average variable cost curve at their minimums.
d.All of these are true.
e. None of these are true
d. all of these are true
Law of diminishing marginal productivity states:
a.As more of a variable input is added to an existing fixed input, after some point the additional output from the additional input will fall
b.As more of a variable input is added to an existing fixed input, after some point the additional output from the additional input will rise
c.As more of a fixed input is added to variable inputs, after some point the additional output for the additional input will fall
d.Say what?
a. as more of a variable input is added to an existing fixed input after some point the additional output from the additional input with fall
Fixed costs do not change with increasing output, so why do average fixed costs change with increasing output?
a.They increase as output increases because the fixed costs are spread over a larger quantity of output.
b. They decrease as output increases because the fixed costs are spread over a larger quantity of output.
c.They don’t–average fixed costs, the same as fixed costs, are fixed and do not change.
d.None of these answers are correct
b. they decrease as output increases because the fixed costs are spread over a larger quantity of output
The U-shape of ATC and AVC curves is due to:
a.When output is increased in the short run, it can only be done by increasing the variable input
b.The law of diminishing productivity causes marginal and average productivities to fall
c. As average and marginal productivities fall, average and marginal costs rise
d.All of these answers are correct
d. all of these are correct
Which of the following are true?
a.If marginal productivity is rising, marginal costs are falling
b. If average productivity is falling, average costs are rising
c.Both A and B
d. Neither A or B
c. both A and B
Which of the following are true?
a. Production exhibits economies of scale when long-run average total costs decrease as output increases
b. Production exhibits diseconomies of scale when long-run average total costs increase as output increases
c. Constant returns to scale occur when production techniques can be replicated again and again to increase output without an increase or decrease in marginal costs
d. All of these answers are true
d. all of these are true
The increase in total cost that arises from one more additional unit of production is called:
a.Implicit costs
b.Variable costs
c.Marginal costs
d. Average fixed costs
c. marginal costs
Variable cost divided by the quantity of output is called:
a. Average variable cost
b.Marginal cost
c.Average marginal cost
d. Total variable cost
a. average variable cost
Which of the following would you expect to have the largest indivisible setup costs? (You may need to do some research to find typical kW or MW sizes for these power plants.)
a. A nuclear power plant
b.Rooftop solar panels
c. A wind powered turbine
d. An electric battery
a. a nuclear power plant
Which of the following would you expect to have the largest economies of scale?
a.A corner grocery store
b. A supermarket such as Publix
c.Both the same
d.Neither one
b. a supermarket such as Publix
Which of the following would you expect to have the larger economies of scale?
a. Two separate locations, each with a 825 MW nuclear plant
b.One location with two 825 MW nuclear plants
c.Both the same
d.Neither
b. one location with two 825 MW nuclear plants
There are two cars. One is a POS car with a low capital cost and high operating costs (gas guzzler), and the other is a new car with a high capital cost and low operating costs. You would expect the ______ to have greater economies of scale and _________ marginal costs. (If you don’t know what a POS car is, ask someone or email me.)
a.new car, lower
b.new car, higher
c.POS car, lower
d.POS car, higher
a. new car, lower
