Production and cost

Economists usually assume that ________ is a fixed input in the ________ run.

• labor; short

• capital; short

• labor; long

• capital; long

Total variable cost ________ as output increases, and total fixed cost ________ as output increases.

• increases; increases

• increases; decreases

• increases; does not change

• does not change; does not change

Total cost is calculated as

• the sum of total fixed cost and total variable cost.

• the product of average total cost and price.

• the sum of all the firm's explicit costs.

• the sum of average fixed cost and average variable cost.

Wilbur's Widgets, a widget company, produces 100 widgets. Its average fixed cost is $5 and its total variable cost is $300. What is the total cost of producing 100 widgets?

• $300

• $400

• $700

• $800

Dana spends $10,000 on remodeling a storefront that she then opens as a shoe store. The business has not been very successful, and she needs an additional $3,000 to keep the shoe store open. Which of the following is true?

• The $10,000 Dana spent on remodeling represents a part of the total variable cost of her business.

• The $3,000 represents her marginal costs of production.

• The $10,000 Dana spent on remodeling is a fixed cost of her business.

• The $3,000 Dana needs to keep the deli open represents her total fixed costs.

The total fixed costs for Cyndy's Floral Arrangements are $1,000. If Cyndy's Floral Arrangements produces 200 silk flower arrangements, the average fixed costs are

• $0.20.

• $5.0

• $5.20

• $2

Both Kate and John own saltwater taffy factories. Kate's factory has low fixed costs and high variable costs. John's factory has high fixed costs and low variable costs. Currently, each factory is producing 1,000 boxes of taffy at the same total cost. Complete the following statement with the correct answer. If each produces

• less, their costs will be equal.

• more, their costs will be equal.

• more, the costs of Kate's factory will exceed those of John's factory.

• less, the costs of Kate's factory will exceed those of John's factory.

Assuming the price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, what production technique should this firm use to produce 2 units of output?

• production technique A

• production technique B

• The firm is indifferent between production technique A and production technique B.

• It is impossible to determine if the firm should select production technique A or B because total fixed costs are not given.

A firm will begin to experience diminishing returns at the point where

• A. marginal cost increases.

• B. marginal cost decreases.

• C. marginal product increases.

• Both B and C are correct.

Marginal cost is ________ average variable cost when ________.

• equal to; average total cost is minimized

• less than; total cost is maximized

• greater than; average fixed cost is minimized

• equal to; average variable cost is minimized.