Microeconomics- Chapter 13

Kelly has decided to 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 $2,00 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? A. $170 B. $30 C. $140 D. $300

$170

Jacqui decides to open her own business and earns $50,000 in accounting profit the first year. When deciding to open her own business, she withdrew $20,000 from her savings, which earned 5 percent interest. She also turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Jacqui's economic profit from running her own business? A. -$56,000 B. $19,000 C. $4,000 D. -$6,000

$4,000

Your aunt is thinking about opening a hardware store. She estimates that it would cost $400,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant. Your aunt's opportunity cost of running a hardware store for a year is...

$450,000

Your aunt is thinking about opening a hardware store. She estimates that it would cost $600,000 per year to rent the location and buy the stock. In addition, she would have to quit her $55,000 per year job as an accountant. Your aunt's opportunity cost of running a hardware store for a year is...

$655,000

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. Together Kate and William can arrange 35 bouquets per day. What is William's marginal profit? A. 15 bouquets B. 55 bouquets C. 22.5 bouquets D 35 bouquets

A. 15 bouquets

Which of the following is an example of an implicit cost? A. The owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm B. Interest paid on the firm's debt C. Wages paid to workers D. Rent paid by the firm to lease office space

A. The owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm

_________________________________ is falling when marginal cost is below it and rising when marginal cost is above it.

Average total cost

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... A. $124,000 B. $184,000 C. -$39,000 D. $163,000

C. -$39,000

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. he is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product? A. The farmer is able to produce 6,200 bushels of wheat when he hires 4 workers B. The farmer is able to produce 6,000 bushels of wheat when he hires 4 workers C. The farmer is able to produce 5,800 bushels of wheat when he hires 4 workers D. The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers

D. The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers

Your aunt is thinking about opening a hardware store. She estimates that it would cost $400,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant. What is the opportunity cost of something? A. The time it takes to do something B. What you pay for it C. The cost to produce it D. What must be given up to acquire it

D. What must be given up to acquire it

Total revenue equals...

Price x Quantity

A cost that does not depend on the quantity produced is _________________________________.

a fixed cost

A difference between explicit and implicit costs is that...

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

The cost of producing an extra unit of output is the ___________________________________.

marginal cost

What you give up for taking some action is called the _________________________________.

opportunity cost

Your aunt is thinking about opening a hardware store. She estimates that it would cost $600,000 per year to rent the location and buy the stock. In addition, she would have to quit her $55,000 per year job as an accountant. Suppose your aunt thought she could sell $680,000 worth of merchandise in a year. Your aunt [should/should not] open the store.

should

Your aunt is thinking about opening a hardware store. She estimates that it would cost $400,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant. Suppose your aunt thought she could sell $420,000 worth of merchandise in a year. Your aunt [should/should not] open the store.

should not

Profits equal total revenue minus _______________________________.

total cost

In the ice-cream industry in the short-run, ________________________________ includes the cost of the cream and sugar but not the cost of the factory.

variable cost