econ ch 9

You are considering whether to drive your car or fly 1,000 miles to Florida for spring break. Which costs would you take into account in making your decision?

The variable costs of the trip, the opportunity cost of your time, and the need for transportation in Florida.

Why do economists classify normal profits as costs?

A normal profit is the amount required to ensure continued supply of the product.

Which of the following statements is true? -Normal profit equals revenue minus implicit costs. -Accounting profit equals revenue minus explicit costs. -Accounting profit gives a true measure of the opportunity cost of the current business venture. -Economic profit equals opportunity cost.

Accounting profit equals revenue minus explicit costs.

Which of the following statements is true regarding the costs associated with owning and operating an automobile? -Fixed costs include gasoline, and variable costs include repairs. -Fixed costs include depreciation, and variable costs include insurance. -Fixed costs include repairs, and variable costs include depreciation. -Fixed costs include insurance, and variable costs include gasoline.

Fixed costs include insurance, and variable costs include gasoline.

Which of the following are short-run adjustments, and which are long-run adjustments? a. Wendy's builds a new restaurant: b. Harley-Davidson Corporation hires 200 more production workers: c. A farmer increases the amount of fertilizer used on his corn crop: d. An Alcoa aluminum plant adds a third shift of workers:

a. long-run adjustment b. short-run adjustment c. short-run adjustment d. short-run adjustment

Suppose a firm is producing in the long run. When it produces 4,000 units of output, its total cost is $8,000. When it produces 4,100 units of output, its total cost is $8,200, and when it produces 4,200 units of output, its total cost is $8,400. This firm is experiencing __________ returns to scale.

constant

Classify the following as fixed or variable costs: b. Interest on company-issued bonds:

fixed costs

Classify the following as fixed or variable costs: e. Real estate taxes:

fixed costs

Classify the following as fixed or variable costs: f. Executive salaries:

fixed costs

Classify the following as fixed or variable costs: g. Insurance premiums:

fixed costs

Classify the following as fixed or variable costs: j. Rental payments on leased office machinery:

fixed costs

Suppose a firm is producing in the long run. When it produces 4,000 units of output, its total cost is $8,000. When it produces 4,200 units of output, its total cost is $8,200, and when it produces 4,400 units of output, its total cost is $8,800. This firm is experiencing __________ returns to scale.

increasing, then decreasing

Classify the following as fixed or variable costs: a. Fuel:

variable costs

Classify the following as fixed or variable costs: c. Shipping charges:

variable costs

Classify the following as fixed or variable costs: d. Payments for raw materials:

variable costs

Classify the following as fixed or variable costs: h. Wage payments:

variable costs

Classify the following as fixed or variable costs: i. Sales taxes:

variable costs