Question 1

Table 13-20
Listed in the table are the long-run total costs for three different firms. 
-Refer to Table 13-20. Firm A is experiencing economies of scale.

Accepted Answer

Firm A is experiencing economies of scale because its long-run total cost decreases as output (Q) increases.

Question 2

Adam Smith's example of the pin factory demonstrates that economies of scale result from specialization.

Accepted Answer

In his book "The Wealth of Nations," Adam Smith uses the example of a pin factory to show how the division of labor and specialization can lead to increased efficiency and productivity, resulting in economies of scale.

Question 3

Jaxon borrows $10,000 from a bank and withdraws $20,000 from his personal savings to open a tattoo parlor. The interest rate is 3 percent for both the bank loan and his personal savings. Jaxon's implicit costs are $900.
​

Accepted Answer

The statement is false. Implicit costs refer to opportunity costs, which are the value of alternatives forgone in order to pursue a certain action. The statement does not provide any information about Jaxon's opportunity costs, so it cannot be concluded that his implicit costs are $900.

Question 4

In some cases, specialization allows larger factories to produce goods at a lower average cost than smaller factories.

Accepted Answer

Specialization can lead to economies of scale, which can lower the average cost of producing goods in larger factories.

Question 5

Diseconomies of scale often arise because higher production levels allow specialization among workers.

Accepted Answer

Diseconomies of scale often arise due to inefficiencies associated with managing a larger workforce and operations, not because of specialization, which typically contributes to economies of scale by increasing efficiency.

Question 6

If the average-total-cost curve is falling, then the marginal-cost curve must also be falling.

Accepted Answer

The average-total-cost curve (ATC) is a U-shaped curve, with the lowest point being the efficient scale where marginal cost (MC) intersects ATC. If the ATC curve is falling, this means that the efficient scale has not yet been reached and MC must be below ATC. However, the MC curve can be rising or falling before it intersects ATC at the efficient scale. Therefore, if ATC is falling, MC does not have to be falling as well.

Question 7

If the production function exhibits diminishing marginal product, the total cost function gets steeper as the quantity of output increases.
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Accepted Answer

Diminishing marginal product means that each additional unit of input yields less and less additional output. This leads to an increase in the cost per unit of output as more inputs are used, causing the total cost function to get steeper as output increases.

Question 8

Table 13-20
Listed in the table are the long-run total costs for three different firms. 
-Refer to Table 13-20. Firm B is experiencing diseconomies of scale.

Accepted Answer

The answer of Table 13-20
Listed in the table are the...

Question 9

A firm produces 60 units of output with 5 workers, 65 units with 6 workers, and 68 units with 7 workers. The firm's production function exhibits diminishing marginal productivity between 5 and 7 workers.
​

Accepted Answer

Diminishing marginal productivity occurs when adding more units of a variable input (in this case, workers) leads to a smaller increase in output. The fact that the firm is only increasing production by 5 units when going from 5 to 6 workers, but then only increasing production by 3 units when going from 6 to 7 workers, indicates that the production function has diminishing marginal productivity between 5 and 7 workers.

Question 10

The use of specialization to achieve economies of scale is one reason modern societies are as prosperous as they are.

Accepted Answer

Specialization allows individuals and firms to focus on producing a specific good or service in which they have a comparative advantage, leading to increased efficiency and productivity. This, in turn, can lead to economies of scale, which lower the average cost of production and ultimately contribute to greater prosperity within a society.

Question 11

Table 13-20
Listed in the table are the long-run total costs for three different firms. 
-Refer to Table 13-20. Firm C is experiencing economies of scale.

Accepted Answer

The answer of Table 13-20
Listed in the table are the...

Question 12

If long-run average total cost is rising, then the firm is experiencing economies of scale.

Accepted Answer

If long-run average total cost is rising, it means that the firm is experiencing diseconomies of scale, not economies of scale. Economies of scale occur when long-run average total cost decreases as output increases.

Question 13

The U-shaped average-total-cost curve reflects the U-shaped average-fixed-cost curve.

Accepted Answer

The U-shaped average-total-cost curve reflects both the U-shaped average-variable-cost curve and the downward slope of the average-fixed-cost curve as output increases, not just the shape of the average-fixed-cost curve.

Question 14

Economists include both explicit and implicit costs while accountants include only implicit costs.
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Accepted Answer

Economists include both explicit and implicit costs while accountants only include explicit costs.

Question 15

Table 13-20
Listed in the table are the long-run total costs for three different firms. 
-Refer to Table 13-20. Firm C is experiencing diseconomies of scale.

Accepted Answer

Firm C is experiencing diseconomies of scale because its long-run total cost increases as output increases, indicating that it is becoming less efficient as it grows larger.

Question 16

Table 13-20
Listed in the table are the long-run total costs for three different firms. 
-Refer to Table 13-20. Firm B is experiencing constant returns to scale.

Accepted Answer

Since the long-run total cost increases proportionally with the increase in output, and the cost for producing 3 units is twice the cost for producing 1 unit, it indicates that firm B is experiencing constant returns to scale.

Question 17

Adam Smith describes a visit to a car factory when discussing economies of scale in his book An Inquiry into the Nature and Causes of the Wealth of Nations.

Accepted Answer

Adam Smith did not describe a visit to a car factory in his book, as cars had not yet been invented during his time.

Question 18

When a firm experiences economies of scale, long-run average total cost falls as the quantity of output increases.

Accepted Answer

This is the definition of economies of scale - as output increases, the firm benefits from lower costs per unit, leading to a decrease in long-run average total cost.

Question 19

Table 13-20
Listed in the table are the long-run total costs for three different firms. 
-Refer to Table 13-20. Firm A is experiencing constant returns to scale.

Accepted Answer

The statement cannot be verified without the actual data from Table 13-20. Constant returns to scale occur when increasing inputs leads to a proportional increase in output, which requires specific data to confirm.

Question 20

Jaxon borrows $10,000 from a bank and withdraws $20,000 from his personal savings to open a tattoo parlor. The interest rate is 3 percent for both the bank loan and his personal savings. Jaxon also quit his job as a waiter, which paid $20,000. According to an economist, Jaxon's opportunity cost of opening the tattoo parlor equals $20,900.

Accepted Answer

Jaxon's opportunity cost includes the income he gave up by quitting his job as a waiter, which was $20,000, plus the interest he would have earned on the $20,000 he withdrew from savings at a rate of 3 percent, which is $900. Therefore, his total opportunity cost is $20,900.

Quiz 13: The Costs of Production

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm A is experiencing economies of scale.

Adam Smith's example of the pin factory demonstrates that economies of scale result from specialization.

Jaxon borrows $10,000 from a bank and withdraws $20,000 from his personal savings to open a tattoo parlor. The interest rate is 3 percent for both the bank loan and his personal savings. Jaxon's implicit costs are $900. ​

In some cases, specialization allows larger factories to produce goods at a lower average cost than smaller factories.

Diseconomies of scale often arise because higher production levels allow specialization among workers.

If the average-total-cost curve is falling, then the marginal-cost curve must also be falling.

If the production function exhibits diminishing marginal product, the total cost function gets steeper as the quantity of output increases. ​

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm B is experiencing diseconomies of scale.

A firm produces 60 units of output with 5 workers, 65 units with 6 workers, and 68 units with 7 workers. The firm's production function exhibits diminishing marginal productivity between 5 and 7 workers. ​

The use of specialization to achieve economies of scale is one reason modern societies are as prosperous as they are.

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm C is experiencing economies of scale.

If long-run average total cost is rising, then the firm is experiencing economies of scale.

The U-shaped average-total-cost curve reflects the U-shaped average-fixed-cost curve.

Economists include both explicit and implicit costs while accountants include only implicit costs. ​

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm C is experiencing diseconomies of scale.

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm B is experiencing constant returns to scale.

Adam Smith describes a visit to a car factory when discussing economies of scale in his book An Inquiry into the Nature and Causes of the Wealth of Nations.

When a firm experiences economies of scale, long-run average total cost falls as the quantity of output increases.

Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm A is experiencing constant returns to scale.

Jaxon borrows $10,000 from a bank and withdraws $20,000 from his personal savings to open a tattoo parlor. The interest rate is 3 percent for both the bank loan and his personal savings. Jaxon's implicit costs are $900.

If the production function exhibits diminishing marginal product, the total cost function gets steeper as the quantity of output increases.

A firm produces 60 units of output with 5 workers, 65 units with 6 workers, and 68 units with 7 workers. The firm's production function exhibits diminishing marginal productivity between 5 and 7 workers.

Economists include both explicit and implicit costs while accountants include only implicit costs.