question
$50, $10
answer
Xavier opens up a lemonade stand for two hours. He spends $10 for ingredients and sells $60 worth of lemonade. In the same two hours, he could have mowed his neighbor's lawn for $40. Xavier has an accounting profit of _____ and an economic profit of ____.
question
the production function gets flatter, while the total-cost curve gets steeper.
answer
Diminishing marginal product explains why, as a firm's output increases,
question
Marginal cost is $8, and average total cost is $5.
answer
A firm is producing 1,000 units at a total cost of $5,000. If it were to increase production to 1,001 units, its total cost would rise to $5,008. What does this information tell you about the firm?
question
Average total cost would decrease
answer
A firm is producing 20 units with an average total cost of $25 and a marginal cost of $15. If it were to increase production to 21 units, which of the following must occur?
question
average total cost and average fixed cost
answer
The government imposes a $1,000 per year license fee on all pizza restaurants. As a result, which cost curves shift?
question
economies, falling
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If a higher level of production allows workers to specialize in particular tasks, a firm will likely exhibit ________ of scale and ________ average total cost.
question
a. The opportunity cost of something is what must be given up to acquire it.
b. The opportunity cost of running the hardware store is $550,000, consisting of $500,000 to rent the store and buy the stock and a $50,000 implicit cost, because your aunt would quit her job as an accountant to run the store. Because the total opportunity cost of $550,000 exceeds the projected revenue of $510,000, your aunt should not open the store, as her economic profit would be negative.
b. The opportunity cost of running the hardware store is $550,000, consisting of $500,000 to rent the store and buy the stock and a $50,000 implicit cost, because your aunt would quit her job as an accountant to run the store. Because the total opportunity cost of $550,000 exceeds the projected revenue of $510,000, your aunt should not open the store, as her economic profit would be negative.
answer
Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant.
a. Define opportunity cost.
b. What is your aunt's opportunity cost of running the hardware store for a year? If your aunt thinks she can sell $510,000 worth of merchandise in a year, should she open the store? Explain.
a. Define opportunity cost.
b. What is your aunt's opportunity cost of running the hardware store for a year? If your aunt thinks she can sell $510,000 worth of merchandise in a year, should she open the store? Explain.
question
At an output level of 600 players, total cost is $180,000 (600 × $300). The total cost of producing 601 players is $180,901. Therefore, you should not accept the offer of $550, because the marginal cost of the 601st player is $901.
answer
You are the chief financial officer for a firm that sells digital music players. Your firm has the following average-total-cost schedule:
Quantity Average Total Cost
600 players $300
601 301
Quantity Average Total Cost
600 players $300
601 301
question
The following table illustrates average fixed cost (AFC), average variable cost (AVC), and average total cost (ATC) for each quantity. The efficient scale is 4 houses per month, because that minimizes average total cost.
(image with definition)
(image with definition)
answer
Your cousin Vinnie owns a painting company with fixed costs of $200 and the following schedule for variable costs:
Quantity of Houses 1 2 3 4 5 6 7
Painted per Month
Variable $10 $20 $40 $80 $160 $320 $640 Costs
Quantity of Houses 1 2 3 4 5 6 7
Painted per Month
Variable $10 $20 $40 $80 $160 $320 $640 Costs
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