The academic calendar for a university is August 15 through May 15. A professor commits to a contract that binds her to a teaching position at this university for this period. Based on this information, the short run for the professor 

ECON 201: Chapter 22 Chapter 22 The academic calendar for a university is August 15 through May 15. A professor commits to a contract that binds her to a teaching position at this university for this period. Based on t ...

ECON 201: Chapter 22 Chapter 22 The academic calendar for a university is August 15 through May 15. A professor commits to a contract that binds her to a teaching position at this university for this period. Based on this information, the short run for the professor  A. will be the calendar year between January 1 and December 31; any time period longer than this will be long run for her. B. will be the time period between August 15 of the current year and August 14 of the following year; any time period longer than this will be long run for her.  C. will be the nine month period between August 15 and May 15; any time period longer than this will be long run for her.  D. will be the time period between August 15 and December 31; any time period longer than this will be long run for her. From the perspective of the firm, what is the difference between the short run and the long run? A. The short run is a period of less than a year while the long run is a period of one year or more. B. In the long run, at least one input is fixed, while in the short-run all inputs are variable. C. In the short run, at least one input is fixed, while in the long run all inputs are variable. D. There is no difference between the short run and the long-run from the perspective of the firm. The short run is defined as A. the period of time in which all factors of production are variable. B. a period of time of five years or less. C. the period of time in which at least one factor of production is fixed. D. the period of time it takes the firm to make its first economic profit. In the long run A. all factors of production are fixed. B. some factors are fixed and some are variable. C. economic profits are always positive. D. all factors of production are variable. In the long run there A. are only fixed inputs. B. are both fixed and variable inputs. C. is only one level of capacity at which the firm can operate. D. are only variable inputs If total physical product is increasing at a decreasing rate, then marginal physical product is A. constant. B. decreasing. C. increasing at a decreasing rate. D. increasing at an increasing rate. If a firm hires an additional worker and discovers that its total physical output has fallen, then it must be true that A. average total cost is negative. B. marginal physical product is minimized and marginal cost is maximized. C. marginal physical product is negative. D. marginal cost is negative. Why does the marginal physical product of labor eventually decline as more labor is used with another fixed input? A. The labor will have, on average, more units of the other inputs to combine with and the increases to total output obtained from more labor will decrease. B. The labor will have, on average, fewer units of the other inputs to combine with and the increases to total output obtained from more labor will increase. C. The labor will have, on average, more units of the other inputs to combine with and the increases to total output obtained from more labor will decrease. D. The labor will have, on average, fewer units of the other inputs to combine with and the increases to total output obtained from more labor will decrease. The law of diminishing marginal returns shows the relationship between A. inputs and outputs for a firm in the long run. B. inputs and outputs for a firm in the short run. C. short run inputs and long run outputs for a firm.  D. accounting and economic profits. The law of diminishing marginal returns is caused by A. insufficient amounts of the variable input. B. the existence of a fixed input that must be combined with increasing amounts of the variable input. C. some workers performing poorly on the job. D. poor quality fixed inputs. The law of diminishing marginal returns shows the relationship between A. short run and long run outputs for a firm.  B. accounting and economic profits. C. inputs and outputs for a firm in the long run. D. inputs and outputs for a firm in the short run. At the end of the year, a firm produced 12,000 laptop computers. Its total costs were $5 million, and its fixed costs were $2 million. What are the average variable costs of this firm? $250.00 (Round your answer to the nearest penny.) (3,000,000 – 2,000,000 /12,000 = 250) During the previous month, a firm produced 300 tablet devices and its total costs were $15,900.  Just before the firm produced its last tablet device in the previous month, its total costs were  $15,827. The marginal cost incurred by the firm in producing the final tablet device that month was $73 (Enter your response as a whole number.) The diagram to the right displays short-run cost curves for a facility that produces liquid crystal display (LCD) screens for cell phones. (Text problem 22-7) a. What are the daily total fixed costs of producing 300 LCD screens? $999 (Round your answer to the nearest penny.) AFC X Quantity (3.33 x 300 = 999) b. What are the total variable costs of producing 300 LCD screens per day? $1275 (Round your answer to the nearest penny.) AVC X Quantity (4.25 x 300 = 1275) c. What are the total costs of producing 300 LCD screens per day? $2274 (Round your answer to the nearest penny.) Add both sums (999 + 1275 = 2274) d. What is the average total cost of producing 300 LCD screens? $7.58 (Round your answer to the nearest penny.) Total divided by 300 (2274 / 300 = 2274) At its current short-run level of production, a firm's average variable costs equal $15 per unit, and its average fixed costs equal $30 per unit. Its total costs at this production level equal $900.  What is the firm's current output level? 20 units. (15 +30 / 900 = 20) What are its total variable costs at this output level? $300. (15 x 20 = 300) What are its total fixed costs? $600 (30 x 20 = 600) During autumn months, passenger railroads across the globe deal with a condition called slippery rail. It results from a combination of water, leaf oil, and pressure from the train's weight, which creates a slippery black ooze that prevents trains from gaining traction. One solution for slippery rail is to cut back trees from all of a rail firm's rail network on a regular basis, thereby helping prevent the problem from developing. If incurred, would this railroad expense be a better example of a fixed cost or a variable cost? Why? A. This is an example of a variable cost because it is a long-run cost. B. This is an example of a fixed cost because the cost doesn't vary with the number of trains. C. The cost can be either fixed or variable depending on whether we are talking about the short run or long run. Another way of addressing slippery rail is to wait until it begins to develop. Then the company purchases sand and dumps it on the slippery tracks so that trains already en route within the rail network can proceed. If incurred, would this railroad expense be a better example of a fixed cost or a variable cost? Why? A. This is an example of a fixed cost because it is a short-run cost. B. This is an example of a variable cost because the cost varies with the number of trains. C. The cost can be either fixed or variable depending on whether we are talking about the short run or long run. At the end of the year, a firm produced 10,000 laptop computers. Its total costs were $5 million, and its fixed costs were $2 million. What are the average variable costs (to the nearest dollar) of this firm? $300. (5,000,000 – 2,000,000 / 10,000 = 300). At its current short-run level of production, a firm's average variable costs equal $20.00 per unit, and its average fixed costs equal $20.00 per unit. Its total costs at this production level equal $2,500. What is the firm's output level? 62.50 (Your answer should have 2 decimal places). (20.00 +20.00 /2500) What are its total variable costs (to the nearest dollar) at this output level? $1250 (62.50 x 20.00 = 1250) What are its total fixed costs (to the nearest dollar)? $1250 (62.50 x 20.00 = 1250) Suppose that a company currently employs 1,000 workers and produces 1 million units of output per month. Labor is its only variable input, and the company pays each worker the same monthly wage. The company's current total variable costs equal $2 million. What are the average variable costs at this firm's current output level? $2 (Enter your response as a whole number).(2,000,000 / 1,000,000 = 2) What is the average physical product of labor? 1000 (Enter your response as a whole number). (1,000,000 / 1,000 = 1000) What monthly wage does the firm pay each worker? $2000 (Enter your response as a whole  number). (2,000,000 / 1,000 = 2,000) Which of the following statements describes a firm's long-run average cost curve? A. A U-shaped curve that represents the lowest point on a series of short-run variable cost curves. B. A U-shaped curve that represents the minimum unit cost of producing any given rate of output. C. A U-shaped curve that represents the lowest point on a series of short-run total cost curves. D. A U-shaped curve that represents the minimum point on a series of marginal cost curves. Which of the following is true about the long-run average cost curve? A. The shape of the long-run average cost curves is determined by the law of diminishing marginal returns. B. The long-run average cost curve is the envelope of the firm's short-run average cost curves. C. The long-run average cost curve is the locus of points of the minimum points of the firm's short-run average total cost curves. D. The long-run average cost curve is the locus of points of the minimum points of the firm's short-run average variable cost curves. The minimum possible short-run average costs are equal to long-run average costs when A. short-run and long-run costs are declining. B. the plant is producing at its short-run minimum point. C. the long-run curve is at a minimum point. D. production is at any point on the long-run average cost curve. In economics, the planning horizon is defined as A. the longest time period over which the firm can make decisions. B. the period of time for which technology is fixed. C. the long run, during which all inputs are variable. D. 10 years. When the long-run average cost curve is falling A. the firm needs to contract the scale of their operations to produce more efficiently. B. the firm is experiencing economies of scale. C. the firm is experiencing constant returns to scale. D. the firm is experiencing diseconomies of scale. Economies of scale in production A. occur when the marginal physical product of labor increases in the short run. B. cause the long-run average cost to increase as the firm grows larger. C. in the short run are a miniature version of long-run production. D. indicate that as a firm expands, its long-run per-unit costs fall. What is a firm's minimum efficient scale? A. All ranges of output at which the firm achieves minimum long-run average cost. B. The lowest rate of output at which the firm achieves minimum short-run average cost. C. All outputs where the firm achieves the minimum marginal cost. D. The lowest rate of output at which the firm achieves minimum long-run average cost. The firm's minimum efficient scale occurs A. when economies of scale end and constant returns to scale begin. B. when diseconomies of scale are falling. C. when constant returns to scale end and diseconomies of scale begin. D. when economies of scale are rising.  Suppose that a firm's only variable input is labor, and the constant hourly wage rate is $15 per hour. The last unit (hour) of labor hired enabled the firm to increase its hourly production from 250 units to 251 units. What was the marginal cost of the 251st unit of output? $15.  Suppose that a company currently employs 2,000 workers and produces 2 million units of output per month. Labor is its only variable input, and the company pays each worker the same monthly wage. The company's current total variable costs equal $6 million. What are average variable costs at this firm's current output level? $ 3 (Your answer should have two decimal place.) (6,000,000 / 2,000,000 = 3) What is the average physical product of labor? 1,000 (Your answer should be rounded to two decimal  places.) (2,000,000 / 2,000 = 1,000) What monthly wage does the firm pay each worker? $3,000 (Your answer should be rounded to the nearest penny.) (6,000,000 / 2,000 = 3,000) When the total product function begins to increase at a decreasing rate A. marginal cost is rising. B. marginal physical product is falling. C. the law of diminishing returns has set in. D. All of the above. The wage rate divided by marginal product equals A. marginal cost. B. average total cost. C. average variable cost. D. average product. When marginal cost is falling A. marginal physical product is at a maximum. B. marginal physical product must be rising. C. marginal physical product must be falling. D. marginal physical product is at a minimum. The shape of the short-run cost curves are the result of  A. economies of scale. B. diseconomies of scale. C. the law of diminishing returns. D. falling profits. Auto companies are seeking economies of scale in production of battery packs A. in order to reduce the marginal cost of powering hybrid and all-electric vehicles.  B. in order to reduce the average cost of powering hybrid and all-electric vehicles.  C. in order to increase the total cost of powering hybrid and all-electric vehicles.  D. in order to increase the average cost of powering hybrid and all-electric vehicles.  Out of more than 12 million U.S. vehicles produced each year, only about 200,000 cars are hybrid and 9,000 are all-electric. Thus, the battery packs that are used in these vehicles have a very low scale of production. The long-run average cost of producing a battery pack for use in passenger vehicles  A. is likely to be higher than the minimum feasible level for many years to come. B. is likely to be lower than the minimum feasible level for many years to come. C. is likely to remain the same as the minimum feasible level for many years to come. D. is likely to be volatile for some time due to the persistent high demand for the product. The firms are expanding their productive capabilities in hopes of making larger numbers of battery packs per year because  A. they desire to move downward along their long-run average cost curves to the increasing cost portion of the long-run cost curve. B. they desire to move downward along their short-run average cost curves to the minimum efficient scale of annual production. C. they desire to move downward along their long-run average cost curves to the minimum efficient scale of annual production. D. they desire to move upward along their long-run average cost curves to the minimum efficient scale of annual production. Which of the following is a correct statement about the long run in economics? A. There are no costs. B. At least one input cannot be changed. C. All inputs are variable. D. All inputs are fixed. The short-run production function for a manufacturer of flash memory drives is shown at the right. Based on this information, calculate the average physical product at each quantity of labor.  (Your answers should be whole numbers.) Input of Labor (workers per week) Total Output of Flash Memory Drives Average Product 0 0 1 40 40 2 72 36 3 90 30 4 112 28 5 130 26 6 144 24 Divide input of labor w/total out (72 / 2 = 36) The short-run production function for a manufacturer of flash memory drives is shown at the right. Based on this information, calculate the marginal physical product at each quantity of labor. (Your answers should be whole numbers). Input of Labor (workers per week) Total Output of Flash Memory Drives Marginal Product 0 0 1 30 30 2 65 35 3 90 25 4 110 20 5 120 10 6 125 5 Subtract line 2 from line 1 and so on to get MP (65 – 30 = 35) Input of Labor (workers per week) Total Output of Flash Memory Drives 0 0 1 25 2 60 3 85 4 105 5 115 6 120 At which point does marginal product begin to diminish for the manufacturer of flash memory drives?  Between 2 and 3 workers per week. Divide input of labor and total output and see when productivity drops. Paul's Chair Factory currently employs 100 workers, who produce 700 chairs. If Paul hires a 101st worker, output will rise to 800. What is the marginal physical product of the 101st worker? A. 800 B. 7.92 C. 8.00 D. 100 Formula for MPP: (800 -700 = 100) / (101 – 100 = 1) 100 / 1 = 100 Paul's Chair Factory currently employs 50 workers, who produce 800 chairs. If Paul hires a 51st worker, output will rise to 925. What is the average physical product of the 51st worker? A. 18.14 B. 2.45 C. 925 D. 125 Formula for APP: 925 / 51 = 18.14 In the short run, if a firm continues to add workers, marginal physical product must begin to diminish because A. the saturation point has been achieved. B. each worker has less capital to work with. C. new workers are less qualified than previous workers. D. average physical product must be declining. The following table shows the relationship between workers and output for a small factory in the short run, with capital held constant. Find the marginal physical product of labor (MPPL). Workers Output MPPL 0 0 -- 1 50 50 2 110 60 3 176 66 4 229 53 5 252 23 For this firm, diminishing marginal returns set in after worker 3 is employed. A reason for economies of scale is  A. diminishing marginal physical product. B. gains from specialization. C. limits to the efficient functioning of management. D. costs of information and communication. The long-run average cost curve A. represents the various average costs attainable at the planning stage of the firm's decision making. B. is the envelope of the short-run average variable cost curves. C. represents the various average costs attainable with a fixed level of capital. D. is the envelope of the short-run total cost curves. In the short run, if marginal cost is decreasing, which of the following statements must be true? A. Marginal physical product is increasing. B. Average total cost is increasing. C. Average fixed cost is increasing. D. Average variable cost is increasing. E. There is not enough information to determine whether the statements are correct. In the short run, if marginal cost is decreasing, which of the following statements must be true? A. Marginal physical product is increasing. B. Average total cost is increasing. C. Average fixed cost is increasing. D. Average variable cost is increasing. E. There is not enough information to determine whether the statements are correct. In the short run, if average physical product is decreasing, which of the following statements must be true? A. Average variable cost is increasing. B. Marginal cost is decreasing. C. Marginal physical product is increasing. D. Average total cost is decreasing. E. There is not enough information to determine whether the statements are correct. Suppose that a firm's only variable input is labor. The firm increases the number of employees from four to five, thereby causing weekly output to rise by five units and total costs to increase from $3,500 per week to $3,800 per week.  What is the marginal physical product of the fifth worker? 5 units. (Your answer should be a whole  number.) (5 / 1 = 5) What is the weekly wage rate earned by the fifth worker? $300 (Your answer should be rounded to the nearest dollar.) (3,800 – 3,500 = 300) In the short run, a firm's total costs of producing the hundredth unit of output equal $12,000. If it produces one more unit, its total costs will increase to $12,200. What is the marginal cost of the 101st unit of output? $200 (Round your answer to the nearest cent.) (12,200 – 12,000) / (101 – 100) = 200 / 1 =200 What is the firm's average total cost of producing 100 units? $120 (Round your answer to the nearest  cent.) (12,000 / 100 = 120) What is the firm's average total cost of producing 101 units? $120.79 (Round your answer to the nearest  cent.) (12,200 / 101 = 120.79) Assume a firm reduces its cost by shifting from paychecks to payroll cards, which are stored-value cards onto which the companies can download employees' wages and salaries electronically. If the only factor of production the firm varies in the short run is the number of hours worked by people already on its payroll, would the shift from paychecks to payroll cards reduce the firm’s total fixed costs or its variable costs? A. Since the wages paid to employees, the firm's variable labor input, have not changed, variable costs are unaffected. If the switch from issuing paychecks to payroll cards is cost-reducing, this change will cut its fixed costs of meeting its payrolls. B. Since the wages paid to employees, the firm's variable labor input, have changed, if the switch from issuing paychecks to payroll cards is cost-reducing, this change will cut its variable costs of meeting its payrolls. C. Since the number of hours worked is variable, the variable cost of processing the payroll changes; therefore, the cost savings must come from a reduction in variable costs in the long run. D. Since the number of hours worked is variable, the variable cost of processing the payroll changes; therefore, the cost savings must come from a reduction in variable costs in the short run. A watch manufacturer finds that at 1,000 units of output, its marginal costs are above average total costs. If it produces an additional watch, its average total costs will rise. The cost structure of a manufacturer of microchips is described in the table shown below. The firm's fixed costs equal $20,000 per day. Calculate the average variable cost, average fixed cost, and average total cost at each output level. (Your answers should be rounded to the nearest cent.) Output  (microchips per day) Total Cost of Output  Average  Variable Cost ($) Average  Fixed Cost ($) Average  Total Cost ($) 0 $20,000 − − − 25,000 70,000 2.00 0.80 2.80 50,000 105,000 1.70 0.40 2.10 75,000 160,000 1.86 0.27 2.13 100,000 230,000 2.10 0.20 2.30 125,000 335,000 2.52 0.16 2.68 150,000 475,000 3.04 0.13 3.17 Average Total Cost = TC / Q (70,000 / 25,000 = 2.80) Average Fixed Cost = FC / Q (20,000 / 25,000 = 0.80) Average Variable Cost = ATC – AFC (2.80 – 0.80 = 2.00) A manufacturing firm with a single plant is contemplating changing its plant size. It must choose from among seven alternative plant sizes. In the table, plant size A is the smallest it might build, and size G is the largest. Currently, the firm's plant size is B. At plant size B, this firm is currently experiencing economies of of scale. What is the firm's minimum efficient scale? C (Enter a letter: A, B, C... G.) Plant Size Average Total Cost ($) A (smallest) 4,250 B 3,600 C 3,100 D 3,100 E 3,100 F 3,250 G (largest) 4,100 The following table shows the daily relationship between the number of workers and output (Q) for a small factory in the short run, with capital held constant. Each worker costs $150 per day, and the firm has fixed costs of $25 per day. Calculate total cost (TC), marginal cost (MC), and average total cost (ATC). (Round your answers to two decimal places.) Workers Q TC MC  ATC 0 0 25.00 -- -- 1 30 175 5.00 5.83 2 66 325.00 4.17 4.92 3 106 475.00 3.75 4.48 4 138 625.00 4.69 4.53 5 152 775.00 10.71 5.10 Total cost is the fixed cost ($25) plus the total variable cost ($150 per worker multiplied by the number of workers). Marginal cost is the change in total cost (325 – 175) divided by the change in output (66 -30). Average total cost is total cost divided by output (175 / 30).