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Exam 7: The Costs of Production

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Question 81

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One In the News article titled "Funeral Giant Moves In on Small Rivals" reports that profit for a Houston-based funeral giant is 31 cents on every dollar versus a profit of 12 cents for the funeral industry in general.Such profits are most likely the result of

A) Constant returns to scale.
B) Economies of scale.
C) Higher minimum average costs.
D) A downward shift in the production function.

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

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Question 82

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$\begin{array}{l}\begin{array} { | c | c | } \hline \begin{array} { c } \text { Output } \\\text { (Units per Day) }\end{array} & \begin{array} { c } \text { Total Cost } \\\text { (Dollars per Day) }\end{array} \\\hline 0 & 16 \\\hline 1 & 30 \\\hline 2 & 42 \\\hline 3 & 58 \\\hline 4 & 78 \\\hline\end{array}\\\text { Table 21.4 }\end{array}$ At 4 units of output in Table 21.4, total fixed costs are

A) $78.00.
B) $19.50.
C) $16.00.
D) $20.00.

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

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Question 83

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Intel's chief executive says the company might expand the technology it is using in its planned $2.5 billion chip-manufacturing factory in China if the U.S.government allows it, underscoring the technology giant's ambitions in the world's fourth-biggest economy.The Intel executive is making a

Which of the following is a factor of production for the Little Biscuit Bread Company?

Marginal cost

The productivity of any input is independent and is not affected by the other resources that are used.

$\begin{array}{l}\begin{array} { | c | c | } \hline \begin{array} { c } \text { Output } \\\text { (Units per Day) }\end{array} & \begin{array} { c } \text { Total Cost } \\\text { (Dollars per Day) }\end{array} \\\hline 0 & 16 \\\hline 1 & 30 \\\hline 2 & 42 \\\hline 3 & 58 \\\hline 4 & 78 \\\hline\end{array}\\\text { Table 21.4 }\end{array}$ At 3 units of output in Table 21.4, average fixed costs are

$\begin{array}{l}\begin{array} { | c | c | } \hline \begin{array} { c } \text { Output } \\\text { (Units per Day) }\end{array} & \begin{array} { c } \text { Total Cost } \\\text { (Dollars per Day) }\end{array} \\\hline 0 & 16 \\\hline 1 & 30 \\\hline 2 & 42 \\\hline 3 & 58 \\\hline 4 & 78 \\\hline\end{array}\\\text { Table 21.4 }\end{array}$ For the output levels in Table 21.4, the minimum of the average variable cost curve occurs at a production rate of

In the long run, which of the following is likely to be a variable cost?

Economists point out that if it were not for diminishing returns, we could grow enough food to feed the world in a flowerpot.Explain what they mean.

$\begin{array}{l}\begin{array} { | l | r | r | r | r | } \hline \text { Output (units per day) } & 0 & 10 & 20 & 30 \\\hline \text { Total cost (dollars per day) } & \$ 40 & \$ 54 & \$ 62 & \$ 80 \\\hline\end{array}\\\text { Table } 21.2\end{array}$ For the output levels in Table 21.2, the minimum of the average variable cost curve occurs at a production rate of

Economies of scale

Total output may continue to rise even though marginal physical product is negative.

Complete Table 21.3 below: $\begin{array}{l}\begin{array} { l l l } \text { Units of } & \text { Units of } \\\text { Labor } & \text { Output } & \text { MPP } \\0 & 0 &\underline{\quad\quad} \\1 & \underline{\quad\quad} & 30 \\2 & 66 & \underline{\quad\quad}\\3 &\underline{\quad\quad} &30 \\4 & 116&\underline{\quad\quad}\end{array}\\\text { Table } 21.3\end{array}$ How many units of output can be produced when three units of labor are employed in Table 21.3?

Megan used to work at the local pizzeria for $15,000 per year but quit in order to start her own deli.To buy the necessary equipment, she withdrew $20,000 from her inheritance (which paid 8 percent interest) .Last year she paid $25,000 for ingredients and $500 per month rent but had revenue of $50,000.She asked her dad the accountant and her mom the economist to calculate her costs for her.

Diseconomies of scale are reflected in

Higher education levels and better management