ECO chapter 5

Economic profit is equal to total revenue minus the

opportunity cost of producing goods and services.

The marginal product of an input in the production process is the increase in

quantity of output obtained from an additional unit of that input.

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?

$0

Refer to Table 13-9. The average variable cost of producing 240 units is

$0.19.

Refer to Table 13-9. The average total cost of producing 240 units is

$0.32.

Brady Industries has average variable costs of $1 and average total costs of $3 when it produces 500 units of output. The firm's total fixed costs equal

$1,000.

Refer to Table 13-7. What is the value of B?

$100

Tom's Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $80 for 10,000 tents. At that level of output, the firm's average total costs equal

$110

Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers the firm produces 90 units of output. Fixed costs of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. Given this information, what is the marginal cost of production when the firm hires the 7th worker?

$2.50

Cindy's Car Wash has average variable costs of $2 and average total costs of $3 when it produces 100 units of output (car washes). The firm's total variable cost is

$200.

Barney builds custom wooden birdhouses. He can make 150 birdhouses per month and sell them for $50 each. His average total cost is $30 per birdhouse. Barney's monthly total profit is

$3,000

A firm has a fixed cost of $200 in its first year of operation. When the firm produces 99 units of output, its total costs are $4,000. The marginal cost of producing the 100th unit of output is $700. What is the total cost of producing 100 units?

$4,700

Refer to Table 13-15. What is the total fixed cost for this firm?

$40

Refer to Table 13-7. What is the value of A?

$50

Cindy's Car Wash has average variable costs of $2 and average fixed costs of $3 when it produces 100 units of output (car washes). The firm's total cost is

$500

Barney builds custom wooden birdhouses. He can make 150 birdhouses per month and sell them for $50 each. His average total cost is $30 per birdhouse. Barney's monthly total revenue is

$7,500.

Anya has decided to start her own hair-styling salon. To purchase the necessary equipment, Anya withdrew $10,000 from her savings account, which was earning 3% interest, and borrowed an additional $5,000 from the bank at an interest rate of 8%. What is Anya's annual opportunity cost of the financial capital that has been invested in the business?

$700

Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers it produces 90 units of output. Fixed cost of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. Given this information, what is the total cost of production when the firm hires 7 workers?

$76

Bubba is a shrimp fisherman who catches 4,000 pounds of shrimp per year. He can sell the shrimp for $5 per pound. His average total cost of catching shrimp is $3 per pound. Bubba's annual total revenue is

$8,000

What is variable cost when output equals 30 units?

$90

Average total cost equals

(fixed costs + variable costs) divided by quantity produced.

Billy's Bean Bag Emporium produced 300 bean bag chairs but sold only 275 of the units it produced. The average cost of production for each unit of output produced was $100. The price for each of the 275 units sold was $95. Total profit for Billy's Bean Bag Emporium would be

-$3875

The marginal product of the fourth worker is

10 units.

Suppose a firm currently produces 325 units of output per day with 15 workers. The firm is able to produce 340 units of output with a 16th worker. What is the marginal product of the 16th worker?

15 units of output

Refer to Table 13-3. If the firm can sell its output for $1 per unit, what is the profit-maximizing level of output?

230 units

Refer to Table 13-9. What is the marginal product of the third worker?

60 units

Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers the firm produces 90 units of output. Fixed costs of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. Given this information, what is the average variable cost of production when the firm hires 7 workers?

75 cents

Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers the firm produces 90 units of output. Fixed costs of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. Given this information, what is the average total cost of production when the firm hires 7 workers?

81 cents

Jennifer is a junior in college. Her current cumulative grade point average (GPA) is 3.5 out of a 4.0 scale. Jennifer is hoping that by the time she graduates, she can raise her cumulative GPA to a 3.7. Which of the following statements is correct?

Jennifer must earn above a 3.7 GPA in her senior year in order to raise her cumulative GPA to a 3.7.

Refer to Figure 13-10. The firm experiences diseconomies of scale if it changes its level of output from

Q4 to Q5

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers

Foregone investment opportunities are an example of

an implicit cost.

At Bert's Bootery, the total cost of producing twenty pairs of boots is $400. The marginal cost of producing the twenty-first pair of boots is $83. We can conclude that the

average total cost of 21 pairs of boots is $23.

firm produces 400 units of output at a total cost of $1,200. If fixed costs are $200,

average variable cost is $2.50.

In the long run,

inputs that were fixed in the short run become variable.

Total revenue minus both explicit and implicit costs is called

economic profit.

A difference between explicit and implicit costs is that

implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.

Diseconomies of scale occur when a firm's

long-run average total costs are increasing as output increases.

Economies of scale occur when

long-run average total costs fall as output increases.

The cost of producing an additional unit of output is the firm's

marginal cost.