Econ Chapter 14 Homework Answers

question

Based on the figure above, curve A is the firms

answer

average fixed cost curve

question

In the above figure, curve A is the _____ cure and curve C is the _____ curve

answer

total cost; total fixed cost

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Normal profit is

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part of the firm's opportunity cost

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At the Punjab Bakery, two workers can decorate 14 cakes in an hour and three workers can decorate 18 cakes in an hour. The marginal product of the third worker is

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4 cakes and the average product for three workers is 6 cakes

question

Diseconomies of scale can occur as a result of which of the following

answer

management difficulties as the firm increases its size

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In the long run, the firm _____ change the number of workers it employs and _____ change the size of its plant

answer

can; can

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The long run is defined as

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the period of time when all resources are variable

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Bill is an economics professor who earns $37,000 teaching but decides to leave and fulfill his dream of catering barbecues. During his year of barbecuing he earned total revenue of $60,000. He spent $30,000 on food and supplies. He also paid his wife $10,000 to help serve food. The
normal profit for an entrepreneur running a barbecue business is $3,000. Bill also rented an industrial grill/fry truck for $12,000. Bill had an economic

answer

loss of -$32000

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A firm's fundamental goal is

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to maximize profit

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A cost incurred in the production of a good or service and for which the firm does not need to make a direct monetary payment, is referred to as _____ cost.

answer

an implicit

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a firm pays $50,000 for a machine that is used in production for one year, after which it is sold for $40,000 to another firm. The $10,000 difference is

answer

economic depreciation, an implicit cost of production

question

Economies of scale can occur as a result of which of the following?

answer

greater specialization of labor and capital as the firm increases its size

question

The total variable cost curve _____ because _____ as output increases

answer

slopes upward; variable cost increases

question

Which of the following is an implicit cost in Jim's business venture?
i. the salary Jim could have earned at another job
ii. the interest Jim must pay on the loan he incurred to help open his business iii. the interest Jim lost when he used his savings to help open his business

answer

i and ii

question

If the average product of labor curve is rising,
i) the average variable cost curve is falling.
ii) the marginal cost curve is definitely falling.
iii) the marginal product curve has reached its maximum

answer

i only

question

Jennifer owns a pig farm near Salina, Kansas. Last year she earned $39,000 in total revenue while incurring $38,000 in explicit costs. She could have earned $27,000 as a teacher in Salina.
These are all her revenue and costs. Therefore Jennifer earned an

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accounting profit of $1,000 but incurred an economic loss of $26,000

question

the law of decreasing returns applies to

answer

changes in a variable input with a given quantity of fixed inputs

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Which of the following curves are U-shaped? i) average variable cost curve
ii) average fixed cost curve
iii) average total cost curves

answer

i and iii

question

If a business owner decided to expand her business but rather than borrowing money from a bank used her own funds, then

answer

she would forego the opportunity to earn interest on the money

question

An insurance agent rents a building and has a three year lease. An increase in the rent for the building increases the agents

answer

total fixed cost and average fixed cost

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Economic profit equals total revenue minus total

answer

opportunity cost

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the table above shows a total product schedule. suppose that labor costs $20 per worker and fixed costs are $60. the total cost of producing 80 units equals

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more than $120 and less than $150

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April quit her job as an accountant at Ernst and Young, where she was paid $45,000 per year. She stated her own landscaping business. She rents machines and tools for $50,000 and pays %10,000 as wages to her help. These are her only costs. April earned total revenue of $100,000

answer

both answers A and B are correct

question

Which of the following curves are U-shaped? i) average variable cost curve
ii) average fixed cost curve
iii) average total cost curve

answer

i, ii, and iii

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The above table gives some production and cost information for Flaming Fernando's, as restaurant that sells Fiery Frijoles. Between what two levels of output does the marginal cost of producing Fiery Frijoles first begin to rise?

answer

3000 and 4000

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the table above shows the total product schedule for Rick's Lawn Service, a yard care company. The average product of labor _____ when the 7th worker is hired

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equals 4 lawns mowed

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In a graph of a typical firm's AFC, ATC, and AVC curves, the

answer

distance between the ATC curve and the AVC curve equals the AFC

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Decreasing marginal returns

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affect all firms, but at different production levels

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the table above gives costs at Jan's Bike Shop. unfortunately, Jan's record keeping has been spotty. Each worker variable costs of production. What is the total variable cost of producing 60 bikes?

answer

$300

question

Lauren runs a chili restaurant in San Francisco. Her total revenue last year was
$110,000. The rent on her restaurant was $48,000, her labor costs were $42,000, and her materials, food and other variable costs were $20,000. Lauren could have worked as a biologist and earned $50,000 per year. An economist calculates her implicit costs as

answer

$50,000

1 of 30

question

Based on the figure above, curve A is the firms

answer

average fixed cost curve

question

In the above figure, curve A is the _____ cure and curve C is the _____ curve

answer

total cost; total fixed cost

question

Normal profit is

answer

part of the firm's opportunity cost

question

At the Punjab Bakery, two workers can decorate 14 cakes in an hour and three workers can decorate 18 cakes in an hour. The marginal product of the third worker is

answer

4 cakes and the average product for three workers is 6 cakes

question

Diseconomies of scale can occur as a result of which of the following

answer

management difficulties as the firm increases its size

question

In the long run, the firm _____ change the number of workers it employs and _____ change the size of its plant

answer

can; can

question

The long run is defined as

answer

the period of time when all resources are variable

question

answer

loss of -$32000

question

A firm's fundamental goal is

answer

to maximize profit

question

A cost incurred in the production of a good or service and for which the firm does not need to make a direct monetary payment, is referred to as _____ cost.

answer

an implicit

question

a firm pays $50,000 for a machine that is used in production for one year, after which it is sold for $40,000 to another firm. The $10,000 difference is

answer

economic depreciation, an implicit cost of production

question

Economies of scale can occur as a result of which of the following?

answer

greater specialization of labor and capital as the firm increases its size

question

The total variable cost curve _____ because _____ as output increases

answer

slopes upward; variable cost increases

question

answer

i and ii

question

answer

i only

question

answer

accounting profit of $1,000 but incurred an economic loss of $26,000

question

the law of decreasing returns applies to

answer

changes in a variable input with a given quantity of fixed inputs

question

Which of the following curves are U-shaped? i) average variable cost curve
ii) average fixed cost curve
iii) average total cost curves

answer

i and iii

question

If a business owner decided to expand her business but rather than borrowing money from a bank used her own funds, then

answer

she would forego the opportunity to earn interest on the money

question

An insurance agent rents a building and has a three year lease. An increase in the rent for the building increases the agents

answer

total fixed cost and average fixed cost

question

Economic profit equals total revenue minus total

answer

opportunity cost

question

the table above shows a total product schedule. suppose that labor costs $20 per worker and fixed costs are $60. the total cost of producing 80 units equals

answer

more than $120 and less than $150

question

answer

both answers A and B are correct

question

Which of the following curves are U-shaped? i) average variable cost curve
ii) average fixed cost curve
iii) average total cost curve

answer

i, ii, and iii

question

answer

3000 and 4000

question

the table above shows the total product schedule for Rick's Lawn Service, a yard care company. The average product of labor _____ when the 7th worker is hired

answer

equals 4 lawns mowed

question

In a graph of a typical firm's AFC, ATC, and AVC curves, the

answer

distance between the ATC curve and the AVC curve equals the AFC

question

Decreasing marginal returns

answer

affect all firms, but at different production levels

question

the table above gives costs at Jan's Bike Shop. unfortunately, Jan's record keeping has been spotty. Each worker variable costs of production. What is the total variable cost of producing 60 bikes?

answer

$300

question

answer

$50,000

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