Chapter 13.

THE COSTS OF PRODUCTION

1. Farmer mcdonald gives banjo lessons for $20 per hour. one day, he spends 10 hours
planting $100 worth of seeds on his farm. What total cost has he incurred?

a. $100

b. $200

c. $300

d. $400

2. Xavier opens up a lemonade stand for two hours. he spends $10 for ingredients and sells
$60 worth of lemonade. in the same two hours, he could have mowed his neighbor’s lawn for
$40. Xavier earns an accounting profit of _________ and an economic profit of _________.

a. $50; $10

b. $90; $50

c. $10; $50

d. $50; $90

3. Farmer Greene faces diminishing marginal product. if she plants no seeds on her farm, she
gets no harvest. if she plants 1 bag of seeds, she gets 3 bushels of wheat. if she plants 2 bags,
she gets 5 bushels. if she plants 3 bags, she gets

a. 6 bushels.

b. 7 bushels.

c. 8 bushels.

d. 9 bushels.

4. diminishing marginal product explains why, as a firm’s output increases,

a. the production function and total-cost curve both get steeper.

b. the production function and total-cost curve both get flatter.

c. the production function gets steeper, while the total-cost curve gets flatter.

d. the production function gets flatter, while the total-cost curve gets steeper.

5. A firm is producing 1,000 units at a total cost of $5,000. When it increases production to
1,001 units, its total cost rises to $5,008. For this firm,
a. marginal cost is $5, and average variable cost is $8.

b. marginal cost is $8, and average variable cost is $5.

c. marginal cost is $5, and average total cost is $8.

d. marginal cost is $8, and average total cost is $5.

6. A firm is producing 20 units with an average total cost of $25 and a marginal cost of $15.
if it increases production to 21 units, which of the following must occur?

a. marginal cost will decrease.

b. marginal cost will increase.

c. Average total cost will decrease. (MC<ATC  ATC decrease)

d. Average total cost will increase.

7. the government imposes a $1,000 per year license fee on all pizza restaurants. As a result,
which cost curves shift?

a. average total cost and marginal cost

b. average total cost and average fixed cost

c. average variable cost and marginal cost

d. average variable cost and average fixed cost

8. if a higher level of production allows workers to specialize in particular tasks, a firm will
likely exhibit _________ of scale and _________ average total cost.

a. economies; falling

b. economies; rising

c. diseconomies; falling

d. diseconomies; rising

9. if Boeing produces 9 jets per month, its long-run total cost is $9 million per month. if it
produces 10 jets per month, its long-run total cost is $11 million per month. Boeing exhibits

a. rising marginal cost.

b. falling marginal cost.

c. economies of scale.

d. diseconomies of scale.
10. 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
each sentence:

a. What you give up in taking some action is called the ____ opportunity cost _____.

b. ____ average total cost _____ 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(n) ____ fixed cost _____.

d. In the ice-cream industry in the short run, ____ variable cost _____ includes the cost of
cream and sugar but not the cost of the factory.

e. Profits equal total revenue minus ____ total cost _____.

f. The cost of producing an extra unit of output is the ____ marginal cost _____.

11. Buffy is thinking about opening an amulet store. She estimates that it would cost
$350,000 per year to rent the location and buy the merchandise. In addition, she would have
to quit her $80,000 per year job as a vampire hunter.

a. Define opportunity cost. What you give up in taking some action is called the opportunity
cost

b. What is Buffy’s opportunity cost of running the store for a year? $80,000 per year as a
vampire hunter

c. Buffy thinks she can sell $400,000 worth of amulets in a year. What would her accountant
consider the store’s profit? Accounting profit = $400,000 - $350,000 = $50,000

d. Should Buffy open the store? Explain.

Economic profit = $400,000 - $350,000 - $80,000 = -$30,000  Buffy shouldn’t open the
store

e. How much revenue would the store need to generate for Buffy to earn positive economic
profit

Total revenue > $430,000

12.
 Hours Quantity of fish (in pounds) Marginal Product

0 0 0

1 10 10

2 18 8

3 24 6

4 28 4

5 30 2

b) The production function gets flatter as the number of hours spent increases, reflecting
diminishing marginal product.

c)
 The total cost curve gets steeper as the
quantity of output increases because of
diminishing marginal product.

13.

The total cost of 600 players is

= 600 × $300 = $180,000
The total cost of 601 players is
= 601 × $301 = $180,901
→ Marginal cost = 180,901 - 180,000 = $901 > $550
→ The offer should not be accepted

14.
a)

Quantity Total cost Variable cost Fixed cost

0 dozen pizzas $300 $0 $300

1 350 50 300

2 390 90 300

3 420 120 300

4 450 150 300

5 490 190 300

6 540 240 300

→ Fixed cost = $300

b)

Total Variable Marginal cost (using Marginal cost (using

Quantity
cost cost total cost) variable cost)

0 dozen $300 $0 $0 $0
pizzas

1 350 50 50 50

2 390 90 40 40

3 420 120 30 30

4 450 150 30 30

5 490 190 40 40
 6 540 240 50 50

 Chi phí cận biên là sự thay đổi trong tổng chi phí cho mỗi đơn vị đầu ra bổ sung. Nó
cũng bằng với sự thay đổi trong chi phí biến đổi cho mỗi đơn vị đầu ra bổ sung. Mối
quan hệ này xảy ra vì tổng chi phí bằng tổng chi phí biến đổi và chi phí cố định và chi
phí cố định không thay đổi khi số lượng thay đổi. Do đó, khi số lượng tăng lên, tổng
chi phí tăng lên bằng với mức tăng chi phí biến đổi.

15.

Quantity of houses Fixed Variable Average Average Average

painted per month cost cost fixed cost variable cost total cost

1 $200 $10 $200 $10 $210

2 200 20 100 10 110

3 200 40 66.667 13.333 80

4 200 80 50 20 70

5 200 160 40 32 72

6 200 320 33.333 53.333 86.6667

7 200 640 28.571 91.429 120

Efficient scale (Quy mô hiệu quả): mức sản lượng mà tại đó tổng chi phí bình quân thấp nhất

The efficient scale of the painting company is 4 houses per month

16.
 a) As a result of the lump-
sum tax, the average
fixed cost curve and the
average total cost curve
would shift because the
lump-sum tax increases
the fixed cost but has no
effect on marginal cost
and variable cost (chỉ
thay đổi theo sản lượng).
Therefore, the fixed cost
curve and the average
total cost curve would
shift upward.

b) As a result of the per-

burger tax, average total
cost curve , average
variable cost curve and
marginal cost curve
would shift because the
per-burger tax increases
the va
c) riable cost but has no
effect on fixed cost.
Therefore, these three
curves would shift
upward.

17.
 Quantity Variable Cost Total Cost AVC ATC MG

0 vats of juice $0 $30

1 10 40 $10 $40 $10

2 25 55 12.5 27.5 15

3 45 75 15 25 20

4 70 100 17.5 25 25

5 100 130 20 26 30

6 135 165 22.5 27.5 35

b) MG nằm dưới ATC và tổng

chi phí trung bình giảm khi
sản lượng nhỏ hơn 4. MG nằm
trên ATC khi sản lượng cao
hơn 4 và tổng chi phí trung
bình đang tăng.

Đường chi phí cận biên nằm trên

đường chi phí biến đổi trung bình.

18.
 Quantity 1 2 3 4 5 6 7

ATC Firm A $60 35 26.6 22.5 2 18.33 17.14

7 0

ATC Firm B $11 12 13 14 1 16 17

5

ATC Firm C $21 17 16.3 16.5 1 17.67 18.43

3 7

Lợi thế kinh tế theo vi mô: ATC trong dài hạn giảm khi sản lượng tăng

Bất lợi thế kinh tế theo vi mô: ATC trong dài hạn tăng khi sản lượng tăng

Firm A: economies of scale

Firm B: diseconomies of scale

Firm C: từ 1 đến 3: economies of scale

từ 4 đến 7: diseconomies of scale