Econ principles #5 homework (study for Exam #2)

The downward-sloping portion of the long-run average cost curve is a result of multiple choice A.economies of scale. B.constant returns to scale. C.diseconomies of scale. D.decreasing marginal productivity.

A.

Which of the following costs is an explicit cost for you? multiple choice A. You hire a worker who could have received the same wage working for your competitor. B. You raise cattle on your family-owned farm even though you could sell your land to a developer. C. You spend your time running your own business even though a large corporation offered you a generous contract. D. You decide to use an extra room for your business that you could have rented out to your neighbor.

A.

Which of the following is an implicit cost of owning and operating a farm? multiple choice A. the money paid for fertilizer each growing season B. the money a farmer could earn by working for someone else C. the money paid for repairing a tractor D.the money received for crops grown during the growing season

B. (implicit costs are unseen usually opportunity costs)

If you know that when a firm produces 10 units of output, total cost is $1,030 and average fixed cost is $10, then total variable cost is Multiple Choice A. $104. B. $930. C. $1,040. D. $1,130.

B. to get total fixed costs multiply AFC 10* 10 output= 100 total fixed (100)- total variable (?) = total cost (1030) 1030-100= 930

The upward-sloping portion of the long-run average cost curve is a result of multiple choice A.economies of scale. B.constant returns to scale. C.diseconomies of scale. D.decreasing marginal productivity.

C.

Assume that you are the owner of a small bakery in your hometown. Which of the following would be a variable cost of production in the short run? Multiple Choice A. baking ovens B. the interest on business loans C. the annual lease payment for use of the building D. baking supplies (flour, salt, etc.)

D. Variable costs are costs that change as the quantity of the good or service that a business produces changes so here annual lease payment the interest on business loan and oven baking are constant only supply change according with demand so above option D is correct option .

A business owner makes 50 items by hand in 40 hours. She could have earned $20 an hour working for someone else. Her total explicit costs are $200. If each item she makes sells for $15, her economic profit equals?

-250: Economic profit = total revenue- economic costs total revenue= 750 (15*50) economic costs= implicit+explicit explicit = 200 implicit = 800 (20*40) economic costs = 1000 (200 +800) economic profit = TR (750)- EC (1000)= -250

A young Thomas Edison produces and sells 20 light bulbs a week in his dorm room. The parts for each light bulb cost $2.00. He sells each light bulb for $5.00. General Electric offers Thomas an executive job that pays $50.00 a week. Thomas's weekly economic profit from making light bulbs is equal to:

10; Economic Profit=total revenue- economic costs total revenue=100; (20*5) economic costs=implicit+explicit implicit= 50 explicit = 40 (2*40) Economic costs= 90 (50+40) Economic profit= TR (100)- EC (90)= 10

Suppose that a firm produces 200,000 units a year and sells them all for $10 each. The explicit costs of production are $1,500,000 and the implicit costs of production are $300,000. The firm earns an accounting profit of ________ and an economic profit of ________.

500,000, 200,000 TR= 200,000*10= 2,000,000 Accounting = TR- explicit (2,000,000- $1,500,000= 500,000) Economic profit = TR - economic cost (explicit + implicit. 2,000,000- ($1,500,000 + $300,000)= 200,000

Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and has average variable costs of $150. The firm's total fixed costs are Multiple Choice A/ $5,000. B. $500. C. $0.50. D. $50.

A. 200-150= 50 *100 units= answer

If you know that total fixed cost is $200, total variable cost is $600, and total product is 4 units, then average total cost must be Multiple Choice A. $200. B. $250. C. $800. D. $3,200.

A. Average total cost= total costs (total variable+total fixed)/ output. total costs= 200+600= 800 800/4= 200

A firm finds that whether it produces 30,000 vases or 40,000 vases, its average total cost is $180. This observed pattern might be explained by multiple choice A. diminishing marginal productivity. B. economies of scale. C. constant returns to scale. D. diseconomies of scale.

C.

Barney decides to quit his job as a corporate accountant, which pays $10,000 a month, and goes into business for himself as a certified public accountant. He runs his business from his converted garage apartment, which he could rent out for $300 a month if he wasn't using it as a home office. He must purchase office supplies worth $75 a month, and his monthly electricity bill has increased by $50 now that he is working out of his home office. After six months of working from home, Barney has earned an average of $12,000 per month. Instructions: Enter your answers as a whole number. a. What are Barney's average monthly accounting profits? b. What are Barney's average monthly economic profits?

a 11875 (AP= total revenue -explicit costs, 12000- (75+50)) b. 1575 (EP= total revenue- economic costs (implicit+explicit) 12000-(125+10300))

Barney decides to quit his job as a corporate accountant, which pays $10,000 a month, and goes into business for himself as a certified public accountant. He runs his business from his converted garage apartment, which he could rent out for $300 a month if he wasn't using it as a home office. He must purchase office supplies worth $75 a month, and his monthly electricity bill has increased by $50 now that he is working out of his home office. After six months of working from home, Barney has earned an average of $12,000 per month. Instructions: Enter your answers as a whole number. a. What are Barney's monthly explicit costs? b. What are Barney's monthly implicit costs? c. What are Barney's monthly economic costs?

a. 125 (75+50) b. 10300 (10000+300) c. 10425 (125+10300)

When a firm is experiencing diseconomies of scale, it should Multiple Choice A. lower its price to attract new consumers B.expect its average total cost to increase if it reduces its level of production. C. expect its average total cost to decrease if it reduces its level of production. D. expect its average total cost to remain unchanged if it changes its level of production.

c.