Microeconomics Module 11

A young Thomas Edison produces and sells 20 light bulbs a week in his dorm room. The parts for each light bulb cost $2.00. He sells each light bulb for $5.00. General Electric offers Thomas an executive job that pays $50.00 a week. Thomas's weekly economic profit from making light bulbs is equal to:

$10

Which of the following costs is an explicit cost for you?

You hire a worker who could have received the same wage working for your competitor.

If the short-run average variable cost of production for a firm is decreasing, then it follows that

average variable cost must be greater than marginal cost

If the marginal cost curve is below the average variable cost curve

both average total cost and average variable cost are decreasing.

Variable costs are

costs that change with the amount of output a firm produces.

Economic profit is

equal to the difference between accounting profit and implicit costs.

To an economist, the economic costs associated with the use of resources include

explicit and implicit costs.

Accounting profit equals total revenue minus

explicit costs.

Monetary payments a firm makes to pay for resources are called

explicit costs.

Fixed costs are those costs that are

independent of the amount of output a firm produces in the short run.

Implicit costs are

opportunity costs of using owned resources.

Economic profit is equal to

total revenue minus the explicit and implicit costs of production.

Suppose that you could either prepare your own tax return in 15 hours or hire a tax specialist to prepare it for you in 2 hours. You value your time at $11 an hour; the tax specialist will charge you $55 an hour. The opportunity cost of preparing your own tax return is

$165.