question
Which of the following statements regarding accounting profits, opportunity costs, and economic profits is true?
answer
If accounting profits are less than opportunity costs, there will be economic losses.
question
Assume Nadia voluntarily leaves a job with a salary of $100$100 per day to open and run a restaurant instead. After deducting all explicit costs from the restaurant revenues, Nadia has a gain of $120$120. Assuming there are no additional implicit costs, which of the following statements is true?
answer
Nadia has an economic profit of $20
question
Ryan quit a job with a daily salary and opened a business. On a daily basis, the total revenue of the business is $200$200, and the explicit costs of the business are $120$120. If Ryan has zero economic profits, what must be the value of Ryan's implicit costs?
answer
$80
question
Which of the following provides an example of the law of diminishing returns?
answer
As more of a variable input—for example, labor is used with a fixed number of machines— output increases but at a diminishing rate.
question
Assume the marginal product of labor first rises, reaches a maximum, and then falls. If the average product of labor is falling, which of the following is true?
answer
The marginal product of labor must be falling.
question
Based on the short-run production function graph above showing the relationship between the quantity of labor and total product, which of the following statements is true?
answer
Total product is maximized when marginal product is zero.
question
The graph above shows a firm's long-run average total cost curve (LRATC)(LRATC). Which of the following statements is true as the firm increases its scale of production?
answer
For output levels above Q1Q1, the firm experiences diseconomies of scale.
question
Assume a firm doubles its usage of each input, resulting in a doubling of the firm's output. Which of the following describes this result?
answer
Constant returns to scale
question
Which of the following explains the difference between short-run and long-run costs?
answer
All costs are variable in the long run but not in the short run.
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