Econ Chapter 13 Questions (test bank), MICROECON 1311 - Ch 13 Quiz

Refer to Figure 13-2. Curve D is increasing because

of diminishing marginal product.

The Bow Wow company produced and sold 350 dog beds. The average cost of production per dog bed was $35. Each dog bed can be sold for a price of $45. Bow Wow's total costs are

$12,250.

Ryzard decides to open his own business and earns $60,000 in accounting profit the first year. When deciding to open his own business, he withdrew $20,000 from his savings, which earned 6 percent interest. He also turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Ryzard's economic profit from running his own business?

$13,800

Ryzard decides to open his own business and earns $60,000 in accounting profit the first year. When deciding to open his own business, he withdrew $20,000 from hissavings, which earned 6 percent interest. He also turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Ryzard's economic profit from running his own business?

$13,800

Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly 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 Kelly's annual opportunity cost of the financial capital that has been invested in the business?

$170

Scenario 13-1 Korie wants to start her own business making custom furniture. She can purchase a factory that costs $400,000. Korie currently has $500,000 in the bank earning 3 percent interest per year. Refer to Scenario 13-1. Suppose Korie purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Korie's annual opportunity cost of purchasing the factory?

$18,000

Teacher's Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts. The owner rents several small rooms in an office building in the suburbs for $600 a month and has leased computer equipment that costs $480 a month.​​​​​Refer to Table 13-10. What is the marginal cost of creating the tenth instructional module in a given month?

$2,500

Scenario 13-2Kachina is a senior majoring in graphic design at Awesome University (AU). While she has been attending college, Kachina started a computer consulting business to help senior citizens learn how to use their iPads. Kachina charges $25 per hour for her consulting services. She also works 5 hours a week for the Economics Department to maintain that department's Web page. The Economics Department pays Kachina $20 per hour.Refer to Scenario 13-2. If Kachina can work additional hours at either job, what is the opport2 y cost if she spends one hour reading a novel?

$25

Scenario 13-3 Ziva is an organic brocolli farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $40 an hour for her home-organization services. One spring day, Ziva spends 9 hours in herfields planting $130 worth of seeds on her farm. Sheexpects that the seeds she planted will yield $300 worth of brocolli. Refer to Scenario 13-3. What is the total opportunity cost of the day that Farmer Ziva spent in the field planting brocolli?

$360

Ziva is an organic brocolli farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if shemaintains her farming business. Farmer Ziva charges $40 an hour for her home-organization services. One spring day, Ziva spends 9 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of brocolli. Refer to Scenario 13-3. What is the total opportunity cost of the day that Farmer Ziva spent in the field planting brocolli?

$360

Katherine gives piano lessons for $45 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in hergarden. Once the seeds have grown into flowers, she can sell them for $450 at the farmer's market. Katherine's accounting profits are

$400, and her economic profits are $175.

Lim Industries has average variable costs of $1 and average total costs of $12 when it produces 500 units of output. The firm's total fixed costs equal

$5,500.

The following table shows the production costs for The Flying Elvis Copter Rides. Refer to Table 13-7. What is the value of A?

$50

Nathan makes candles. If he charges $20 for each candle, his total revenue will be

$500 if he sells 25 candles.

Teacher's Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts. The owner rents several small rooms in an office building in the suburbs for $600 a month and has leased computer equipment that costs $480 a month. ​ ​Refer to Table 13-10. What is the average variable cost for the month if 6 instructional modules are produced?

$533.33

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that the average total cost when 5 units of output are produced is $60, and the marginal cost of the sixth unit of output is $120. What is the average total cost when six units are produced?

$70.00

Taylor sells 400 candy bars at $0.50 each. Her total costs are $125. Her profits are

$75.00.

Zaid's Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $65 for 10,000 tents. At that level of output, the firm's average total costs equal

$95

Billy's Bean Bag Emporium produced 300 bean bag chairs but sold only 245 of the units it produced. The average cost of production for each unit of output produced was $100. The price for each of the 245 units sold was $90. Total profit for Billy's Bean BagEmporium would be

-$2,450

Billy's Bean Bag Emporium produced 300 bean bag chairs but sold only 245 of the units it produced. The average cost of production for each unit of output produced was $100. The price for each of the 245 units sold was $90. Total profit for Billy's Bean Bag Emporium would be

-$2,450.

Suppose a certain firm is able to produce 125 units of output per day when 19 workers are hired. The firm is able to produce 137 units of output per day when 20 workers are hired, holding other inputs fixed. The marginal product of the 20th worker is

12 units of output.

Refer to Table 13-2. What is the marginal product of the first worker?

300 units

Kate is a florist. Kate can arrange 15 bouquets per day. She is considering hiring her husband Amir to work for her. Together Kate and Amir can arrange 23 bouquets per day. What is Amir's marginal product?

8 bouquets

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q = 130). Then the marginal product of the 13th worker is

8 units of output.

Which of the following statements is correct?

Assuming that implicit costs are positive, accounting profit is greater than economic profit.

Refer to Figure 13-2. Curve C represents which type of cost curve?

Average fixed cost

Which of the following costs of publishing a book is a fixed cost?

Composition, typesetting, and jacket design for the book

Refer to Figure 13-2. Which of the curves is most likely to represent marginal cost?

Curve B

Refer to Table 13-11. Which firm is experiencing diseconomies of scale?

Firm C only

Which of the following explains why long-run average total cost at first decreases as output increases?

Gains from specialization of inputs

Pete owns a shoe-shine business. His accountant most likely includes which of the following costs on his financial statements?

Shoe polish and rent on the shoe stand

Which of the following expressions is correct?

accounting profit = economic profit + implicit costs

Suppose that for a particular business there are no implicit costs. Then

accounting profit will be the same as economic profit.

The average fixed cost curve

always declines with increased levels of output.

Table 13-6 Consider the following information about baseball production at Bobby's Baseball Factory. Refer to Table 13-6. Bobby pays all his workers the same wage, and labor is his only variable cost. From this information we can conclude that Bobby's average variable cost decreases

as output rises from 0 to 26, but rises after that.

A firm that wants to achieve economies of scale could do so by

assigning limited tasks to its employees, so they can master those tasks.

Average total cost is very high when a small amount of output is produced because

average fixed cost is high.

Marginal cost is equal to average total cost when

average total cost is at its minimum.

When marginal cost is less than average total cost,

average total cost is falling.

A firm produces 100 units of output at a total cost of $1,200. If fixed costs are $100,

average variable cost is $11.

If a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would

be horizontal.

Refer to Table 13-9. The marginal products of hiring additional workers are

decreasing

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

economies of scale.

A firm that produces and sells furniture gets to choose

how many workers to hire in both the short run and the long run.

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.

Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's

implicit costs.

In the long run,

inputs that were fixed in the short run become variable.

When a factory is operating in the short run,

it cannot adjust the quantity of fixed inputs.

Firms may experience diseconomies of scale when

large management structures are bureaucratic and inefficient.

An example of an explicit cost of production would be the

lease payments for the land on which a firm's factory stands.

When a firm experiences diseconomies of scale,

long-run average total cost increases as output increases.

When a firm experiences constant returns to scale,

long-run average total cost is unchanged, even when output increases.

Economies of scale occur when

long-run average total costs fall as output increases.

The most likely explanation for economies of scale is

specialization of labor.

If a firm uses labor to produce output, the firm's production function depicts the relationship between

the number of workers and the quantity of output.

Refer to Figure 13-2. Curve C is always declining because

we are dividing fixed costs by higher and higher levels of output.

Jane was a partner at a law firm earning $223,000 per year. She left the firm to open her own law practice. In the first year of business she generated revenues of $347,000 and incurred explicit costs of $163,000. Jane's economic profit from her first year in her own practice is

−$39,000.