ECO2023 - Module 7 Quiz

The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000Annual lease on building = $22,000Annual revenue from operations = $380,000Payments to workers = $120,000Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Refer to the data. Creamy Crisp's implicit costs, including a normal profit, are: $94,000. $150,000. $156,000. $136,000.

$136,000.

The Sunshine Corporation finds that its costs are $40 when it produces no output. Its total variable costs (TVC) change with output as shown in the accompanying table. Use this information to answer the following question. Refer to the information. The marginal cost of the third unit of output is: $25. $15. $20. $105.

$15

Answer the question on the basis of the following cost data: Refer to the data. The marginal cost of the fifth unit of output is: $62. $3. $78. $80.

$80

Which of the following is a short-run adjustment? BMW constructs a new assembly plant in South Carolina. Six new firms enter the plastics industry. The number of farms in the United States declines by 5 percent. A local bakery hires two additional bakers.

A local bakery hires two additional bakers.

Which of the following statements concerning the relationships between total product (TP), average product (AP), and marginal product (MP) is not correct? TP reaches a maximum when the MP of the variable input becomes zero. AP reaches a maximum before TP reaches a maximum. MP cuts AP at the maximum AP. AP continues to rise so long as TP is rising.

AP continues to rise so long as TP is rising.

Refer to the graph. Which one of the following would cause a move from point b on short-run average total cost curve ATC1 to point e on short-run average cost curve ATC2? An increase in the wage rate. Diminishing marginal returns. A decrease in the wage rate. Increasing marginal returns.

An increase in the wage rate.

Refer to the short-run production and cost data. In Figure B curve (3) is: AFC and curve (4) is MC. MC and curve (4) is AVC. MC and curve (4) is AFC. AVC and curve (4) is MC.

MC and curve (4) is AVC.

Refer to the diagram, where variable inputs of labor are being added to a constant amount of property resources. Marginal cost will be at a minimum for this firm when it is hiring: Q1 workers. Q3 workers. more than Q3 workers. Q2 workers.

Q1 workers.

In the diagram, total product will be at a maximum at: some point that cannot be determined with the above information. Q3 units of labor. Q2 units of labor. Q1 units of labor.

Q3 units of labor

Answer the question on the basis of the following information: Refer to the information. Average total cost is:

TFC + TVC -------------- Q

In the diagram it is assumed that: the law of diminishing returns determines the shape of the cost curve. some costs are fixed and other costs are variable. all costs are variable. marginal product first falls, but ultimately rises as output is increased.

all costs are variable.

Fixed cost is: the cost of producing one more unit of capital, for example, machinery. average cost multiplied by the firm's output. usually zero in the short run. any cost that does not change when the firm changes its output.

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

Answer the question on the basis of the following cost data: Refer to the data. The profit-maximizing output for this firm: cannot be determined from the information given. is 5. is 4. is 3.

cannot be determined from the information given.

As the firm in the diagram expands from plant size #3 to plant size #5, it experiences: constant costs. diseconomies of scale. economies of scale. increasing returns.

diseconomies of scale.

Economic profits are calculated by subtracting: implicit costs from normal profits. explicit and implicit costs from total revenue. implicit costs from total revenue. explicit costs from total revenue.

explicit and implicit costs from total revenue.

To the economist, total cost includes: neither implicit nor explicit costs. explicit, but not implicit, costs. implicit, but not explicit, costs. explicit and implicit costs.

explicit and implicit costs.

Refer to the diagram. At output level Q average fixed cost: is equal to QE. is measured by both QF and ED. is equal to EF. cannot be determined from the information given.

is measured by both QF and ED.

Production costs to an economist: reflect opportunity costs. never reflect monetary outlays. always reflect monetary outlays. consist only of explicit costs.

reflect opportunity costs.

Use the following data to answer the question: Refer to the data. Marginal product becomes negative with the hiring of the __________ unit of labor.

seventh

Refer to the diagram. This firm's average fixed costs are: the vertical distance between AVC and ATC. equal to the per unit change in MC. not shown. the vertical distance between AVC and MC.

the vertical distance between AVC and ATC.