ECON 213 InQuizitive 8 Business Cost and Production Assignment solutions complete answers

ECON 213 InQuizitive 8 Business Cost and Production Assignment solutions complete answers 

Chapter 8: Business Costs and Production

 

The graph below represents the short run cost functions for a firm. At an output of 50 units, which vertical portion of the costs represents the average fixed costs (AFC)?

 

 

Darla started a business making designer dog houses. In year 1, the total yearly costs were $10,000 and she produced 125 dog houses. In year 2, Darla decided to expand her business, and total yearly costs increased to $14,000 and she produced 175 houses. In year 3, success encouraged her to expand her business again; total yearly costs increased to $18,000 and she produced 225 dog houses.

On what part of the long-run average total cost curve (LRATC) is Darla operating?

 

A firm considers hiring more workers. Where on the graph does hiring another worker increase total output and where on the graph does hiring another worker decrease total output? Apply the correct labels to each part of the graph.

 

Perry’s Pie Shop will produce only the possible number of pies listed in the chart. Given the fixed and variable cost, determine which positive output will result in the lowest average total cost (ATC).

 

 

In the long run, firms generally experience diseconomies of scale, first because the large initial costs are spread over a small amount of output. Eventually, economies of scale decrease the long-run average total costs (LRATC) as output increases.

 

On the graph below, all costs have been removed except the average total cost (ATC) curve. The lowest point on the ATC curve, indicated by the black dot, occurs when the marginal cost (MC) curve intersects the ATC curve. Select the area of the graph where you would expect the marginal cost of producing a unit to be greater than the average total cost of producing the unit.

 

This graph shows a production function as more workers are added. Select the workers whose marginal product increases output by 15 units.

 

Carla owns a small cake shop with three inexperienced employees and would like to lower her costs in the long run to make her company more efficient. Which of the following is true about her desire to lower her average total costs in the long run?

 

A television production firm is able to produce TVs according to the short-run production table below. With the hiring of which worker would the diminishing marginal product begin? Select the correct number on the table.

 

Carolina used to work as a teacher, and she would make $4,000 a month. She now owns and runs Carolina’s Cupcake Shoppe. In the month of April this year, Carolina spent $1,100 on ingredients (eggs, flour, sugar, etc.) and $400 on utilities (electricity, water, etc.). Her labor costs were $3,000. She owns and uses a storefront for her shop that she previously rented out for $1,500. Lastly, Carolina brought in $10,000 in revenue in April.

Based on this information, select whether the following statements are true or false.

 

Jean decides to operate a painting business out of his home. Which of the following types of costs would represent fixed costs and variable costs for his painting business?

 

Fill in the blanks to describe how expanding the scale of production affects production costs.

Arnold and Helga decide to start selling homemade jewelry on Etsy to earn some extra income. However, the materials they use are expensive, and it takes them a long time to finish each piece of jewelry because they bicker about how it should look. This results in several attempts to redesign many pieces of jewelry. In short, their process is not –Press Space to open
efficient
economies of scale
average total
specialization
diseconomies of scale
average fixed
productivity
productive
. Their daughter Phillipa suggests that they design the pieces before they start making the jewelry to help increase their –Press Space to open
efficient
economies of scale
average total
specialization
diseconomies of scale
average fixed
productivity
productive
. They are able to make the jewelry more quickly and decrease their –Press Space to open
efficient
economies of scale
average total
specialization
diseconomies of scale
average fixed
productivity
productive
 cost of production. When Arnold and Helga are able to expand the size of their operation, they are able to experience –Press Space to open
efficient
economies of scale
average total
specialization
diseconomies of scale
average fixed
productivity
productive
.

 

The table below lists Bruno’s Custom Bike Shop’s costs and revenue for the month of May:

Bike Parts:
$5,000
Shop Rent:
$1,000
Large Print Sign Advertisements:
$50
Electric Bill:
$150
Total Bike Sales:
$9,000
Based on this information, determine Bruno’s Custom Bike Shop’s accounting profit for the month of May.

 

Fill in the blanks to complete the passage about why firms do not always increase their production.

Firms use cost data to make decisions about how many units to produce based on their –Press Space to open
fixed
average fixed
variable
fixed and variable
 costs. Increasing production may not always lead to an increase in profit. Increasing production will cause a firm’s –Press Space to open
fixed
average fixed
variable
fixed and variable
 costs to increase, which could outweigh any benefits that were previously gained by lowering their overhead—which is determined by their –Press Space to open
fixed
average fixed
variable
fixed and variable
 costs in the short run.

 

Fill in the blanks to explain why it can be bad for a company to have too much labor.

A company can take advantage of –Press Space to open
marginal product
consumers
specialization
capital resources
total output
, as the –Press Space to open
marginal product
consumers
specialization
capital resources
total output
 of the first group of workers will increase, but at a certain point it will decline. At this point, –Press Space to open
marginal product
consumers
specialization
capital resources
total output
 will continue to increase, but marginal product will diminish with each additional worker. Eventually there will be too many workers and not enough –Press Space to open
marginal product
consumers
specialization
capital resources
total output
 to keep them busy, inevitably slowing down production and reducing output.

 

Which situation describes a company experiencing an accounting loss?

 

Place the numbers in the appropriate locations to complete the table showing total output and marginal product of labor, where diminishing marginal product begins with the third worker.

 

Calculate the marginal product of labor for a car repair shop that adds two mechanics and begins fixing five extra cars each week.

 

Fill in the blanks to explain what a firm should do once it realizes it is in a situation with a diminishing marginal product.

The firm –Press Space to open
should
increase
should not necessarily
capital
low
still high
input
 stop producing additional units. If marginal product is –Press Space to open
should
increase
should not necessarily
capital
low
still high
input
, the firm should continue production if it can sell the output for more than the –Press Space to open
should
increase
should not necessarily
capital
low
still high
input
 costs.

 

Examine the data on the chart, and select the production level where the average variable cost first begins to increase.

 

Consider a restaurant operating during the COVID-19 pandemic. Identify each cost as either fixed or variable in the short run.

 

Profit is the dollar amount a firm collects from its customers after selling its goods or services.

 

Review the table below, which shows the costs of producing Big Macs. Why does the total cost equal $100 even when there are zero Big Macs produced?

 

In the long run, average costs can change depending on the output. Order the types of scales from falling long-run average total cost to rising long-run average total cost.

 

What are examples of the factors of production that affect the output of a car repair shop?

the tools in the garage

the amount of space available to accommodate cars in the garage

the number of competing car repair shops nearby

the number of people who own cars near the shop

the number of mechanics at the shop

 

Look at the table below which shows the costs of producing Big Macs. Why does the total cost equal $100 even when there are zero Big Macs produced?

 

Total cost includes both fixed and variable costs, and fixed costs are incurred even when they are not producing.

Total costs include only variable costs, and variable costs are incurred even when they are not producing.

Total costs include only fixed costs, and fixed costs are incurred even when they are not producing.

Total cost includes both fixed costs and variable costs, and variable costs are incurred even when they are not producing.

 

Profit is the amount of money a company earns.

 

When will firms have lower costs in the long run? Order the types of scales from that with the lowest long-run average total cost to that with the highest long-run average total cost.

 

What are some of the variable costs of running a flower shop?

 

What is the relationship between the marginal product of labor and total output? Drag the marginal product labels to the appropriate sections of the total product graph.

 

What are examples of explicit costs?

paying an employee’s wages

the amount of money an owner could have made by raising prices

the cost of the business owner’s time and labor

the amount of money the owner could have made by investing in an alternative activity

paying for gas for a company vehicle

 

It is always good to have a high output because it spreads the total fixed costs over more units.

 

Bill owns a grocery store chain with 2,000 total employees. Nine hundred of his employees are managers. What can we assume about the total productivity of Bill’s chain?

 

What should a firm do once it realizes it is in a situation with a diminishing marginal product?

The firm – stop producing additional units. If marginal product is –, the firm should continue production if it can sell the output for more than the – costs.

 

Place the numbers in the appropriate locations to complete the table showing total output and marginal product of labor.

 

Calculate the marginal product for a car repair shop that adds two mechanics and begins fixing five extra cars each week.

 

Which situation describes a company experiencing a loss?

 

A company that manufactures computers has a monthly fixed cost of $1,000. If it sells 400 computers each month, what is its average fixed cost?

 

Examine the data on the chart and click on the first (lowest) production level where average variable cost has gone past its minimum and begun to rise.

 

In the long run, firms can control their costs by adjusting the scale of their production process. Drag the appropriate description of the relationship between output and cost to the end of the correct long-run average total cost curve.

 

Fill in the blanks to explain why it can be bad for a company to have too much labor.

Additional workers will increase a company’s – to a certain point until gains from – begin to decline. At this point, – will continue to increase, but marginal product will diminish with each additional worker. Eventually there will be too many workers and not enough – to keep them busy, inevitably slowing down production.

 

Which statement accurately describes the relationship between average fixed costs and output?

 

Match the type of scale to the situation it describes.

An international investment banking company has a huge bureaucracy that slows down the decision-making process and increases costs.

A large computer company hires many specialists to produce its product and is able to save money by buying supplies in bulk.

A national movie theater chain has advantages in advertising costs, but has high payroll costs because of its many levels of management.

 

Calculate the monthly implicit costs for a business owner who devotes 200 hours per month to his business that could be spent working at $50/hour for someone else.

 

A firm considers hiring more workers. Will this increase total output? Apply the correct label to each part of the graph.

 

Match each factor of production with its definition.

 

How are costs different in the long run compared with the short run?

In the long run, – costs are variable and firms have – control over their costs. In the short run, costs are related to –. In the long run, costs are related to –.

 

A television production firm is able to produce TVs according to the short-run production table below. Click on the image to show with the hiring of which worker the diminishing marginal product begins.

 

What happens to total fixed and total variable costs as production increases?

For every output created, a firm needs to spend money on capital, labor, and other –. Thus, – will increase with increasing output. The – are not tied to the rate of output. Those costs – in the – run.

 

Yael decides that she no longer enjoys her job, and she quits to open a gluten-free, dairy-free kosher bakery. She pays a monthly rent for her store of $2,000. Her labor costs for one month are $4,500, and she spends $6,000 a month on nut flours, sugar, and other supplies. Yael was earning $2,500 a month working as a bank teller. These are her only costs. Her monthly revenue is $14,000. Which of the following statements about Yael’s costs and profit are correct?

 

What is the difference between economic profit and accounting profit?

– is calculated by subtracting both the explicit and the implicit costs from total revenue. – is calculated by subtracting the explicit costs from the total revenue. Economic profit is always – than accounting profit, because it takes into account more variables for –.

 

Hosea decides to support an entrepreneur on a new business venture. He sells $500,000 worth of stocks to put into the new business. By the end of the first year, he earns a rate of return of $25,000 on his financial investment in the business. Based on the average rate of return to stocks from the table below, Hosea made a good choice to support this new business.

 

 

The efficient scale is the production quantity at which marginal cost equals average total cost.

 

How does expanding the scale of production affect production costs?

Arnold and Helga decide to start selling homemade jewelry on Etsy to earn some extra income. However, the materials they use are expensive, and it takes them a long time to finish each piece of jewelry because they bicker about how it should look. In short, their process is not –. Their daughter Phillipa suggests that they design the pieces before they start making the jewelry to help increase their –. They are able to make the jewelry more quickly and decrease their – cost of production. When Arnold and Helga are able to expand the size of their operation, they are able to experience –.

 

Is it better to have an accounting profit or economic profit? Why?

It is better for a company to have an – profit because it means both – costs have been – the total revenue and the company is still profitable. An – profit only takes into consideration the explicit costs of doing business.

 

Jeff works at a grocery store in the summer. One year he considers the possibility of operating and owning a hot dog stand instead of working at the store. What are some of the implicit costs Jeff might have to consider when thinking about his new business venture?

 

How do you calculate total cost?

 

Carla owns a small cake shop with three inexperienced employees and would like to lower her costs in the long run to make her company more efficient. What can she do to lower her average total costs in the long run?

 

Label each resource with the factor of production it represents.

 

Calculate the weekly profit for a company with a total cost of $10,000 and a total revenue of $30,000.

 

Stephen decides to operate a painting business out of his home. Which of the following types of costs would represent fixed costs and variable costs for his painting business?

 

What will happen if a movie theater has too many employees working a particular shift?