Question 1

Scenario 13-16
Barney builds custom wooden birdhouses. He can make 150 birdhouses per month and sell them for $50 each. His average total cost is $30 per birdhouse.
-Refer to Scenario 13-16. Barney's monthly total revenue is
A)$12,000.
B)$7,500.
C)$4,500.
D)$1,500.

Accepted Answer

Barney can make 150 birdhouses per month and sell them for $50 each, so his monthly total revenue is 150 x $50 = $7,500.

Question 2

Scenario 13-17
If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost.
-Refer to Scenario 13-17. Farmer Brown's marginal-cost curve is
A)increasing.
B)decreasing.
C)constant.
D)U-shaped.

Accepted Answer

As Farmer Brown plants more and more bags of seeds, his marginal cost of production increases because he has to spend more money on buying additional bags of seeds. Therefore, his marginal-cost curve is increasing.

Best choice(s):
Answer: C) Plant 2 bags of seeds 
 The marginal benefit of planting an additional bag of seeds decreases after planting 2 bags because the marginal product of labor (MP) decreases. MP for the third bag is only 3 bushels, whereas the MP for the second bag is 4 bushels. Additionally, the marginal cost of planting a third bag of seeds outweighs the marginal benefit, as the cost of the seeds is $120 and the additional yield is only 3 bushels. Therefore, the best choice for Farmer Brown is to plant 2 bags of seeds, which gives him a total of 9 bushels (5 from 1 bag and 4 from the second bag) and the highest total profit of $360 (total revenue - total cost).

Question 3

Table 13-14 
-Refer to Table 13-14. What is the marginal cost of the 2nd unit of output?
A)$10
B)$15
C)$24
D)$38

Accepted Answer

Marginal cost is calculated by dividing the change in total cost by the change in quantity. In this case, the change in total cost for producing the 2nd unit is $15 ($40 - $25), while the change in quantity is 1 unit. Therefore, the marginal cost of the 2nd unit of output is $15. The best choice would be to produce as long as the marginal revenue is greater than or equal to the marginal cost, which is the case for the first two units.

Question 4

Table 13-14 
-Refer to Table 13-14. What is the average variable cost of producing 3 units of output?
A)$20
B)$30
C)$35
D)$60

Accepted Answer

The answer of Table 13-14 
-Refer to Table 13-14. What...

Question 5

Table 13-15 
-Refer to Table 13-15. What is average variable cost when output is 50 units?
A)$3.60
B)$4.00
C)$4.40
D)$4.80

Accepted Answer

To find average variable cost, we need to look at the AVC column in the table. When output is 50 units, AVC is $4.00. Therefore, the best choice is B.

Question 6

Table 13-14 
-Refer to Table 13-14. What is the marginal cost of the 8th unit of output?
A)$20.00
B)$21.86
C)$23.13
D)$32.00

Accepted Answer

The answer of Table 13-14 
-Refer to Table 13-14. What...

Question 7

Scenario 13-16
Barney builds custom wooden birdhouses. He can make 150 birdhouses per month and sell them for $50 each. His average total cost is $30 per birdhouse.
-Refer to Scenario 13-16. Barney is considering hiring his best friend Fred to work for him. Fred can build 125 birdhouses per month. If Barney hires Fred, what will be the monthly marginal product?
A)25 birdhouses
B)125 birdhouses
C)150 birdhouses
D)275 birdhouses

Accepted Answer

The answer of Scenario 13-16
Barney builds custom wooden birdhouses. He...

Question 8

Scenario 13-17
If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost.
-Refer to Scenario 13-17. Farmer Brown's marginal cost of producing 9 units of output (using 2 bags of seed) is
A)$240.
B)$120.
C)$40.
D)$30.

Accepted Answer

The answer of Scenario 13-17
If Farmer Brown plants no seeds...

Question 9

Scenario 13-18
Farmer Jack is a watermelon farmer. If Jack plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 30 watermelons. If he plants 2 bags of seeds, he gets 50 watermelons. If he plants 3 bags of seeds he gets 60 watermelons. A bag of seeds costs $100, and the costs of seeds are his only costs.
-Refer to Scenario 13-18. Which of the following statements is (are) true?
(i)Farmer Jack experiences decreasing marginal product.
(ii)Farmer Jack's production function is nonlinear.
(iii)Farmer Jack's total cost curve is linear.
A)(i) only
B)(i) and (ii) only
C)(ii) only
D)(i) and (iii) only

Accepted Answer

(i) is true because as Jack increases the number of bags of seeds he plants, the additional number of watermelons he gets per bag of seeds decreases, indicating decreasing marginal product. 
(ii) is true because the production function is not a straight line, but rather curved, indicating nonlinearity. 
(iii) is false because although the costs of seeds are his only costs, the cost curve is not linear as the total cost of seeds increases as Jack plants more bags of seeds.

Question 10

Table 13-15 
-Refer to Table 13-15. What is variable cost when output equals 30 units?
A)$4
B)$40
C)$90
D)$130

Accepted Answer

Variable cost per unit is given as $3. Therefore, when output equals 30 units, variable cost = 30*$3 = $90. Option C is the correct answer. Option A and B are incorrect as they are too low. Option D is incorrect as it is too high.

Question 11

Scenario 13-16
Barney builds custom wooden birdhouses. He can make 150 birdhouses per month and sell them for $50 each. His average total cost is $30 per birdhouse.
-Refer to Scenario 13-16. Barney is considering hiring his best friend Fred to work for him. Fred can build 125 birdhouses per month. If Barney hires Fred, what will be the monthly total output of his birdhouse business?
A)25 birdhouses
B)125 birdhouses
C)150 birdhouses
D)275 birdhouses

Accepted Answer

Barney's current output is 150 birdhouses per month. If he hires Fred, their joint output will be 150 + 125 = 275 birdhouses per month.

Question 12

Table 13-14 
-Refer to Table 13-14. What is the average total cost of producing 2 units of output?
A)$15
B)$19
C)$24
D)$48

Accepted Answer

To find the average total cost of producing 2 units of output, we look at the row where Q=2. The total cost is $48 and the quantity produced is 2 units, so the average total cost is $24 ($48/2). Therefore, the best choice is C.

Question 13

Table 13-14 
-Refer to Table 13-14. What is the average fixed cost of producing 3 units of output?
A)$1.67
B)$3.33
C)$10
D)$20

Accepted Answer

The answer of Table 13-14 
-Refer to Table 13-14. What...

Question 14

Table 13-14 
-Refer to Table 13-14. What is the average fixed cost of producing 8 units of output?
A)$1.25
B)$3.13
C)$20.00
D)$24.37

Accepted Answer

The answer of Table 13-14 
-Refer to Table 13-14. What...

Question 15

Table 13-15 
-Refer to Table 13-15. What is average fixed cost when output is 40 units?
A)$1.00
B)$3.32
C)$5.00
D)$8.00

Accepted Answer

The answer of Table 13-15 
-Refer to Table 13-15. What...

Question 16

Table 13-14 
-Refer to Table 13-14. What is the marginal cost of the 4th unit of output?
A)$4
B)$10
C)$14
D)$16

Accepted Answer

The answer of Table 13-14 
-Refer to Table 13-14. What...

Question 17

Table 13-15 
-Refer to Table 13-15. What is the total fixed cost for this firm?
A)$20
B)$30
C)$40
D)$50

Accepted Answer

The total fixed cost is the sum of all fixed costs, which in this case is $10 + $15 + $15 = $40. Therefore, the best choice is C.

Question 18

Table 13-14 
-Refer to Table 13-14. What is the average total cost of producing 6 units of output?
A)$19.67
B)$20.00
C)$21.33
D)$21.86

Accepted Answer

To find the average total cost of producing 6 units, we need to locate the row for 6 units in the table. The total cost for 6 units is $128, and the corresponding total variable cost is $116. The average variable cost can be calculated as $116/6 = $19.33. Adding the average fixed cost of $2.00 (calculated as total fixed cost of $12 divided by 6 units), we get an average total cost of $21.33. Thus, the best choice is C.

Question 19

Table 13-14 
-Refer to Table 13-14. What is the average variable cost of producing 6 units of output?
A)$1.67
B)$18
C)$19.67
D)$21.33

Accepted Answer

To find the average variable cost of producing 6 units of output, we need to look at the column for output quantity 6 and the corresponding variable cost, which is $118. Dividing $118 by 6 units yields an average variable cost of $19.67 per unit. Therefore, the correct answer is C.

Question 20

Scenario 13-16
Barney builds custom wooden birdhouses. He can make 150 birdhouses per month and sell them for $50 each. His average total cost is $30 per birdhouse.
-Refer to Scenario 13-16. Barney's monthly total profit is
A)$1,500.
B)$3,000.
C)$4,500.
D)$7,500.

Accepted Answer

To calculate Barney's monthly total profit, we need to subtract his total cost from his total revenue:
Total revenue = 150 birdhouses x $50/birdhouse = $7,500
Total cost = 150 birdhouses x $30/birdhouse = $4,500
Total profit = Total revenue - Total cost = $7,500 - $4,500 = $3,000. Therefore, option B is the correct answer.

Quiz 13: The Costs of Production

Scenario 13-16 Barney builds custom wooden birdhouses. He can make 150 birdhouses per month and sell them for $50 each. His average total cost is $30 per birdhouse. -Refer to Scenario 13-16. Barney's monthly total revenue is

Table 13-14 -Refer to Table 13-14. What is the marginal cost of the 2nd unit of output?

Table 13-14 -Refer to Table 13-14. What is the average variable cost of producing 3 units of output?

Table 13-15 -Refer to Table 13-15. What is average variable cost when output is 50 units?

Table 13-14 -Refer to Table 13-14. What is the marginal cost of the 8th unit of output?

Table 13-15 -Refer to Table 13-15. What is variable cost when output equals 30 units?

Table 13-14 -Refer to Table 13-14. What is the average total cost of producing 2 units of output?

Table 13-14 -Refer to Table 13-14. What is the average fixed cost of producing 3 units of output?

Table 13-14 -Refer to Table 13-14. What is the average fixed cost of producing 8 units of output?

Table 13-15 -Refer to Table 13-15. What is average fixed cost when output is 40 units?

Table 13-14 -Refer to Table 13-14. What is the marginal cost of the 4th unit of output?

Table 13-15 -Refer to Table 13-15. What is the total fixed cost for this firm?

Table 13-14 -Refer to Table 13-14. What is the average total cost of producing 6 units of output?

Table 13-14 -Refer to Table 13-14. What is the average variable cost of producing 6 units of output?

Scenario 13-16 Barney builds custom wooden birdhouses. He can make 150 birdhouses per month and sell them for $50 each. His average total cost is $30 per birdhouse. -Refer to Scenario 13-16. Barney's monthly total profit is