Econ Ch13 - Costs of Production

Farmer McDonald gives banjo lessons for $20 per

hour. One day, he spends 10 hours planting $100

worth of seeds on his farm. What total cost has he

incurred?

• $100

• $200

• $300

• $400

Xavier opens up a lemonade stand for two hours.

He spends $10 for ingredients and sells $60 worth

of lemonade. In the same two hours, he could have

mowed his neighbor’s lawn for $40. Xavier earns

an accounting profit of _________ and an economic

profit of _________.

• $10; $50

• $50; $10

• $50; $90

• $90; $50

Diminishing marginal product explains why, as a

firm’s output increases,

• the production function and total-cost curve both

  get steeper.

• the production function and total-cost curve both

  get flatter.

• the production function gets steeper, while the

  total-cost curve gets flatter.

• the production function gets flatter, while the

  total-cost curve gets steeper.

A firm is producing 1,000 units at a total cost of

$5,000. When it increases production to 1,001 units,

its total cost rises to $5,008. For this firm,

• marginal cost is $5, and average variable cost is $8.

• marginal cost is $8, and average variable cost is $5.

• marginal cost is $5, and average total cost is $8.

• marginal cost is $8, and average total cost is $5.

A firm is producing 20 units with an average

total cost of $25 and a marginal cost of $15. If

it increases production to 21 units, which of the

following must occur?

• Marginal cost will decrease

• Marginal cost will increase.

• Average total cost will decrease.

• Average total cost will increase.

The government imposes a $1,000 per year license

fee on all pizza restaurants. As a result, which cost

curves shift?

• average total cost and marginal cost

• average total cost and average fixed cost

• average variable cost and marginal cost

• average variable cost and average fixed cost

If a higher level of production allows workers to

specialize in particular tasks, a firm will likely

exhibit _________ of scale and _________ average

total cost.

• economies; rising

• economies; falling

• diseconomies; rising

• diseconomies; falling

If Boeing produces 9 jets per month, its long-run

total cost is $9 million per month. If it produces

10 jets per month, its long-run total cost is

$11 million per month. Boeing exhibits

• rising marginal cost.

• falling marginal cost.

• economies of scale.

• diseconomies of scale.