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Exam 13: The Costs of Production

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Question 41

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Scenario 13-4 Suppose that Abdul opens a coffee shop. He receives a loan from a bank for $100,000. He withdraws $50,000 from his personal savings account. The interest rate on the loan is 8%, and the interest rate on his savings account is 2%. -Refer to Scenario 13-4. Abdul's explicit cost of capital is

A) $8,000.
B) $4,000.
C) $2,000.
D) $1,000.

E) None of the above
F) B) and D)

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Question 42

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Table 13-1 -Refer to Table 13-1. What is total output when 1 worker is hired?

A) 10
B) 30
C) 45
D) 75

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

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Question 43

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For a firm, the relationship between the quantity of inputs and quantity of output is called the

Which of the following statements is not correct?

When average total cost rises if a producer either increases or decreases production, then the firm is said to be operating at efficient scale.

If Danielle sells 300 wrist bands for $0.50 each, her total revenues are

Marginal costs are costs that do not vary with the quantity of output produced.

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm B is experiencing diseconomies of scale.

Table 13-2 -Refer to Table 13-2. What is the marginal product of the fourth worker?

Total revenue minus both explicit and implicit costs is called

In setting the production level, a firm's cost curves

Which of the following would be an example of an implicit cost?

The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm B is experiencing constant returns to scale.

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 could earn $6,000 per year preparing taxes. In calculating the economic profit of her cookie jar business, the $6,000 that Christine gives up is counted as part of her business's

Figure 13-10 -Refer to Figure 13-10. The firm experiences economies of scale if it changes its level of output from

The typical total-cost curve is U-shaped.

Accounting profit is greater than or equal to economic profit.

Figure 13-3 -Refer to Figure 13-3. The changing slope of the total cost curve reflects

Katherine gives piano lessons for $20 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmer's market. Katherine's accounting profits are