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Exam 9: Businesses and the Cost of Production

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Question 81

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Answer the question on the basis of the following cost data: $\begin{array} { c c c } &&\text { Total } \\\text { Output }&&\text { Cost }\\\hline0 & & \$ 24 \\1 & & 33 \\2 & & 41 \\3 & & 48 \\4 & & 54 \\5 & & 61 \\6 & & 69\end{array}$ Refer to the data.The profit-maximizing output for this firm:

A) is 3.
B) is 4.
C) is 5.
D) cannot be determined from the information given.

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

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Question 82

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Use the following data to answer the question.The letters A,B,and C designate three successively larger plant sizes. $\begin{array}{c}\begin{array}{ccc}\text { Output } & & \text { ATC-A } \\\hline10 & & \$ 6 \\20 & & 5 \\30 & & 4 \\40 & & 5 \\50 & & 7 \\60 & & 10 \\70 & & 14 \\80 & & 19 \\90 & & 25 \\100 & & 32\end{array}\begin{array}{ccc}\text { ATC-B } & & \text { ATC-C } \\\hline\$ 13 & & \$ 44 \\9 & & 35 \\6 & & 27 \\4 & & 20 \\3 & & 14 \\4 & & 11 \\5 & & 8 \\7 & & 6 \\10 & & 5 \\16 & & 7\end{array}\end{array}$ Refer to the data.At what level of output is minimum efficient scale realized?

A) 30.
B) 40.
C) 50.
D) 60.

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

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Question 83

Multiple Choice

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If in the short run a firm's total product is increasing,then its:

Variable costs are costs that change directly with output.

Answer the question on the basis of the following cost data: $\begin{array} { c c c } &&\text { Total } \\\text { Output }&&\text { Cost }\\\hline0 & & \$ 24 \\1 & & 33 \\2 & & 41 \\3 & & 48 \\4 & & 54 \\5 & & 61 \\6 & & 69\end{array}$ Refer to the data.The marginal cost of producing the sixth unit of output is:

Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10: $\begin{array} { c r } \text { Output } & \text { ATC } \\\hline 1 & \$ 40 \\2 & 27 \\3 & 29 \\4 & 31 \\5 & 38\end{array}$ Refer to the data.The marginal cost of the fourth unit of output is:

Which of the following is most likely to be an implicit cost for Company X?

At zero units of output a firm's variable costs are zero.

The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity,water,disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the data.If,other things equal,Creamy Crisp's revenue fell to $286,000:

Answer the question on the basis of the following information: $\begin{array} { l l } \text { TFC = Total Fixed Cost } & Q = \text { Quantity of Output } \\\text { MC = Marginal Cost } & P = \text { Product Price } \\\text { TVC = Total Variable Cost } &\end{array}$ Refer to the information.Marginal cost is:

Because of higher gasoline prices,firms using gasoline intensively in the production or distribution of their goods have experienced:

The short-run average total cost curve is U-shaped because:

A firm's economic profit is usually higher than its accounting profit.

If a firm increases all of its inputs by 10 percent and its output increases by 15 percent,then:

(Consider This) Susie purchased a nonrefundable ticket to a soccer match for $20.It will cost her $10 worth of gas and wear and tear to drive to the match and $5 to park her car.On the day of the match,Susie's boss offers her $100 to come to work instead.In considering what to do,which of the above would be considered a sunk cost?

Total fixed cost (TFC) :

Which of the following statements is correct?

Use the following data to answer the question.The letters A,B,and C designate three successively larger plant sizes. $\begin{array}{c}\begin{array}{ccc}\text { Output } & & \text { ATC-A } \\\hline10 & & \$ 6 \\20 & & 5 \\30 & & 4 \\40 & & 5 \\50 & & 7 \\60 & & 10 \\70 & & 14 \\80 & & 19 \\90 & & 25 \\100 & & 32\end{array}\begin{array}{ccc}\text { ATC-B } & & \text { ATC-C } \\\hline\$ 13 & & \$ 44 \\9 & & 35 \\6 & & 27 \\4 & & 20 \\3 & & 14 \\4 & & 11 \\5 & & 8 \\7 & & 6 \\10 & & 5 \\16 & & 7\end{array}\end{array}$ Refer to the data.In the long run the firm should use plant size "A" for:

The vertical distance between a firm's ATC and AVC curves represents: