question
The long-run average cost curve is tangent to the minimum point of every short-run average total cost curve.
answer
False
question
Which of the following is a fixed cost for Wendy's Hamburgers?
answer
interest on funds borrowed to build new facilities
question
Sally owns a small business that she operates in a small building she owns. Given the information in Exhibit 7-1, Sally's normal profit is
answer
$41,000
question
What is true of marginal cost when marginal returns are increasing?
answer
It is positive and decreasing.
question
Suppose Ernie gives up his job as financial advisor for P.E.T.S., at which he earned $30,000 per year, to open up a store selling spot remover to Dalmatians. He invested $10,000 in the store, which had been in savings earning 5 percent interest. This year's revenues in the new business were $50,000, and explicit costs were $10,000. Calculate Ernie's accounting profit.
answer
$40,000
question
Which of the following is true of the MC curve?
answer
It intersects both the ATC and the AVC curves at their minimums.
question
Accounting profit equals
answer
economic profit plus implicit costs
question
In Exhibit 7-3, diminishing marginal returns set in with the addition of the
answer
fourth worker
question
If variable cost rises from $60 to $100 as output increases from 15 to 20 units, the marginal cost of the twentieth unit
answer
is $8
question
Diseconomies of scale are pictured on a graph by the upward-sloping portion of the
answer
long-run average cost curve
question
The shape of short-run variable cost curve is determined by
answer
the marginal productivity of the variable inputs the firm uses
question
Long-run average costs are the same as long-run total costs
answer
True
question
A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20,000 a year, and take over a store building that he owns and currently rents to his brother for $6,000 a year. His expenses at the sushi bar would be $50,000 for food and $2,000 for gas and electricity. What are his explicit costs?
answer
$52,000
question
In the short run, which of the following is likely to be a variable cost to a physician?
answer
insurance forms
question
Which of the following is a long-run adjustment?
answer
Glow Electric disassembles one of its nuclear power plants.
question
If variable cost at each output level doubles,
answer
MC doubles
question
Suppose Ernie gives up his job as financial advisor for P.E.T.S., at which he earned $30,000 per year, to open up a store selling spot remover to Dalmatians. He invested $10,000 in the store, which had been in savings earning 5 percent interest. This year's revenues in the new business were $50,000, and explicit costs were $10,000. Calculate Ernie's economic profit.
answer
$9,500
question
The difference between a firm's total revenue and what must be paid to attract resources from their best alternative use is called
answer
economic profit
question
Which of the following is most likely to be a fixed resource for Paul's Country Fresh Pies, Inc.?
answer
ovens
question
In the long run, all of a firm's inputs are variable.
answer
true
question
The marginal product of labor is the
answer
change in output from using one more unit of labor
question
Minimum efficient scale is the level of output at which
answer
long-run average cost stops decreasing
question
Which of the following would most likely reach the long run most rapidly?
answer
a hot dog stand
question
The long-run average cost curve is tangent to the minimum point of every short-run average total cost curve.
answer
False
question
The relationship between average and marginal variables can be stated as follows: if the marginal is greater than the average,
answer
the average is increasing
question
Which of the following is a short-run adjustment?
answer
People's Bank hires two new tellers to meet increased demand for customer services.
question
In Exhibit 7-8, A is marginal cost, B is average variable cost and C is average total cost, the vertical distance between lines B and C at any level of output represents
answer
Average fixed cost
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