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Management Core
MGCR 293
Tariq Nizami

CHAPTER 5 THE ANALYSIS OF COSTS Longrun average cost equals longrun marginal cost whenever1 a the production function exhibits constant returns to scale b fixed costs are zero c no factor always has increasing marginal returns d the cost of capital is near zero e longrun marginal cost is at its minimum When average total cost is at its minimum2 a average variable cost is declining with increases in output average variable cost plus average fixed cost is declining withb increases in outputc average total cost is equal to average variable cost d marginal cost is equal to average variable cost e marginal cost is equal to average total cost Where longrun average cost equals shortrun average cost3 a shortrun average cost is minimized longrun average variable cost equals shortrun average variableb costc longrun average cost equals longrun marginal cost d longrun average cost is minimized e longrun marginal cost equals shortrun marginal cost 3Leisure Enterprises total cost of producing speedboats is given by TC10Q 4 2 4Q25Q500 On the basis of this information the marginal cost of producing the twentyfifth speedboat isa 1700 b 6050 c 18575 d 18775 e 19075 15Tasty Tortess weekly total cost of baking pies is given by TC001Q 5 Tastys marginal cost of producing 10000 pies a week isa 100 b 150 c 200 d 250 e 450 Economies of scope exist when it is cheaper to produce6 a with a large fixed plant and equipment b at increasing rates of output given quantities of two different products together than to producec the same quantities separatelygiven quantities of two different products separately than to produced the same quantities togethere using more than one technique 12The Wilson Corporation produces output according to Q4KL where K 7 is the amount of capital used and L is the amount of labor employed If capital costs 2 per unit and labor costs 8 per unit Wilsons minimized longrun average total cost isa 2 b 2Q c 10
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