Refer to the figure at right. An increase in production from q, to q, A. is more costly in the short run than in the long run. B. uses less inputs in the long run. C. costs the same in the short run or in the long run. D. uses more capital in the short run.

Refer to the figure at right. An increase in production from q, to q, A. is more costly in the short run than in the long run. B. uses less inputs in the long run. C. costs the same in the short run or in the long run. D. uses more capital in the short run.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter21: Production And Costs

Section: Chapter Questions

Problem 13QP

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Concept explainers

Cost of Production

In economic theory, production costs are the costs incurred by an industrial organization when it engineers a project or provides a service that generates revenue and benefits. Labor costs, raw materials, consumable manufacturing costs, and general overhead sum up, accounting for production costs. Total cost data is calculated by combining total direct costs of materials, labor costs, and total production costs.

Question

is qu
Capital per year
E-
Long-Run
Expanšion Path
A-
K2
Short-Run
Expansion Path
P
92
L, B
Labor per year
L1

Refer to the figure at right. An increase in production from q, to q,
A. is more costly in the short run than in the long run.
B. uses less inputs in the long run.
C. costs the same in the short run or in the long run.
D. uses more capital in the short run.

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Long-run costs of production are generally lower than the short run costs because: a. all inputs are fixed in the long run. b. firms cannot change their scale of production in the long run. c. there is greater flexibility in input usage in the long run.
What are different types of costs involved in production of goods and services? Analyze the relationship between cost and productivity in the short run.
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To economists, the main difference between the short run and the long run is that: the law of diminishing returns applies in the long run, but not in the short run.B. in the long run all resources are variable, while in the short run at least one resource is fixed.C. fixed costs are more important to decision making in the long run than they are in the short run.D. in the short run all resources are fixed, while in the long run all resources are variable.
1. In the short run, an increase in output at low levels of production will most likely cause: A. an increase in the marginal cost due to the rising total fixed cost. B. an increase in the marginal cost due to the law of diminishing returns. C. a decrease in the marginal cost due to economies from greater specialization.
What causes costs of production to vary with output in the short run? What generally causes costs of production to vary in the long run?
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Question 2 a. A producer borrows money and starts a business. He himself looks after the business. Identify implicit and explicit costs from this information. Explain. b.List and explain which of the following is a fixed cost or a variable cost for Caribbean Airlines. i.The cost of fuel used in its planes. ii. The rent on its Piarco headquarters. iii. The lease payments on its current inventory of jets. iv. The cost of peanuts it serves to passengers. v. The salary paid to the Chief Executive Officer. c. How is the difference between average total cost and average variable cost impacted by an increase in output?