question
Sebastian decides to open a tree farm. When deciding to open his own business, he turned down two separate job offers of $25,000 and $30,000 and withdrew $20,000 from his savings. Sebastian's savings account paid 3 percent interest. He also borrowed $20,000 from his brother, whom he pays 2 percent interest per year. He spent $15,000 to purchase supplies and earned $50,000 in revenue during his first year. Which of the following statements is correct?
answer
Sebastian's total explicit costs are $15,400.
question
The long-run average total cost curve is always
answer
flatter than the short-run average total cost curve, but not necessarily horizontal.
question
Refer to Table 13-1. What is total output when 3 workers are hired?
answer
135
question
Profit is defined as
answer
total revenue minus total cost
question
Sebastian decides to open a tree farm. When deciding to open his own business, he turned down two separate job offers of $25,000 and $30,000 and withdrew $20,000 from his savings. Sebastian's savings account paid 3 percent interest. He also borrowed $20,000 from his brother, whom he pays 2 percent interest per year. He spent $15,000 to purchase supplies and earned $50,000 in revenue during his first year. Which of the following statements is correct?
answer
Sebastian's economic profit is $4,000, and his accounting profit is $34,600.
question
Refer to Table 13-2. What is the marginal product of the first worker?
answer
300 units
question
Explicit costs
answer
require an outlay of money by the firm.
question
The nature of a firm's cost (fixed or variable) depends on the
answer
time horizon under consideration.
question
Economists normally assume that the goal of a firm is to
(i)
sell as much of its product as possible.
(ii)
set the price of the product as high as possible.
(iii)
maximize profit.
(i)
sell as much of its product as possible.
(ii)
set the price of the product as high as possible.
(iii)
maximize profit.
answer
(iii) only
question
Refer to Table 13-2. What is the marginal product of the third worker?
answer
100 units
question
For a firm, the relationship between the quantity of inputs and quantity of output is called the
answer
production function.
question
An entrepreneur's motivation to start a business arises from
answer
All of the above could be correct.
question
Katherine gives piano lessons for $15 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmer's market. Katherine's accounting profits are
answer
$100, and her economic profits are $25.
question
Industrial organization is the study of
answer
how firms' decisions regarding prices and quantities depend on the market conditions they face.
question
Patrice owns a travel agency. Her accountant most likely includes which of the following costs on her financial statements?
answer
the cost of utilities for operating the storefront
question
Total revenue equals
answer
price x quantity.
question
The figure below depicts average total cost functions for a firm that produces automobiles.
Refer to Figure 13-9. At levels of output between M and N, the firm experiences
Refer to Figure 13-9. At levels of output between M and N, the firm experiences
answer
constant returns to scale.
question
A firm's opportunity costs of production are equal to its
answer
explicit costs + implicit costs.
question
The length of the short run
answer
is different for different types of firms.
question
Refer to Figure 13-3. The changing slope of the total cost curve reflects
answer
decreasing marginal product.
question
Refer to Figure 13-3. Assuming that the firm depicted produces cookies, which of the statements below is most consistent with the shape of the total cost curve?
answer
Producing an additional cookie is always more costly than producing the previous cookie.
question
Refer to Table 13-2. What is the marginal product of the fourth worker?
answer
50 units
question
Refer to Table 13-1. What is total output when 2 workers are hired?
answer
75
question
Total revenue equals
answer
price x quantity.
question
The figure below depicts average total cost functions for a firm that produces automobiles.
Refer to Figure 13-9. Which curve represents the long-run average total cost?
Refer to Figure 13-9. Which curve represents the long-run average total cost?
answer
ATCD
question
Economies of scale occur when
answer
long-run average total costs fall as output increases.
question
A firm that wants to achieve economies of scale could do so by
answer
assigning limited tasks to its employees, so they can master those tasks.
question
Refer to Figure 13-3. Which of the following statements best captures the nature of the underlying production function (not pictured)?
answer
Output increases at a decreasing rate with additional units of input.
question
Economic profit
answer
will never exceed accounting profit.
question
Which of the following expressions is correct?
answer
Accounting Profit = Total Revenue - Explicit Costs
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