question
Wiladee used to work as an office manager, earning $45,000 per year. She gave up that job to start a tailoring business. In calculating the economic profit of her tailoring business, the $45,000 income that she gave up is counted as part of the tailoring firm's
answer
opportunity costs.
question
An entrepreneur's motivation to start a business could arise from
A.
an innate love for the type of business that he or she starts.
B.
a desire to earn a profit.
C.
an altruistic desire to provide the world with a good product.
D.
All of the above could be correct.
A.
an innate love for the type of business that he or she starts.
B.
a desire to earn a profit.
C.
an altruistic desire to provide the world with a good product.
D.
All of the above could be correct.
answer
All of the above could be correct.
question
Suppose a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short tun, the firm most likely considers
answer
labor to be variable and capital to be fixed.
question
Joy sells 200 glasses of iced tea at $0.50 each. Her total costs are $25. Her profits are
answer
$75
question
Grace is a self-employed artist. She can make 20 pieces of pottery per week. She is considering hiring her sister Kate to work for her. Both she and Kate can make 35 pieces of pottery per week. What is Kate's marginal product?
answer
15 pieces of pottery
question
Economists assume that the typical person who starts her own business does so with the intention of
answer
maximizing profits.
question
The marginal product of labor is equal to the
answer
increase in output obtained from a one unit increase in labor.
question
Zach has decided to start his own photography studio. To purchase the necessary equipment, Zach withdrew $10,000 from his savings account, which was earning 3% interest, and borrowed an additional $5,000 from the bank at an interest rate of 8%. What is Zach's annual opportunity cost of the financial capital(implicit + explicit)that has been invested in the business?
answer
$700
question
Tom quit his $65,000 a year corporate lawyer job to open up his own law practice. In Tom's first year in business his total revenue equaled $150,000. Tom's explicit cost during the year totaled $85,000. What is Tom's economic profit for his first year in business? (Hint: Be sure to include explicit and implicit costs when calculating economic profit)
answer
$0
question
Analyzing the behavior of the firm enhances our understanding of
answer
what decisions lie behind the market supply curve.
question
A difference between explicit and implicit costs is that
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implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.
question
Cody builds mailboxes. If he charges $20 for each mailbox, his total revenue will be
answer
$500 if he sells 25 mailboxes.
question
The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is
answer
an implicit cost.
question
For a construction company that builds houses, which of the following costs would be a fixed cost?
answer
the $30,000 per year salary paid to the company's bookkeeper
question
Profit is defined as
answer
total revenue minus total cost.
question
Trevor's Tire Company produced and sold 500 tires. The average cost of production per tire was $50. Each tire sold for a price of $65. Excuding any other costs, Trevor's Tire Company's total profits are
answer
$7,500
question
Average total cost is equal to
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total cost divided by output.
question
Suppose Jan started up a small lemonade stand business last month. Variable costs for Jan's lemonade stand now include the cost of
A.
the wages paid to her hourly workers.
B.
lemons and sugar.
C.
paper cups.
D.
All of the above are correct.
A.
the wages paid to her hourly workers.
B.
lemons and sugar.
C.
paper cups.
D.
All of the above are correct.
answer
All of the above are correct.
question
A firm's opportunity costs of production are equal to its
answer
explicit costs + implicit costs.
question
A total-cost curve shows the relationship between the
answer
quantity of output produced and the total cost of production.
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
Total cost is the
answer
market value of all inputs that a firm uses in production.
question
If Darren sells 300 glasses of iced tea at $0.50 each, his total revenues are
answer
$150.
question
The value of the next best alternative things that must be lost to acquire a good are called
answer
opportunity costs.
question
If marginal cost is rising,
answer
marginal product must be falling.
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