Econ Quiz 9 Test 3

John has decided to start his own lawn-mowing business. To purchase the mowers and the trailer to transport the mowers, John withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is John's annual opportunity cost of the financial capital that has been invested in the business?

1000 *.03= $30 2000*.07= $140 30 + 140 +$170

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 outcomes can occur if the production function exhibits diminishing marginal productivity of labor starting from the 4th worker?

A.The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers. CORRECT B.The farmer is able to produce 5,800 bushels of wheat when he hires 4 workers. C.The farmer is able to produce 6,000 bushels of wheat when he hires 4 workers. A because the marginal product should be decreasing. 3000-4400= 1400 5600-4400=1200 marginal product is less with 4 workers.

economies of scale

ATC falls as Q increases

Marginal Cost

Change in TC/ Change in Q

Economic Profit is equal to

Total revenue minus the opportunity cost of producing goods and services

In the short run a firm incurs fixed costs

Whether it produces output or not

efficiant scales of production

quantity that minimizes ATC

"the cost of a typical unit of output if total cost is divided evenly over all the units produced?"

Average Total Cost

Marginal Product

Increase in output from an additional unit of input ex. 1 worker 20 product 2 worker 45 product Marginal product= 25