Chapter 9 microeconomics

The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the data. Creamy Crisp's implicit costs, including a normal profit, are:

$136,000

The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the data. Creamy Crisp's explicit costs are:

$150,000

fixed cost is

any cost that does not change when the firm changes its output

marginal cost is the

change in total cost that results from producing one more unit of output

which of the following is most likely to be an implicit cost for company X?

forgone rent from the building owned and used by company X.

which of the following is most likely to be a variable cost

fuel and power payments

marginal product

may initially increase, then diminish, and ultimately become negative.

which of the following is most likely to be a fixed cost

property insurance premiums

The law of diminishing returns describes the:

relationship between resource inputs and product outputs in the short run.

the basic characteristic of the short run is that:

the firm does not have sufficient time to change the size of its plant.

Implicit and explicit costs are different in that:

the former refer to nonexpenditure costs and the latter to monetary payments.

Marginal product is:

the increase in total output attributable to the employment of one more worker.

normal profit is:

the return to the entrepreneur when economic profits are zero

which of the following is a short-run adjustment?

A local bakery hires two additional bakers

Which of the following best expresses the law of diminishing returns?

As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra or marginal output will decline.

The total output of a firm will be at a maximum where:

MP is zero

An explicit cost is:

a money payment made for resources not owned by the firm itself.

to the economist total cost includes

explicit and implicit costs

economic profits are calculated by subtracting:

explicit and implicit costs from total revenue

To economists, the main difference between the short run and the long run is that:

in the long run all resources are variable, while in the short run at least one resource is fixed.

If a firm increases all of its inputs by 10 percent and its output increases by 15 percent, then:

it is encountering economies of scale.

Diseconomies of scale arise primarily because:

of the difficulties involved in managing and coordinating a large business enterprise.

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed. #of workers/ units of output 0/0 1/40 2/90 3/126 4/150 5/165 6/180 Refer to the data. Diminishing marginal returns become evident with the addition of the:

third worker

A natural monopoly exists when:

unit costs are minimized by having one firm produce an industry's entire output.