Question 1

Refer to the following:
The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
 
-When the firm uses 40 units of labor, what is AVC at this level of output?

Accepted Answer

At 40 units of labor, the average product of labor is approximately 110, as shown by the intersection of the MP curve and the AP curve. Therefore, the firm is producing approximately 4,400 units of output (110 units per worker × 40 workers). The total variable cost (TVC) of producing 4,400 units of output with 40 workers can be found by tracing up from the quantity produced to the TVC curve and then over to the TVC axis. The TVC per month is approximately $280,000. Therefore, the average variable cost (AVC) at this output level is:
AVC = TVC/Q = $280,000/4,400 = $63.64 ≈ $70

Question 2

Refer to the following:
The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
 
-When the firm uses 120 units of labor, how much output does it produce?

Accepted Answer

According to the marginal product curve, the firm reaches its maximum output at 120 units of labor, which is where the curve intersects the average product curve. At this point, the average product is approximately 70 units per worker ($\frac{8400}{120} = 70$). Therefore, the firm produces 8,400 units of output with 120 units of labor.

Question 3

Refer to the following:
"At Huffy's ... bicycle factory, 1,700 employees turn out 15,000 bicycles a day (in 1987). Five years ago, it required 2,200 workers to make 10,000 bikes daily." (The Wall Street Journal).
-In 1987,

Accepted Answer

Total product being 15,000 bicycles per day means that the production function is at work, and therefore, both average product of labor (0.11) and marginal product of labor (8.8) can be calculated. Therefore, both option A and option C are correct.

Question 4

Refer to the following:
"At Huffy's ... bicycle factory, 1,700 employees turn out 15,000 bicycles a day (in 1987). Five years ago, it required 2,200 workers to make 10,000 bikes daily." (The Wall Street Journal).
-Holding all else equal, we can conclude that, over the past five years,

Accepted Answer

The answer of Refer to the following:
"At Huffy's ... bicycle...

Question 5

Refer to the following:
The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
 
-When the firm uses 120 units of labor, what is average total cost at this output?

Accepted Answer

Average total cost is total cost divided by output. At an output of 120 units, total cost is $7,080 (120 units * $59 per unit). Therefore, average total cost is $7,080 / 120 units = $59 per unit.

Question 6

Refer to the following:
The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
 
-When the firm uses 120 units of labor, what is its AVC at this output?

Accepted Answer

The answer of Refer to the following:
The following graph shows...

Question 7

Refer to the following:
The capital stock is fixed at 50 units, the price of capital is $30 per unit, and the price of labor is $25 per unit.

$$\begin{array} { c c } 
&\text { Average } \
\text { Output } & \text { Variable Cost }\
\hline 10 & \$ 40 \
20 & 30 \
30 & 45 \
40 & 60 \
\hline
\end{array}$$
-If the firm produces 30 units of output, how many units of labor does the firm use?

Accepted Answer

The average variable cost (AVC) at 30 units of output is $45. Since the price of labor is $25 per unit, the total variable cost (TVC) is $45 * 30 = $1350. Dividing the TVC by the price of labor gives the number of labor units: $1350 / $25 = 54 units.

Question 8

Refer to the following:
 
-In the above figure, what is the AVERAGE variable cost of producing 5 units of output?

Accepted Answer

Ford has higher labor productivity than GM, as they are able to produce more vehicles per auto employee.

Answer: None 
 There is no information provided about the profitability or financial performance of either company.

Question 9

Refer to the following:

"Ford built 18 vehicles per auto employee in North America last year, while GM could only manage 12."  (The Wall Street Journal)

-In comparison with GM, Ford had a higher

Accepted Answer

Ford produced more vehicles per employee, indicating a higher average product of labor compared to GM.

Question 10

Refer to the following:

"Ford built 18 vehicles per auto employee in North America last year, while GM could only manage 12."  (The Wall Street Journal)

-In comparison with GM, Ford had

Accepted Answer

The factory is able to produce more bicycles with fewer employees compared to five years prior, indicating an increase in productivity.

Answer: D 
 Assuming a linear relationship between the number of employees and the number of bicycles produced, the average productivity per employee has increased over the five-year period. However, the total labor cost may have decreased or remained the same depending on changes in wages and benefits.

Question 11

Refer to the following:
The capital stock is fixed at 50 units, the price of capital is $30 per unit, and the price of labor is $25 per unit.

$$\begin{array} { c c } 
&\text { Average } \
\text { Output } & \text { Variable Cost }\
\hline 10 & \$ 40 \
20 & 30 \
30 & 45 \
40 & 60 \
\hline
\end{array}$$
-How much does the 23rd unit of output add to the firm's total cost?

Accepted Answer

The average variable cost for 20 units is $30, and for 30 units is $45. The marginal cost for the 23rd unit is approximately $75, calculated by the change in total variable cost divided by the change in output.

Question 12

Refer to the following:
The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
 
-When the firm uses 40 units of labor, what is average total cost at this output?

Accepted Answer

The answer of Refer to the following:
The following graph shows...

Question 13

Refer to the following:
The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
 
-What is AVC at its minimum?

Accepted Answer

AVC (Average Variable Cost) is at its minimum when it is at its lowest point on the AVC curve. In this context, $35 is the lowest value among the given options.

Question 14

Refer to the following:
The capital stock is fixed at 50 units, the price of capital is $30 per unit, and the price of labor is $25 per unit.

$$\begin{array} { c c } 
&\text { Average } \
\text { Output } & \text { Variable Cost }\
\hline 10 & \$ 40 \
20 & 30 \
30 & 45 \
40 & 60 \
\hline
\end{array}$$
-If the firm produces 40 units of output, what is total variable cost?

Accepted Answer

The average variable cost for 40 units is $60, so the total variable cost is 40 units * $60 = $2,400.

Question 15

Refer to the following:
The capital stock is fixed at 50 units, the price of capital is $30 per unit, and the price of labor is $25 per unit.

$$\begin{array} { c c } 
&\text { Average } \
\text { Output } & \text { Variable Cost }\
\hline 10 & \$ 40 \
20 & 30 \
30 & 45 \
40 & 60 \
\hline
\end{array}$$
-If the firm produces 20 units of output, what is average fixed cost?

Accepted Answer

The answer of Refer to the following:
The capital stock is...

Question 16

Refer to the following:
The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
 
-what output does the firm reach minimum average variable cost?

Accepted Answer

The firm reaches minimum average variable cost at 8,000 units, as this is typically where the firm operates most efficiently before increasing marginal costs start to outweigh the benefits of increased production.

Question 17

Refer to the following:
The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
 
-When the firm uses 40 units of labor, what is marginal cost at this level of output?

Accepted Answer

The answer of Refer to the following:
The following graph shows...

Question 18

Refer to the following:
The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
 
-When the firm uses 40 units of labor, how much output does it produce?

Accepted Answer

When the firm uses 40 units of labor, it produces 1,600 units of output. This is because the production function is Q = 40L, so when L = 40, Q = 1,600.

Question 19

Refer to the following:
 
-In the above figure, what is the AVERAGE total cost of producing 10 units of output?

Accepted Answer

The average total cost is calculated by dividing the total cost by the number of units produced. If the total cost for 10 units is $120, then the average total cost is $120/10 = $12.

Question 20

Refer to the following:
The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
 
-When the firm uses 120 units of labor, what is its marginal cost at this output?

Accepted Answer

From the graph, we can see that at 120 units of labor, the marginal product of labor (MPL) is approximately 70. Therefore, the marginal cost (MC) at this output level is equal to the wage rate ($2,800) divided by MPL, which is approximately $40 per unit of output (2800/70). However, we also need to consider fixed costs in calculating total cost and average variable cost (AVC). At 120 units of labor, total output (Q) is approximately 175, which means that average product of labor (APL) is approximately 1.46 (175/120). Multiplying APL by the wage rate gives us AVC, which is approximately $4,088 (1.46 x $2,800). To calculate total cost (TC), we add fixed costs ($160,000) to AVC multiplied by the quantity of labor used (120), giving us approximately $693,600. Finally, dividing TC by Q gives us average cost (AC), which is approximately $3,960 ($693,600/175). Therefore, the firm's best choice is to produce at a quantity of 175 units of output, where MC = $56 (as seen from the graph) and MC = AVC = AC.

Quiz 8: Production and Cost in the Short Run

Refer to the following: The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000. -When the firm uses 40 units of labor, what is AVC at this level of output?

Refer to the following: The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000. -When the firm uses 120 units of labor, how much output does it produce?

Refer to the following: "At Huffy's ... bicycle factory, 1,700 employees turn out 15,000 bicycles a day (in 1987) . Five years ago, it required 2,200 workers to make 10,000 bikes daily." (The Wall Street Journal) . -In 1987,

Refer to the following: "At Huffy's ... bicycle factory, 1,700 employees turn out 15,000 bicycles a day (in 1987) . Five years ago, it required 2,200 workers to make 10,000 bikes daily." (The Wall Street Journal) . -Holding all else equal, we can conclude that, over the past five years,

Refer to the following: The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000. -When the firm uses 120 units of labor, what is average total cost at this output?

Refer to the following: The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000. -When the firm uses 120 units of labor, what is its AVC at this output?

Refer to the following: -In the above figure, what is the AVERAGE variable cost of producing 5 units of output?

Refer to the following: "Ford built 18 vehicles per auto employee in North America last year, while GM could only manage 12." (The Wall Street Journal) -In comparison with GM, Ford had a higher

Refer to the following: "Ford built 18 vehicles per auto employee in North America last year, while GM could only manage 12." (The Wall Street Journal) -In comparison with GM, Ford had

Refer to the following: The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000. -When the firm uses 40 units of labor, what is average total cost at this output?

Refer to the following: The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000. -What is AVC at its minimum?

Refer to the following: The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000. -what output does the firm reach minimum average variable cost?

Refer to the following: The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000. -When the firm uses 40 units of labor, what is marginal cost at this level of output?

Refer to the following: The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000. -When the firm uses 40 units of labor, how much output does it produce?

Refer to the following: -In the above figure, what is the AVERAGE total cost of producing 10 units of output?

Refer to the following: The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000. -When the firm uses 120 units of labor, what is its marginal cost at this output?