ECON 120 Chapters 5,6 Quiz 3

Suppose a firm has the following expenditures per day: $240 for wages, $150 for materials, and $80 for equipment rental. The owner of the firm owns the building in which it operates. If the firm were not operating in the building, he could rent the building for $70 per day. Total daily revenue is $600. What are the daily explicit costs for the firm described above?

$470

Suppose a firm has the following expenditures per day: $240 for wages, $150 for materials, and $80 for equipment rental. The owner of the firm owns the building in which it operates. If the firm were not operating in the building, he could rent the building for $70 per day. Total daily revenue is $600. What are the daily accounting costs for the firm described above?

$470

Suppose a firm has the following expenditures per day: $240 for wages, $150 for materials, and $80 for equipment rental. The owner of the firm owns the building in which it operates. If the firm were not operating in the building, he could rent the building for $70 per day. Total daily revenue is $600. What are the daily implicit costs for the firm described above?

$70

If an additional unit of labor costs $40 and has an MPP of 50 units of output, the marginal cost is:

$0.80.

Suppose a firm incurred explicit costs of $900 and implicit costs of $200 during a day. If that day the firm sold 8 units at $300 per unit its accounting profits are:

$1,500 and its economic profits are $1,300

Given the following production costs for a bakery for September 2015: Flour costs =$900, electricity =$550, Employee wages= $4500, other ingredients = $400, rent = $1200, the usual standard city service fees= $60. The bakery produces and sells 6000 loaves of bread during the month of September.

a. What is the total cost of producing 6000 loaves of bread this month? $7,610 b. What are the average total costs per loaf of bread? $1.27 c. What are the average fixed costs per loaf of bread? $0.21 d. What are the average variable costs per loaf of bread? $1.06

Which of the following is the best explanation of why the law of diminishing returns does not apply in the long run?

All factors of production are variable in the long run.

A firm can be identified as profitable if the:

Difference between its total revenue and total costs is positive.

Based on the the NEWSWIRE article, "Catfish Farmers Feel Forced Out of Business", what should happen to the equilibrium price and quantity of catfish over time?

Equilibrium price should go up, and equilibrium quantity should go down.

The reason the average total cost curve declines initially is because of:

Falling average fixed cost. Falling average variable costs

Which of the following is equivalent to average total cost?

Fixed cost and variable cost added together and then divided by output.

If the first, second, third and fourth worker employed by the firm add 15, 21, 12 and 8 units of total product respectively, we can conclude that:

That after the second worker marginal product declines.

Last year, Dr. Lopez quit his $100,000 job at the MegaMall Dental Clinic and opened his own dental practice. His revenue for the first year was $400,000. He paid $80,000 in rent for the dental office, $60,000 for his office manager's salary, $25,000 for the dental hygienist, $150,000 for insurance, and $10,000 for other miscellaneous expenses. Based on this information, which of these statements is correct?

His implicit costs are $100,000. His accounting profit is $75,000. His economic profit is -$25,000.

Which of the following is not a long-run investment decision?

How intensively to use the existing plant.

If the market price is $50, MC equals $45, ATC equals $40, the firm should:

Increase Output

Which of the following would cause a firm's production function to shift upward?

Increased investment in capital.

A firm's rising factor costs can be offset by:

Increases in productivity.

If government policies to increase productivity are successful, then the:

Production function will shift upward.

If price is greater than marginal cost for the last unit produced:

Profit is increasing.

Which of the following is most likely a fixed cost?

Property taxes

Improvements in technology shift the:

Marginal cost curve downward.

Based on the law of diminishing returns, if the number of workers increases and capital investments do not keep pace then, ceteris paribus:

Marginal physical product of labor will decrease.

The NEWSWIRE article in the text titled "Flat Panels, Thin Margins" says that the prices for flat-panel TVs are falling. Which of the following is a likely reason why prices are decreasing?

Market supply has shifted to the right because more firms have entered the market.

Marginal cost:

May initially decline and then increases as more output is produced.

The best measure of the economic cost of doing your homework is:

The best opportunity you give up when you do your homework.

Assume a restaurant hires an additional chef who is as qualified as the current chefs. As a result, the level of output increases but by a smaller amount than when the previous additional chef was hired. Which of the following best explains this occurrence?

The chefs are working with a fixed amount of space and equipment and they get in each other's way.

Rising marginal costs are the result of:

The law of diminishing returns.

The NEWSWIRE article in the text is titled "T-Shirt Shop Owner's Lament: Too Many T-Shirt Shops." If T-shirt shops are perfectly competitive firms, then:

The shops sell identical products.

If a firm increases output, total costs will rise because of a change in:

Variable costs.

In the long run, a company will stay in business as long as price is:

Greater than or equal to average total costs.