Micro Quiz for Exam 3

The Big Box corporation produced and sold 500 units of output. The average cost of production per unit was $50. Each unit sold for a price of $65. The Big Box corporation's total revenues are $7,500. $25,000. $32,500. $67,500.

$32,500.

Cody builds mailboxes. If he charges $20 for each mailbox, his total revenue will be $1,000 if he sells 100 mailboxes. $500 if he sells 25 mailboxes. $20 regardless of how many mailboxes he sells. $200 if he sells 5 mailboxes.

$500 if he sells 25 mailboxes.

Which of the following would be an example of an implicit cost? (i) forgone investment opportunities (ii) wages of workers (iii) raw materials costs (i) only (ii) only (ii) and (iii) only (i) and (iii) only

(i) only

Pete owns a shoe-shine business. Which of the following costs would be implicit costs? (i) shoe polish (ii) rent on the shoe stand (iii) wages Pete could earn delivering newspapers (iv) interest that Pete's money was earning before he spent his savings to set up the shoe-shine business (i) and (ii) only (iv) only (iii) and (iv) only (i), (ii), (iii), and (iv)

(iii) and (iv) only

Grace is a self-employed artist. She can make 20 pieces of pottery per week. She is considering hiring her sister Kate to work for her. Both she and Kate can make 35 pieces of pottery per week. What is Kate's marginal product? 55 pieces of pottery 35 pieces of pottery 22.5 pieces of pottery 15 pieces of pottery

15 pieces of pottery

If a firm incurs a total cost of 200, and the firm' fixed cost is 50, what is its variable cost? 0 200 250 150

150

Grace is a self-employed artist. She can make 20 pieces of pottery per week. She is considering hiring her sister Kate to work for her. Kate can make 18 pieces of pottery per week. What would be the total output of Grace's firm if she hired her sister? 18 pieces of pottery 19 pieces of pottery 20 pieces of pottery 38 pieces of pottery

38 pieces of pottery

For a construction company that builds houses, which of the following costs would be a fixed cost? the $50,000 per year salary paid to a construction foreman the $30,000 per year salary paid to the company's bookkeeper the $10,000 per year premium paid to an insurance company All of the above are correct.

All of the above are correct.

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost? the unemployment insurance premium that the firm pays to the state of Missouri that is calculated based on the number of worker-hours that the firm uses the cost of the steel that is used in producing automobiles the cost of the electricity of running the machines on the factory floor All of the above are correct.

All of the above are correct.

If a firm produce zero, its cost must be zero in the short run? True False

False

Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's costs. Tyler says his costs are $25,900, and Greg says his costs are $66,500. Tyler says his costs are $25,000, and Greg says his costs are $65,000. Tyler says his costs are $66,500, and Greg says his costs are $66,500. Tyler says his costs are $75,000, and Greg says his costs are $41,500.

Tyler says his costs are $25,900, and Greg says his costs are $66,500.

A production function is a relationship between inputs and quantity of output. revenue. costs. profit.

quantity of output.

Foregone investment opportunities are an example of an explicit cost. an implicit cost. revenues. profits.

an implicit cost.

Fixed costs can be defined as costs that vary inversely with production. vary in proportion with production. are incurred only when production is large enough. are incurred even if nothing is produced.

are incurred even if nothing is produced.

A firm produces 400 units of output at a total cost of $1,200. If fixed costs are $200, average fixed cost is $2. average variable cost is $2.50. average total cost is $4. average total cost is $5.

average variable cost is $2.50.

Some costs do not vary with the quantity of output produced. Those costs are called marginal costs. average costs. fixed costs. explicit costs.

fixed costs

Which of the following costs do not vary with the amount of output a firm produces? average fixed costs fixed costs and average fixed costs marginal costs and average fixed costs fixed costs

fixed costs

Total cost can be divided into two types of costs: fixed costs and variable costs. fixed costs and marginal costs. variable costs and marginal costs. average costs and marginal costs.

fixed costs and variable costs.

Which of the following is an example of an implicit cost? salaries paid to owners who work for the firm interest on money borrowed to finance equipment purchases cash payments for raw materials foregone rent on office space owned and used by the firm

foregone rent on office space owned and used by the firm

A difference between explicit and implicit costs is that explicit costs must be greater than implicit costs. explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do. implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do. implicit costs must be greater than explicit costs.

implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.

The difference between accounting profit and economic profit is explicit costs. implicit costs. total revenue. marginal product.

implicit costs.

The marginal product of labor is equal to the incremental cost associated with a one unit increase in labor. incremental profit associated with a one unit increase in labor. increase in labor necessary to generate a one unit increase in output. increase in output obtained from a one unit increase in labor.

increase in output obtained from a one unit increase in labor.

An example of an explicit cost of production would be the cost of forgone labor earnings for an entrepreneur. lost opportunity to invest in capital markets when the money is invested in one's business. lease payments for the land on which a firm's factory stands. Both a and c are correct.

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

Profit is defined as total revenue plus total cost. times total cost. minus total cost. divided by total cost.

minus total cost.

Which of the following is the best example of a variable cost? monthly wage payments for hired labor annual property tax payments for a building monthly rent payments for a warehouse annual insurance payments for a warehouse

monthly wage payments for hired labor

Economic profit is equal to total revenue minus the explicit cost of producing goods and services. opportunity cost of producing goods and services. accounting cost of producing goods and services. implicit cost of producing goods and services.

opportunity cost of producing goods and services.

The marginal product of labor can be defined as the change in profit divided by the change in labor. output divided by the change in labor. labor divided by the change in output. labor divided by the change in total cost.

output divided by the change in labor

Explicit costs require an outlay of money by the firm. include all of the firm's opportunity costs. include the value of the business owner's time. Both b and c are correct.

require an outlay of money by the firm.

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. marginal product and marginal cost. the maximum quantity that the firm can produce as it adds more capital to a fixed quantity of labor. fixed inputs and variable inputs in the short run.

the number of workers and the quantity of output.

When calculating a firm's profit, an economist will subtract only explicit costs from total revenue because these are the only costs that can be measured explicitly. implicit costs from total revenue because these include both the costs that can be directly measured as well as the costs that can be indirectly measured. the opportunity costs from total revenue because these include both the implicit and explicit costs of the firm. the marginal cost because the cost of the next unit is the only relevant cost.

the opportunity costs from total revenue because these include both the implicit and explicit costs of the firm.

An example of an opportunity cost that is also an implicit cost is a lease payment. the cost of raw materials. the value of the business owner's time. All of the above are correct.

the value of the business owner's time.

Profit is defined as net revenue minus depreciation. total revenue minus total cost. average revenue minus average total cost. marginal revenue minus marginal cost.

total revenue minus total cost.

If a firm produces nothing, which of the following costs will be zero? total cost fixed cost opportunity cost variable cost

variable cost