question
What needs to be done to ensure that a company is profitable?
answer
The company needs to both minimize costs and maximize revenue.
question
A restaurant owner just found out that his pizza bistro is losing money. What is one possible explanation for this loss?
answer
The revenue isn't being maximized.
question
Total revenue minus total cost is equal to
answer
profit
question
Explicit costs are
answer
always paid out of pocket
question
The out-of-pocket expenses incurred in producing a good are also known as
answer
explicit costs
question
An explicit cost for a business that manufactures bicycles would be the
answer
Wages paid to employees
question
Remi owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Remi could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total explicit costs last year were
answer
$66,000
question
Lisette is the owner of a bakery that earns zero economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total explicit costs were
answer
$92,000
question
Implicit costs are
answer
the opportunity cost of the means of production
question
Implicit costs can be difficult to measure because
answer
business owners cannot always observe them directly.
question
Ramona owns a small coffee shop, where she works full-time. Her total revenue last year was $100,000, and her rent was $3,000 per month. She pays her one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ramona could earn $35,000 per year as the manager of a competing coffee shop nearby. Her total implicit costs last year were
answer
$35,000
question
Economists consider both explicit costs and implicit costs when measuring economic profit. The reason they consider implicit costs is that
answer
a business must cover its opportunity costs as well as its out-of-pocket expenses to be truly profitable.
question
Accountants consider only explicit costs when measuring accounting profit. The reason they ignore implicit costs is that
answer
implicit costs are not out-of-pocket expenses.
question
Accounting profit is equal to
answer
total revenue minus explicit costs
question
A firm's accounting profit is always greater than its economic profit because
answer
economic profit considers implicit costs, which accounting profit does not.
question
A firm expands its scale of production and finds that its long-run average total cost curve looks like LRATC1. It might look this way because the firm
answer
Is able to negotiate lower prices with its suppliers
question
A firm expands its scale of production and finds that it is able to negotiate better prices with its suppliers. Which of the curves best applies to this firm?
answer
LRATC1 ****
question
If the firm expanded its scale of production and found that its average costs did not change, which of the curves would reflect this situation?
answer
LRATC2******
question
When firms grow larger, they sometimes acquire more market power, meaning that they have greater ability to negotiate lower prices with their suppliers. This ability to negotiate lower prices with their suppliers leads to
answer
economies of scale
question
Joshua owns a suit store. He currently sells around 10,000 suits per year. If he increases the size of his store so that he can display and sell even more suits, and his long-run average total cost remains unchanged, we know that Joshua is experiencing
answer
****
question
Rahim owns a candy factory. If he decided to expand the size of his factory so that he could make more
candy, how would he know if he is experiencing constant returns to scale?
candy, how would he know if he is experiencing constant returns to scale?
answer
His long-run average cost of making each piece of candy remains unchanged.
question
If a firm experiences diseconomies of scale, its long-run average cost curve is
answer
upward sloping
question
Geoffrey owns a wedding dress store. If he increases the size of his store and experiences constant returns to scale as a result, his long-run average total cost curve should be
answer
horizontal
question
If a firm has total costs of $535,000 and its implicit costs are $165,000, how much are its explicit costs?
answer
$370,000
question
Remi owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Remi could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total explicit costs last year were
answer
$66,000
question
Implicit costs are
answer
the opportunity cost of the means of production
question
Implicit costs can be difficult to measure because
answer
business owners cannot always observe them directly.
question
If a firm generates $240,000 in revenue, earns $120,000 in economic profit, and its explicit costs are $80,000, how much are its implicit costs?
answer
$40,000
question
Accounting profit is equal to
answer
total revenue minus explicit costs
question
Accounting profit ignores which of the following?
answer
implicit costs
question
Luciana is the owner of a nail salon. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her accounting profit was
answer
$53,000
question
Economic profit is equal to
answer
total revenue minus implicit costs and explicit costs
question
A firm's economic profit is always less than its accounting profit because
answer
economic profit considers implicit costs, which accounting profit does not.
question
Hannah is the owner of a party store. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. If she could earn $53,000 working for another party store nearby, we know that her economic profit was
answer
0.00
question
The production function shows the relationship between the
answer
quantity of inputs and quantity of outputs****
question
According to the concept of the production function, if a firm is inefficient then it must mean
answer
for the same amount of inputs, the output is less than the production function would have calculated.
question
The diminishing marginal product is NOT responsible for the shape of ________ cost curve.
answer
total fixed
question
Vanessa owns a horse ranch. Her total costs are $550,000 per year, and her fixed costs are $205,000 per year. This means that her variable costs are
answer
$345,000
question
A firm has a certain amount of capital and land. As it hires more labor, each worker is able to
answer
to specialize
question
Accountants consider only explicit costs when measuring accounting profit. The reason they ignore implicit costs is that
answer
implicit costs are not out-of-pocket expenses.
question
A restaurant owner just found out that his pizza bistro is losing money. What is one possible explanation for this loss?
answer
The revenue isn't being maximized.
question
Accounting profit ignores which of the following?
answer
implicit costs
question
If a firm experiences some gains from specialization as it expands its scale of production, and adds additional layers of management as it does so, assuming they have the same effect, we would expect its long-run average total cost curve to be
answer
Downward sloping
question
Explicit costs are
answer
always paid out of pocket
question
If the firm expanded its scale of production and found that its average costs increased, which of the curves would reflect this situation?
answer
LRATC3*****
question
If a firm has total costs of $535,000 and its implicit costs are $165,000, how much are its explicit costs?
answer
$370,000
question
If a firm experiences economies of scale, its long-run average cost curve is
answer
downward sloping
question
According to the concept of the production function, if a firm is inefficient then it must mean
answer
for the same amount of inputs, the output is less than the production function would have calculated.
question
Luciana is the owner of a nail salon. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her accounting profit was
answer
$53,000
question
Use the following scenario to answer the next three questions:
Kareem owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Kareem sold 1,200 bikes.
Kareem's average total cost was ________ per bike.
Kareem owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Kareem sold 1,200 bikes.
Kareem's average total cost was ________ per bike.
answer
1,000
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