Which of the following scenarios is an example of cost complementarity?
Explanation
This question asks for an application of the definition of cost complementarity to a practical business scenario.
Other questions
According to Chapter 5, what is the primary definition of a production function?
What distinguishes the 'long run' from the 'short run' in the context of production decisions, as described on page 157?
Based on the data in Table 5-1 on page 157, what is the marginal product of labor (MPL) when the firm increases labor from 7 to 8 units?
The range of input usage over which marginal product is positive but declining is known as what?
What is the profit-maximizing input usage rule for a manager when the cost of each additional unit of labor is 'w'?
A firm has a production function Q = F(K, L) = min {3K, 4L}. How much output is produced when 5 units of capital and 2 units of labor are employed?
Which type of production function implies that inputs are perfect substitutes for each other?
What does an isoquant represent in production theory?
The absolute value of the slope of the isoquant is known as the:
According to the cost-minimization rule, a firm producing a given level of output should employ inputs such that:
In the context of short-run costs, what are variable costs (VC)?
What is the relationship between the marginal cost (MC) curve and the average total cost (ATC) curve?
A firm paid a nonrefundable fee of 10,000 dollars to lease a railcar for one month. One day later, the firm realizes it does not need the railcar. What is the sunk cost of this decision?
A firm's cubic cost function is given by C(Q) = 10 + 5Q + 2Q^2 + 1Q^3. What is its marginal cost function?
When do economies of scale exist for a firm?
What are economies of scope?
Cost complementarity exists in a multiproduct cost function, C(Q1, Q2), when:
Based on the headline 'Boeing Loses the Battle but Wins the War' on page 155, what does the phrase 'wins the war' refer to?
Temporary Services uses four word processors and two typewriters. The marginal product of a typewriter is 50 pages per day, and the marginal product of a word processor is 500 pages per day. The rental price of a typewriter is 1 dollar per day, while a word processor is 50 dollars per day. Is the firm minimizing costs?
What is the key difference between economic costs and accounting costs as explained on page 186?
A firm's production function is Q = K^(1/2)L^(1/2). Capital is fixed at 1 unit in the short run. If the price of output is 10 dollars and the wage rate is 2 dollars, what is the profit-maximizing quantity of labor?
What does the 'law of diminishing marginal rate of technical substitution' imply about the shape of isoquants?
If a firm's total cost function is C(Q) = 20 + 3Q^2, and it produces 10 units of output, what is its average fixed cost (AFC)?
What happens to the isocost line if the wage rate (w) increases, holding the rental rate of capital (r) and total cost (C) constant?
For the quadratic multiproduct cost function C(Q1, Q2) = f + aQ1Q2 + (Q1)^2 + (Q2)^2, under what condition are economies of scope realized?
ACME Coal paid 5,000 dollars to lease a railcar. The lease specifies that 1,000 dollars is refundable if the railcar is returned within two days. One day after signing, what is the sunk cost?
What is the primary message of the 'Inside Business 5-2' box about fringe benefits and input substitution?
Using the data from Table 5-3 on page 177, what is the total cost (TC) of producing 784 units of output?
When do diseconomies of scale exist?
The long-run average cost curve (LRAC) is described as:
In the context of the production process, what is the manager's primary role regarding the production function?
If a firm's production function is Q = 4K + L, what is the marginal product of capital (MPK)?
A firm's output is sold at a price of 3 dollars per unit and the wage rate is 400 dollars per worker. Based on Table 5-2 on page 162, what is the value marginal product of labor (VMPL) for the 9th worker?
When a firm's long-run average cost curve is U-shaped, it implies the firm experiences:
What happens to average fixed cost (AFC) as a firm increases its output?
What is the relationship between the slope of the total product curve and the marginal product?
A multiproduct firm has a cost function C(Q1, Q2) = 100 - 0.5*Q1*Q2 + (Q1)^2 + (Q2)^2. It wishes to produce 5 units of good 1 and 4 units of good 2. Do economies of scope exist?
The profit-maximizing input usage rule is defined for which range of the marginal product curve?
If MPL/w > MPK/r, how should a firm adjust its input mix to minimize the cost of producing a given quantity?
Why does the average total cost (ATC) curve get closer to the average variable cost (AVC) curve as output increases?
In optimal input substitution, a firm should use less of an input and more of other inputs when:
Using the data from Table 5-4 on page 179, what is the Average Total Cost (ATC) when 1,100 units of output are produced?
What type of production function has isoquants that are L-shaped?
Based on the data in Table 5-5 on page 180, what is the marginal cost (MC) of increasing output from 1,708 to 1,952 units?
When a firm experiences constant returns to scale, its long-run average cost curve is:
What is the slope of an isocost line, where w is the wage rate and r is the rental rate of capital?
Based on Table 5-1 on page 157, what is the average product of labor (APL) when the firm uses 6 units of labor?
The calculus-based approach in the appendix on page 199 shows that the marginal product of labor (MPL) is the:
According to the appendix on page 201, what is the relationship between average cost (AC) and marginal cost (MC) when average cost is at its minimum?