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Exam 12: The Costs of Production

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Question 61

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Scenario 12-5 Suppose that Emily opens a restaurant.She receives a loan from a bank for $200,000.She withdraws $100,000 from her personal savings account.The interest rate on the loan is 6%,and the interest rate on her savings account is 2%. -Refer to Scenario 12-5.Emily's explicit cost of capital is

A) $2,000.
B) $4,000.
C) $12,000.
D) $14,000.

E) A) and C)
F) All of the above

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Question 62

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Economic profit is greater than or equal to accounting profit.

A) True
B) False

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Question 63

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One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

Table 12-2 -Refer to Table 12-2.What is the marginal product of the second worker?

The graph of the production function plots total cost versus quantity of output.

The shape of the marginal cost curve tells a producer something about the marginal product of her workers.

Grace is a self-employed artist.She can make 20 pieces of pottery per week.She is considering hiring her sister Kate to work for her.Kate can make 18 pieces of pottery per week.What would be the total output of Grace's firm if she hired her sister?

The efficient scale of the firm is the quantity of output that

Whenever marginal cost is greater than average total cost,

If a firm produces nothing,it still incurs its fixed costs.

Table 12-7 The Flying Elvis Copter Rides -Refer to Table 12-7.What is the value of L?

A firm has a fixed cost of $500 in its first year of operation.When the firm produces 100 units of output,its total costs are $3,500.When it produces 101 units of output,its total costs are $3,750.What is the marginal cost of producing the 101st unit of output?

At all levels of production higher than the point where the marginal cost curve crosses the average variable cost curve,average variable cost

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery,some workers may be underutilized because they have little work to do while waiting in line to use the machinery.When this occurs,Bubba's Bubble Gum Company encounters

Wiladee used to work as an office manager,earning $25,000 per year.She gave up that job to start a tailoring business.In calculating the economic profit of her tailoring business,the $25,000 income that she gave up is counted as part of the tailoring firm's

Table 12-16 Listed in the table are the long-run total costs for three different firms. -Refer to Table 12-16.Firm B is experiencing diseconomies of scale.

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired.In addition,suppose that when four units of output are produced,the total cost is $175,and the average variable cost is $33.75.What would the average fixed cost be if ten units were produced?

A production function is a relationship between inputs and

Table 12-3 -Refer to Table 12-3.The marginal product of the fourth worker is

Table 12-6 Wooden Chair Factory -Refer to Table 12-6.Assume the Wooden Chair Factory currently employs 5 workers.What is the marginal product of labor when the factory adds a 6th worker?