AP Micro Homework 4

What is the best town in the great state of Michigan?

(A) Ann Arbor

Answer the following question from the perspective of the Cubs. Suppose the Chicago Cubs could rent out Wrigley Field (the field the players play on) to local youth leagues for $11,000 per month. The $11,000 per month reflects the _____ of capital.

(A) Implicit cost

The table above shows the various units of output that can be produced with different combinations of capital and labor. Which of the following statements is correct according to the information in the table? (Refer to table)

(A) In the long run, there are constant returns to scale

Which of the following is true of the marginal cost curve?

(A) It intersects the average variable cost curve and the average total cost curve at each curve's minimum point

Assume that an electric power company owns two plants and that, on a particular day, 10,000 kilowatts of electricity are demanded by the public. In order to minimize the total cost of providing the 10,000 kilowatts, the company should allocate production so that

(A) Marginal costs are the same for both plants

If economic profit for a firm is negative:

(A) The firm should exit the industry in the long run

Which of the following is the firm's average total cost of producing 3 units of output? (Refer to table)

(B) $16.00

If you had to eat at the mall what is one place you should never eat at no matter what?

(B) Panda Express

Suppose that a firm begins to hire workers for a newly completed plant with a fixed amount of machinery. As the firm hires additional workers, one would expect the marginal product to

(B) Rise initially, but eventually fall

Under which of the following circumstances is a firm experiencing economies of scale?

(B) The firm doubles its inputs, and output triples

Instead of being employed at a printing company at a salary of $25,000 per year, Sally starts her own printing firm. Rather than renting a building that she owns to someone else for $10,000 per year, she uses it as the location of her company. Her costs for workers, materials, advertising, and energy during her first year are $125,000. If the total revenue from her printing company is $155,000 her total economic profit is

(A) -$5,000

During its only year of operation, a firm collected $175,000 in revenue and spent $50,000 on raw materials, labor, and utilities. The owners of the firm spent $100,000 of their own money to build the firms factory (instead of buying bonds and earning a 10% rate of return), which they sold at the end of the year for $100,000. The firms economic profit is:

(C) $115,000 (calculate the profit but also subtract the opportunity cost of not having the 10% rate of return)

Which of the following is the firm's average total fixed cost of producing 2 units of output? (Refer to table)

(C) $12.00

Assume that total fixed costs are $46, that the average product of labor is 5 units when 10 units of output are produced, and that the wage rate is $12. If labor is the only variable input, what is the average total cost of producing 10 units of output?

(C) $7

Barney's Bait Company can sell all the lures it produces at the market price of $14. On the basis of the cost information in the table above, how many lures should the bait company make? (Refer to table)

(C) 3

Which of the following is the marginal product of the fourth worker (Refer to table)

(C) 6

What is a result of increasing returns to scale?

(C) Downward-sloping long-run average cost total curve

Costs that are included in the economic concept of cost but that are not explicit costs are:

(C) Implicit costs

If a firm's production exhibits economies of scale, which of the following will occur when the firm's output increases?

(C) Its long-run average total costs will fall

What will decrease as output increases when a firm is experiencing economies of scale?

(C) Long-run average total cost

Which of the following is most likely to occur if the firm increases production beyond 10 units? (Refer to graph)

(C) The firm would have to lower its price to sell more than 10 units

The implicit cost of capital is:

(C) The opportunity cost of capital used by a business

George owns a gun range in Texas. He pays $32,000 per year in insurance, $408,000 in wages, $23,000 in supplies, and he forgoes $32,000 per year he could make as a police officer. His total revenue last year equaled $460,000. That means his economic ____ equaled _____.

(C) losses; $35,000

If the average variable cost of producing 5 units of a good is $100 and the average variable cost of producing 6 units is $150, then the marginal cost of increasing output from 5 to 6 units is

(D) $400

Which of the following is the firm's marginal cost of producing the fourth unit of output? (Refer to table)

(D) $6.00

Which of the following costs must continually decrease as output produced increases in the short run?

(D) Average fixed cost

In order to minimize short-run losses, a profit-maximizing firm will necessarily shut down production under which of the following conditions?

(D) Average revenue is less than average variable cost

What is the best part about new socks?

(D) Both are great reasons

Accounting profit differs from economic profit because:

(D) Economic costs are generally higher than accounting costs because economic costs include ALL opportunity costs, while accounting costs include explicit cost ONLY.

A firm doubles all of its inputs and finds that it has more than doubled its output. This situations is an example of

(D) Increasing returns to sale

If labor is the only variable input in the production process, the short-run marginal cost curve is upward sloping because which of the following occurs as more and more labor is added?

(D) Output increases at a decreasing rate, and thus the cost of producing each additional unit of output increases

Suppose that the license paid by each business to operate in a city increases from $400 per year to $500 per year. What effect will this increase have on a firm's short-run costs?

(E) Marginal cost- No effect Average total cost- Increase Average variable cost- No effect

At a firm's current rate of output, the marginal cost is $65 dollars, the average cost is $35, the average fixed cost is $30, and the product price is $65. Which of the following statements is true for the firm?

(E) Economic profits are zero because price equals average total cost

If total revenue is increasing as output increases, marginal revenue is always

(E) Greater than zero

Which of the following is true about a firm's average variable cost?

(E) It will equal average total cost when fixed costs are zero

How should a firm use its resources in order to produce a given amount of output at the lowest possible cost?

(E) The marginal products per dollar spent on each resource are equal

What is the single least classy town in all of Oakland County?

Waterford