Chapter XIII _amp;quot;production cost_amp;quot;

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					Chapter XIII "production cost"
Review Questions:
1. What is the relationship between a firm's total revenue, profit, and total
cost? Companies total revenue, profit, and the relationship between the total cost.
A: Profit = total revenue business - the total cost
2. Give an example of an opportunity cost that an accountant might not count as a cost.
Why would the accountant ignore this cost? Example of a cost accounting is not the
opportunity cost. Why ignore this cost accounting?
A: If the private owners do not give up their own wages, then the opportunity cost of
his labor is not counted as business costs. Because there is no cash flow occurred, so
ignore this cost accounting.

3. What is marginal product, and what does it mean if it is diminishing? What is the
marginal product, marginal production decline, does that mean?
A: The additional result of a multi- input output. Diminishing marginal productivity, is
an input to the marginal production increases with a reduction in investment.

4. Draw a production function that exhibits diminishing marginal product of labor.
Draw the associated total cost curve. (In both cases, be sure to label the axes.) Explain
the shapes of the two curves you have drawn. Drawn that this work kinds of input
power production function, indicating diminishing marginal productivity. Draw the
total cost curve associated (in both cases marked axis). Explain the shape of the two

 Decreasing slope.

Ascending slope

5. Define total cost, average total cost, and marginal cost. How are they related?
Definition of total cost, average total cost, marginal cost. What is the relationship
between them?
A: The product requires a certain amount of production costs of all inputs, including
fixed and variable costs.
   Meaning the average cost is representative of a unit cost equal to the total cost
divided by output.
   Marginal cost of producing one more unit is the need to increase costs. It is equal to
the total costs divided by the cost of increased output capacity.
   Another relationship between them is that when marginal cost is greater than
average total cost, average total cost is rising. When the marginal cost is less than
average total cost, average total cost is falling.

6. Draw the marginal-cost and average-total-cost curves for a typical firm. Explain
why the curves have the shapes that they do and why they cross where they do. Draw
a typical enterprise's marginal cost and average total cost curve . Explain
its shape and the intersection.

It has following features: (1) In addition to low production began the scope of other
production areas, the marginal cost as output increases. (2) The average total cost is
U-shaped curve, starting with the production increases and reduces, to a certain yield,
the average total cost of starting with the production increases. (3) the marginal cost
curve always intersect at the inflection point average total cost curve.

7. How and why does a firm's average-total-cost curve differ in the short
run and in the long run? Why a business of short-term and long-term average total
cost of the average total cost of inconsistency?
A: The average total cost of long-term average total cost is always lower than the
short term. Long-term considerations, companies can increase production if you can
have time to optimize investment allocation of production factors, so that marginal
costs do not increase "steep."

8. Define economies of scale and explain why they might arise. Define diseconomies
of scale and explain why they might arise. To the definition of economies of scale,
economies of scale will have to explain why. To the definition of diseconomies of
scale, to explain why the economy of scale is not.
A: With the increase in production, long-term decline in average total cost, then the
existence of economies of scale. Because professional workers.
   As production increased, long-term average total costs, then there exists
diseconomies of scale. Because large scale enterprises, the internal coordination
Application questions:
1. This chapter discusses many types of costs: opportunity cost, total cost, fixed cost,
variable cost, average total cost, and marginal cost. Fill in the type of cost that best
completes the phrases below: This article discusses a number of costs, the following
What is the cost involved.
a. The true cost of taking some action is its __ _____ opportunity cost.
b. _ average total cost of ______ is falling when marginal cost is below it, and rising
when marginal cost is above it.
c. A cost that does not depend on the quantity produced is a __ _____ fixed costs.
d. In the ice-cream industry in the short run, __ variable costs _____ includes the cost
of cream and sugar, but not the cost of the factory.
e. Profits equal total revenue less ___ ____ the total cost.
f. The cost of producing an extra unit of output is _ ______ marginal cost.
2. Your aunt is thinking about opening a hardware store. She estimates that it would
cost $ 500,000 per year to rent the location and buy the stock. In addition, she would
have to quit her $ 50,000 per year job as an accountant. Your Shenzi considering to
open a grocery store, purchase an annual rent facade and pay 500,000 yuan, while her
annual salary of 50,000 to quit their job.
a. Define opportunity cost. the definition of opportunity cost.
A: slightly.
b. What is your aunt's opportunity cost of running a hardware store for a
year? If your aunt thought she could sell $ 510,000 worth of merchandise in a year,
should she open the store? Explain.
A: She's the opportunity cost is 500,000 +50,000 = 550,000 yuan.
  ?550,000 is greater than its total output (not the total profit), so she opened the store
economically viable.
3. Suppose that your college charges you separately for tuition and for room and
board. Suppose you were to charge university tuition fees and accommodation costs.
a. What is a cost of attending college that is not an opportunity cost? what cost than
the opportunity cost of college?
A: room and board, because both do not go to college, room and board charges must
be consumer.
b. What is an explicit opportunity cost of attending college? explicit opportunity cost
of college for that?
A: The tuition fees.
c. What is an implicit opportunity cost of attending college? college hidden
opportunity cost?
A: The University four years, unable to work and reduce income.
4. A commercial fisherman notices the following
relationship between hours spent fishing and the
quantity of fish caught:
2 18
3 24
5 30
a. What is the marginal product of each hour spent fishing? marginal product per hour.

b. Use these data to graph the fisherman's production function. Explain its
shape. the production function and shape of the explanation.

Fish ponds fish may be, the more fishing less, the more difficult fishing.
c. The fisherman has a fixed cost of $ 10 (his pole). The opportunity cost of his time is
$ 5 per hour. Graph the fisherman's total-cost curve. Explain its shape. rod
fixed costs 10 yuan, the opportunity cost of his time 5 RMB / hour. Draw the total
cost curve, to explain its shape.

Increase in production costs resulting from disproportionate.
5. Nimbus, Inc., Makes brooms and then sells them doorto-door. Here is the
relationship between the number of workers and Nimbus's output in a
given day: Nimubasi produced brooms and endure door sales company.
a. Fill in the column of marginal products. What pattern do you see? How might you
explain it? fill out the marginal production field. Explained.
A: The first increased and then decreased.

b. A worker costs $ 100 a day, and the firm has fixed costs of $ 200. Use this
information to fill in the column for total cost. each worker's daily wage,
100, 200 yuan of fixed investment. Complete assembly in this column.
A: See above table.
c. Fill in the column for average total cost. (Recall that ATC = TC / Q.) What pattern
do you see?
A: See above table, U-type.
d. Now fill in the column for marginal cost. (Recall that MC = TC / Q.) What pattern
do you see?
A: See above table. Marginal cost is U-shaped, but the increase is more steep.
e. Compare the column for marginal product and the column for marginal cost.
Explain the relationship.
A: The marginal product rises, the marginal costs. And vice versa.
f. Compare the column for average total cost and the column for marginal cost.
Explain the relationship.
A: When the marginal cost lower than the average total cost, average total cost is
falling. When the marginal cost higher than the average total cost of the average total
cost begins to rise.
6. Suppose that you and your roommate have started a bagel delivery service on
campus. List some of your fixed costs and describe why they are fixed. List some of
your variable costs and describe why they are variable. Suppose you and your fellow
students on campus delivery Bagel circle fast food. List your business for fixed and
variable costs.
A: buy a bicycle (vehicle), print advertising alone.
   Variable costs include the money to buy bagel ring and petrol.
7. Consider the following cost information for a pizzeria:
0 $ 300 $ 0
135 050
239 090
3 420 120
4 450 150
a. What is the pizzeria's fixed cost?
A: 300
b. Construct a table in which you calculate the marginal cost per dozen pizzas using
the information on total cost. Also calculate the marginal cost per dozen pizzas using
the information on variable cost. What is the relationship between these sets of
numbers? Comment. with The total cost marginal cost. Variable cost with marginal
cost. The relationship between.
A: The total cost of the change, in fact, variable costs change.

8. You are thinking about setting up a lemonade stand. The stand itself costs $ 200.
The ingredients for each cup of lemonade cost $ 0.50. Do you want a lemonade shop.
Shop cost 200. Cost is 0.5 yuan per cup.
a. What is your fixed cost of doing business? What is your variable cost per cup?
A: 200. 0.5 yuan.
b. Construct a table showing your total cost, average total cost, and marginal cost for
output levels varying from zero to 10 gallons. (Hint: There are 16
cups in a gallon.) Draw the three cost curves.

9. Your cousin Vinnie owns a painting company with fixed costs of $ 200 and the
following schedule for variable costs:
              ?QUANTITY OF HOUSES
              ?PAINTED PERMONTH
Variable costs $ 10 $ 20 $ 40 $ 80 $ 160 $ 320 $ 640
Calculate average fixed cost, average variable cost, and average total cost for each
quantity. What is the efficient scale of the painting company? Average fixed cost,
average variable cost, average total cost. Paint company's effective size is
the number?
A: The four houses.

?From the graphics point of view, as production increased, the average variable costs,
average fixed costs down, upgrade balance, there's the minimum. That
efficient production.
10. Healthy Harry's Juice Bar has the following cost schedules: the cost of
fruit juice shop table.
0 $ 0 $ 30
470 100
a. Calculate average variable cost, average total cost, and marginal cost for each
quantity. calculation of the average variable cost, marginal cost average total cost.

b. Graph all three curves. What is the relationship between the marginal-cost curve
and the averagetotal-cost curve? Between the marginal-cost curve
and the average- variable-cost curve? Explain.
A: The output of less than 4-cylinder, the marginal cost curve below the average total
cost curve, when more than 4-cylinder, in its last.
   Marginal cost curve above average variable cost curve.

11. Consider the following table of long-run total cost for three different firms:
Firm A $ 60 $ 70 $ 80 $ 90 $ 100 $ 110 $ 120
Firm B 11 24 39 56 75 96 119
Firm C 21 34 49 66 85 106 129
Does each of these firms experience economies of scale or diseconomies of scale?

Company 1 has economies of scale. Company 2 has diseconomies of scale. Company
3 has economies of scale in production from 1-3, more than three are diseconomies of
In fact, increased fixed investment to increase production, will result in lower unit

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