Question 1

Janet's poodle grooming salon has a total cost curve expressed by the equation TC = 100 + 3Q₂, where Q is the quantity of dogs groomed.Given this expression, Janet is operating in the:

Accepted Answer

In the short run, at least one factor of production (such as the size of the salon or the amount of equipment) is fixed. Janet's fixed costs are equal to $100, as indicated by the constant term in the total cost equation. Therefore, the correct choice is B.

Question 2

(Table: Lindsay's Farm) Look at the table Lindsay's Farm.Lindsay's variable costs of production:

Accepted Answer

The answer of   (Table: Lindsay's Farm) Look at...

Question 3

A firm's total fixed cost:

Accepted Answer

Total fixed cost refers to the cost that a firm incurs regardless of the level of output. Therefore, it stays constant in the short run as the firm cannot quickly adjust its fixed inputs such as rent or salary. Total fixed cost refers to the costs that do not depend on the level of output and stay constant in the short run. Therefore, it does not change with the production of more output.

Question 4

(Table: Tonya's Production Function for Apples) Look at the table Tonya's Production Function for Apples.Tonya's fixed:

Accepted Answer

The answer of   (Table: Tonya's Production Function for...

Question 5

(Table: Bonnie's Production Function for Good Z) Look at the table Bonnie's Production Function for good Z.The costs that vary with Bonnie's level of production are her:

Accepted Answer

Variable costs are costs that vary with the level of production, such as the cost of raw materials, labor, and utilities. Therefore, Bonnie's costs that vary with her level of production are her variable costs. The other choices are not relevant to this question.

Question 6

(Table: Lindsay's Farm) Look at the table Lindsay's Farm.Lindsay's fixed cost of production equals:

Accepted Answer

Fixed costs are the costs of production that do not vary with the level of output. In this table, the fixed cost is given as $200, so the answer is A.

Question 7

Table: Linda's Copy Shop Production
(Table: Linda's Copy Shop Production) Look at the table Linda's Copy Shop Production.Linda's production runs into diminishing returns to her variable inputs when she employs the unit.

Accepted Answer

Diminishing returns occur when additional units of a variable input (such as labor) lead to decreasing marginal product, or the additional output produced by adding one more unit of the input. Based on the table, Linda experiences diminishing returns starting with the fourth unit of labor, as the marginal product decreases from 200 to 150. Therefore, option C is the only correct choice.

Question 8

(Table: Bonnie's Production Function for Good Z) Look at the table Bonnie's Production Function for good Z.Suppose Bonnie spends $300 per month to rent the building, $100 per month to pay for insurance for her business, and $100 per worker per month for every worker she hires.Given this information, Bonnie's fixed costs equal:

Accepted Answer

Fixed costs are expenses that do not change with the level of output. In this case, Bonnie's fixed costs include the rent for the building ($300) and the insurance ($100), totaling $400.

Question 9

If ATC is equal to MC, then the firm is operating:

Accepted Answer

When ATC is equal to MC, the firm is operating at the minimum point of ATC, which is the most efficient point of production. Therefore, the best choice is A.

Question 10

Janet's poodle grooming salon has a total cost curve expressed by the equation TC = 100 + 3Q₂, where Q is the quantity of dogs groomed.Given this expression, if Janet grooms five dogs, her total costs will be:

Accepted Answer

Substituting Q = 5 into the equation, we get:
TC = 100 + 3(5) = 100 + 15 = 115, so the correct answer is choice B) $175.

Question 11

As production increases and the fixed cost is divided by larger quantities of output, this leads to lower average fixed cost.This is referred to as the effect.

Accepted Answer

Spreading refers to the phenomenon where as production increases, fixed costs are spread out over larger quantities of output, causing a decrease in average fixed cost. This is a common concept in economics and accounting. The other choices are not relevant to this scenario; diminishing returns refers to the point at which adding more inputs leads to a lower increase in output, constant cost refers to a scenario where the total cost does not change regardless of the quantity produced, and increasing returns refers to the point at which adding more inputs leads to a higher increase in output.

Question 12

Diminishing returns are a reason:

Accepted Answer

Diminishing returns occur when additional units of a variable input lead to a smaller increase in output. This means that as more and more of the variable input is added, the marginal cost of producing each additional unit of output increases. Therefore, the marginal cost curve is upward sloping. Choices A and B do not directly relate to diminishing returns. Choice D refers to the average fixed cost curve which is not affected by diminishing returns. Diminishing returns occur when adding additional units of a factor of production (such as labor) results in a smaller increase in output. This leads to an increase in the marginal cost of producing each additional unit, as more inputs must be used to produce the same level of output. Therefore, the marginal cost curve is upward sloping in the short run when diminishing returns occur.

Question 13

When AVC eventually increases as output increases, this is referred to as the effect.

Accepted Answer

Diminishing returns occur when additional units of input result in decreasing marginal product, causing AVC to increase as output increases. The increase in AVC is due to the additional cost of adding more units of input, which eventually reduces the efficiency of production.

Question 14

When a firm produces a small amount of output, the spreading effect:

Accepted Answer

When a firm produces a small amount of output, the spreading effect is stronger because fixed costs are spread over a larger number of units, reducing average total cost.

Question 15

(Table: Bonnie's Production Function for Good Z) Look at the table Bonnie's Production Function for good Z.Diminishing returns to labor occurs when Bonnie hires the worker.

Accepted Answer

Diminishing returns to labor occur when Bonnie hires the fourth worker. As the number of workers increases from three to four, the marginal product of labor declines from 10 to 6, indicating that each additional worker is becoming less productive than the previous one. Therefore, hiring the fourth worker is not the best choice as it results in diminishing returns to labor.

Question 16

With one input fixed, a firm will find that as it attempts to produce more, the total product curve will increase at a decreasing rate and its marginal product curve will be:

Accepted Answer

The law of diminishing marginal returns states that as a firm increases the quantity of one input (assuming the other inputs are fixed), the marginal product of that input eventually decreases. Therefore, the marginal product curve will be downward sloping. The total product curve will still increase, but at a decreasing rate.

Question 17

(Table: Bonnie's Production Function for Good Z) Look at the table Bonnie's Production Function for good Z.The marginal product of labor of the second worker is units of good Z.

Accepted Answer

The marginal product of labor is the additional output produced by adding one more worker. If the first worker produces 150 units and the second worker increases total production to 225 units, the marginal product of the second worker is 225 - 150 = 75 units.

Question 18

Janet's poodle grooming salon has a total cost curve expressed by the equation TC = 100 + 3Q₂, where Q is the quantity of dogs groomed.Janet notices that as she grooms more dogs, her total cost curve:

Accepted Answer

The total cost curve TC = 100 + 3Q² is a quadratic equation, indicating that as Q increases, the total cost increases at an increasing rate, making the curve steeper.

Question 19

(Table: Tonya's Production Function for Apples) Look at the table Tonya's Production Function for Apples.The information provided tells you that Tonya is operating:

Accepted Answer

The fact that the table only shows three levels of input (1 worker, 2 workers, and 3 workers) and their corresponding levels of output suggests that Tonya is operating in the short run, where at least one input is fixed and cannot be adjusted. In this case, it seems that the fixed input is the land, while the variable input is the number of workers.

Question 20

(Table: Tonya's Production Function for Apples) Look at the table Tonya's Production Function for Apples.The marginal product of the fourth worker is apples.

Accepted Answer

The answer of (Table: Tonya's Production Function for Apples) Look...

Quiz 11: Behind the Supply Curve: Inputs and Costs