Micro Econ Quiz 11

Implicit costs are:

"payments" for self-employed resources

A tariff is a:

Tax

The higher price of imported products due to trade barriers causes some consumers to shift their purchases to a domestically-produced product which is now:

Higher in price because import competition has declined

Suppose that a firm produces 200,000 units a year and sells them all for $10 each. The explicit costs of production are $1,500,000 and the implicit costs of production are $300,000. The firm earns an accounting profit of

$500,000 and an economic profit of $200,000

Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. The normal profits for Harvey in the first year were:

$5000

Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. The implicit costs of Harvey's firm in the first year were:

$60,000

Cash expenditures a firm makes to pay for resources are called:

Explicit costs

Fixed costs are those costs which are:

Independent of the rate of output

The use of tariffs and quotas for trade protection results in:

Less efficiency in the economy

When tariffs on imported products are removed by a nation, it will result in:

Lower prices and higher quantities consumed in that nation