Question

4.) Exhibit 7-8 Costs schedules for producing pizza

Pizzas	Fixed Cost	Variable Cost	Total Cost	Marginal Cost
0	$	$	$	$
1		5
2		13
3				10
4	100		140
5				20
6		85
7			215

By filling in the blanks in Exhibit 7-8, the total cost of producing 3 pizzas is shown to be equal to:

a $100.

b $105.

c $113.

d $123.

e $23.

6.) Constant returns to scale exist over the range of output for which the long-run average cost is:

a neither rising or falling.

b falling.

c rising.

d none of these.

Exhibit 7-1 Production of pizza data

Workers	Pizzas
0	0
1	4
2	10
3	15
4	18
5	19

8.) Exhibit 7-1 shows the change in the short-run production of pizzas as more workers are hired. The table shows the marginal product of the labor input is decreasing with the hiring of the third worker. A possible reason for this diminishing marginal product is:

a decreased wages.

b increases in plant size.

c decreases in fixed cost.

d increased division of labor as additional workers are hired.

e decreases in labor productivity.

11.) In the long run, total fixed cost will:

a remain constant.

b increase.

c decrease.

d not exist by definition.

15.) Exhibit 7-12 Cost schedule for producing pizza

Pizzas	Fixed Cost	Variable Cost	Total Cost
0	$	$	$
1			48
2		17
3		27
4			78
5	40
6		64
7		80

By filling in the blanks in Exhibit 7-12, the AVC of 3 pizzas is shown to be equal to:

a $10.

b $13.33.

c $9.

d $22.33.

e $40.

16.) The short run is a period of time:

a in which a firm uses at least one fixed input.

b that is long enough to permit changes in the firm's plant size.

c in which production occurs within one year.

d in which production occurs within six months.

Answer 1

Pizzas	Fixed costs$	Variable costs $	Total costs $ (FC + VC)	Marginal costs $ ( additional cost)
0	100		100
1	100	5	105	5
2	100	13	113	8
3	100	23	123	10
4	100	40	140	17
5	100	60	160	20
6	100	85	185	25
7	100	115	215	30
The total cost of producing 3 pizzas is equal to $123.
6) a neither rising nor falling. The long run average cost is constant.
8 e) Diminishing productivity as more and more laborers become less productive as other inputs are held constant.
11 d) all costs are variable in the long run.