econ exam 2 chapter 8

If a firm has total costs of $535,000 and its implicit costs are $165,000, how much are its explicit costs?

$370,000 535,000-165,000

Lisette is the owner of a bakery that earns zero economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her other monetary expenses were $25,000. From this information, we know that her explicit costs were

$43,000 145,000-12,000-65,000-25,000

Remi owns a small pizza restaurant, where he works full time in the kitchen. His total revenue last year was $100,000, and his rent was $3000 per month. He pays his one employee $2000 a month, and the cost of ingredients averages $ 500 per month. Remi could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His explicit costs last year were

$66,000 2000(12) + 500(12)+3000(12)

If a firm generates $280,000 in revenue, earns $120,000 in economic profit, and its explicit costs are $80,000, how much are its implicit costs?

$80,000 280,000-80,000-120,000

Lester owns a candy equipment store that produces, among other things, chocolate fountains. With his current 5 employees, his candy equipment store can produce 8 chocolate fountains per day. If he hired a 6th employee, he'd be able to produce 9 chocolate fountains per day. What is the marginal product of the 6th employee in terms of chocolate fountains?

1 9-8=1 6-5=1 1(1)=1

Fatima own a car shop that repairs, among other things, spoilers. She currently has 6 employees, her repair shop can repair 9 spoilers per day. If she hired a seventh employee, shed be able to repair 11 spoilers per day. Therefore, the marginal product of the seventh employee is ____ car spoilers

2 11-9=2 7-6=1 2(1)=2

What is the relationship between MC and specialization?

MC is increase in total costs from producing one more output. Specialization is the limiting of ones work to a particular area

Why can implicit costs be difficult to measure for business owners?

We can be sure there is an opportunity cost for owner-provided capital, but we can never know exactly how much that might be

Determine whether each of the following statements is true of false with respect to explicit costs: a. They are not included when measuring accounting profit. b. They are not included when measuring economic profit. c. They are tangible out of pocket expenses. d. They are not measured in terms of dollars. e. They are more difficult to calculate and easier to miss than implicit costs.

a. false b. false c. true d. false e. false

Determine whether each of the following statements is true or false: a. Economists consider only explicit costs. b. Implicit and explicit costs are always equal. c. An implicit cost is an opportunity cost. d. All costs are explicit costs. e. An implicit cost is monetary

a. false b. false c. true d. false e. false

How do you calculate AVC, AFC, ATC?

avc- (VC)/# of units produced atc- (TC)/# of united produced afc- (TFC)/Q or #of united produced

What are good examples of variable costs in the short run?

employees, wages, cost of raw materials

_____ costs are tangible out of pocket expenses

explicit

For a business that manufactures bicycles, wages paid to employees are an example of what type of cost?

explicit costs

Should a firm always produce the level of output where marginal cost is lowest?

firms should not produce at lowest marginal cost, if at that level, ATC is higher than price, leading to a loss

Which inputs are often assumed to be fixed in the short run? Variable in the short run?

fixed= insurance, property taxes variable= opportunity cost of owners time, opportunity cost of owners capital

Change in total output divided by the change in input equals

marginal product

When a firm hires another employee and, as a result, total output increases, this change in total output is also known as:

marginal product

Do fixed costs change as you increase total output?

no

Total revenues minus total costs equals

profit

When the average total cost curve is downward sloping, what must be true about the marginal cost curve?

that its below the average total cost curve

Where would we find a firm's efficient scale of production?

the level of output in which ATC is minimized

What does MC say about marginal product?

the quantity of output in which MC is at a minimum is the same quantity of output produced by the variable input when MC is at a maximum

Review hoe to fill in a table of MC, ATC, AFC, TC, TFC, TVC

watch chapter 8c

What is the average total cost curve at its minimum?

when marginal cost curve intersects the ATC curve