question
The ______ cost of any resource used to produce a good is the value or worth the resource would have in its best alternative use.
answer
economic
question
Which of the following explains the concept of explicit costs?
answer
A firm's monetary payments to those who supply labor services, materials, fuel, and transportation services.
A firm's monetary payments made for the use of resources owned by others.
A firm's monetary payments made for the use of resources owned by others.
question
Your company's total sales revenue for the month is $150,000; the costs to produce your products are $12,000 for rent, $6,000 for utilities, and $42,000 for employee wages. What is your accounting profit?
answer
Reason:
$150,000 - $60,000 (explicit costs) = $90,000.
$150,000 - $60,000 (explicit costs) = $90,000.
question
If economic cost is $96,000 and total revenue is $120,000, what is the economic profit?
answer
Economic profit equals total revenue minus economic cost.$ 24,000
question
True or false: Hourly labor, raw materials, and fuel are examples of resources a firm can easily adjust.
answer
True
question
Which best describes economic costs?
answer
Payments that must be made to obtain a resource
question
What is the definition of total product (TP)?
answer
The total quantity, or total output, of a particular good or service produced
question
_____costs are the monetary payments a firm makes to purchase resources from others..
answer
Explicit
question
What happens to average product as additional units of labor are added to a fixed plant?
answer
It increases, reaches a maximum, and then decreases.
question
Accounting profit is what remains after a firm has paid its _______ costs.
answer
explicit
question
What is the total revenue if the economic profit is $24,000 and the economic costs are $96,000?
answer
$120,000;Rearrange the profit formula to solve for total revenue: economic profit equals total revenue minus total economic cost.
question
Which of the following resources can a firm easily and quickly adjust?
answer
Fuel
Raw materials
Hourly labor
Raw materials
Hourly labor
question
Which costs do not vary with changes in output?
answer
Fixed
question
What is the term for the total quantity of a specific good produced?
answer
Total product
question
Average fixed cost equals total fixed cost divided by the ______.
answer
amount of output
question
What happens to average product when marginal product exceeds it?
answer
...
question
If economic cost is $96,000 and total revenue is $120,000, what is the economic profit?
answer
$24,000; Economic profit equals total revenue minus economic cost.
question
_____costs are part of the simple existence of a firm's plant and must be paid even when output is zero.
answer
Fixed
question
What is the definition of average variable cost?
answer
Total variable cost divided by output (Q)
question
How is average fixed cost determined?
answer
Total fixed cost divided by output
question
What methods can be used to calculate average total cost?
answer
Total cost divided by output (Q)
Average fixed cost plus average variable cost
Average fixed cost plus average variable cost
question
How is marginal cost (MC) calculated?
answer
By dividing the change in total cost by the change in output
question
What is the effect of an increase in the price of labor on the ATC, AVC, and MC curves?
answer
The average-variable-cost, average-total-cost, and marginal-cost curves shift upward.
The average-fixed-cost curve remains the same.
The average-fixed-cost curve remains the same.
question
Total fixed cost divided by output plus total variable cost divided by the output yields which of the following?
answer
Average total cost
question
What is the term for the extra cost of producing one more unit of output?
answer
Marginal cost
question
In the _______ run, firms are able to adjust all resources.
answer
Long
question
An increase in the price of labor has no effect on which cost curve?
answer
Average-fixed-cost
question
How is the long-run average-total-cost curve derived?
answer
From all points of tangency of the short-run average-total-cost curves
question
True or false: Important determinants of an industry's structure are economies of scale and revenue.
answer
False
question
The smoothness of a long-run average-total-cost curve results from which of the following?
answer
The virtually unlimited number of available plant sizes
question
The lowest level of output at which a firm can minimize long-run average costs is called ______.
answer
minimum efficient scale
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