Technology, Production and Costs HW

If production displays economies of scale, the long-run average cost curve is

downward sloping.

If a firm decreases its plant size and finds that its long-run average costs have decreased, then

its diseconomies of scale are less.

All of the following statements are true of the minimum efficient scale except one. Which one?

An increase in the output level will increase profit.

Ford Motor Company started producing the Model A at plants scattered around the United States

because diseconomies of scale at its initial River Rouge plant resulted in high production costs.

What is the difference between "diminishing marginal returns" and "diseconomies of scale"?

Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why average cost increases.

Economies of scale occur when

a firm's long-run average total costs fall as it increases the quantity of output it produces.

Diseconomies of scale occur when

long-run average costs rise as a firm increases its output

If a firm decreases its plant size and finds that its long-run average costs have decreased, then

its diseconomies of scale are less.

Economies of scale occur when

a firm's long-run average total costs fall as it increases the quantity of output it produces.

Diseconomies of scale occur when

long-run average costs rise as a firm increases its output.

Figure 11-10 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc.

Refer to Figure 11-10. The minimum efficient scale of output is reached at what rate of output?

10,000 picture frames

Refer to Figure 11-10. If the firm chooses to produce and sell 25,000 frames per month by operating in the short run with a scale operation represented by ATCc

the firm will be operating efficiently.

Which of the following statements explains the difference between diminishing returns and diseconomies of scale?

Diminishing returns apply only to the short run; diseconomies of scale apply only in the long run.

Which of the following is a fixed cost?

payment to hire a security worker to guard the gate to the factory around the clock

Jayanthi moves her yoga studio from her home to a space she rents in Oakland, California. Holding everything else constant, as a result of this move

her implicit cost falls and her explicit cost rises.

Which of the following are implicit costs for a typical firm?

the opportunity cost of capital owned and used by the firm

As a firm hires more labor in the short run, the

extra output of an additional worker may rise at first, but eventually must fall.

If another worker adds 9 units of output to a group of workers who had an average product of 7 units, then the average product of labor

will increase.

Refer to Figure 11-2. The curve labeled "F" is

the average product curve.

Gertrude Stork's Chocolate Shoppe normally employs 4 workers. When the Chocolate Shoppe hired a 5th worker, the Shoppe's total output decreased. Therefore

All of the following statements are true of the minimum efficient scale except one. Which one?

An increase in the output level will increase profit.

If another worker adds 9 units of output to a group of workers who had an average product of 7 units, then the average product of labor

will increase.

Gertrude Stork's Chocolate Shoppe normally employs 4 workers. When the Chocolate Shoppe hired a 5th worker, the Shoppe's total output decreased. Therefore

the marginal product of the 5th worker is negative.

The division of labor and specialization explain

why the marginal product of labor rises as a firm hires its first units of labor.

Average fixed costs of production

fall as long as output is increased.

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firm's average fixed cost at that level of output?

$15

Average fixed cost is equal to

fixed cost divided by the quantity of output produced.

Refer to Figure 11-6. In the figure above, which letter represents the marginal cost curve?

A)

After Suzie, owner of Suzie's Sweet Shop, hires her 8th worker the average product of labor declines. Which of the following statements must be true?

The marginal product of the 8th worker is less than the average product of labor before the 8th worker was hired.

Jayanthi moves her yoga studio from her home to a space she rents in Oakland, California. Holding everything else constant, as a result of this move

her explicit cost falls and her implicit cost rises.

Gertrude Stork's Chocolate Shoppe normally employs 4 workers. When the Chocolate Shoppe hired a 5th worker, the Shoppe's total output decreased. Therefore

the marginal product of the 5th worker is negative.

The division of labor and specialization explain

why the marginal product of labor rises as a firm hires its first units of labor

Average fixed costs of production

fall as long as output is increased.

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firm's average fixed cost at that level of output?

$15