Module 52 & 53 & 55

Pauli's Pizza offers one slice for $2, two slices for $3.50, three slices for $4.50, and four slices for $5.00. The marginal cost of the third slice is:

$1

(Ref 21-2 Table: Production Function for Soybeans) Use Table 21-2: Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The variable cost of producing 25 bushels of soybeans is:

$100

Werner installs custom sound systems in cars. If he installs seven systems per day, his total costs are $300. If he installs eight systems per day, his total costs are $400. Werner will install eight sound systems per day only if the eighth customer is willing to pay at least:

$100

Scenario: Betty's Cookie Shop (Scenario: Betty's Cookie Shop) Use Scenario: Betty's Cookie Shop. Given the information provided, Betty's implicit costs are: Betty runs a cookie shop where she sells cookies for $1 each. She employs five people, each of whom worked a total of 500 hours last year; she paid them $10 per hour. Her costs of equipment and raw materials add up to $75,000. Her business ability is legendary, and other companies have offered to pay Betty $100,000 to come to work for them. She also knows she could sell her cookie shop for $150,000. The bank in town pays an annual interest rate of 3% on all funds deposited with it.

$100,000

(Ref 21-2 Table: Production Function for Soybeans) Use Table 21-2: Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The total cost of producing 60 bushels of soybeans is:

$450

If at a given quantity _____, the decision maker should do _____ of the activity.

MB < MC; less

Which question best describes a "how much" decision?

Should I buy a third hot dog?

Which statement describes a "how much" decision?

Tim is trying to decide the amount of money to save each month to buy a new car next year.

(Ref. 21-9 Table: Workers and Output) Use Table 21-9: Workers and Output. After graduation, you achieve your dream of opening an art shop that specializes in selling mud statues. You pay $10 per day on a loan from your uncle, regardless of how much you produce. You also pay $10 per day to each of the workers who you hire to make the mud statues. The total cost of producing 48 statues is:

$60

Suppose Cyd knows the average total cost of producing 9 scones is $5, while the average total cost of producing 10 scones is $5.20. What is the marginal cost of the tenth scone?

$7.00

(Ref 21-5 Figure: Short-Run Costs) Use Figure 21-5: Short-Run Costs. The vertical difference between curve B and curve C at any quantity of output is _____ cost.

average fixed

The _____ cost curve is not affected by diminishing returns.

average fixed

If marginal cost is less than average total cost, then _____ cost is _____.

average total; decreasing

(Ref 21-5 Figure: Short-Run Costs) Use Figure 21-5: Short-Run Costs. C is the _____ cost curve.

average variable

(Figure Ref 17-7: The Optimal Quantity) Use Figure 17-7: The Optimal Quantity. If the marginal benefit of lawn mowing increased, the marginal _____ curve in the figure would shift to the _____ and the optimal quantity would be _____ than five lawns mowed.

benefit; right; more

When marginal cost is rising:

both average variable cost and average total cost may be rising or falling.

You plan to attend a movie on Saturday night. You buy a ticket for $7 and then lose it. According to marginal analysis, you should:

buy another ticket and attend the movie only if your marginal benefit of seeing the movie is more than $14

The dormitories of Eastland College are part of its:

capital.

Marginal cost _____ over the range of increasing marginal returns and _____ over the range of diminishing marginal returns.

decreases; increases

John's accountant tells him that he made a profit of $43,002 running a pottery studio in Orlando. John's wife, an economist, claims John lost $43,002 running his pottery studio. This means his wife is claiming that he incurred _____ in _____ costs.

$86,004; implicit

(Ref 17-14 Figure: The Marginal Analysis of Cell Phones) Use Figure 17-14: The Marginal Analysis of Cell Phones . You are considering purchasing cell phones for your department. If you buy the fifth cell phone, your change in total profit will be equal to:

-$2

To maximize her grade in economics, Stacey should study until her:

. marginal benefit of studying equals her marginal cost of studying.

Joan loves sushi. Her first piece of sushi normally gives her a marginal benefit of $5. Each additional piece yields a marginal benefit that declines by $0.25 per piece. If her favorite sushi bar charges $2.75 per piece of sushi, how many pieces should she eat?

10

For most restaurants, the average total cost curve _____ at _____ levels of output, then _____ at _____ levels.

falls; low; rises; high

Accounting profit takes into account explicit costs, but economic profit does not.

false

In economic analysis, the principle of marginal analysis refers to:

he result that the optimal quantity of an activity is that at which marginal benefit is equal to marginal cost.

The fixed cost curve is:

horizontal

Suppose Eastland College does not have a summer program and could rent out the campus to various summer sports camps for $100,000. The potential revenue of the summer camps represents a(n):

implicit cost of capital.

If the marginal cost curve is upward sloping, as output increases, marginal costs will:

increase

To maximize total profit from a particular activity, consumers and firms evaluate each activity at the:

margin

(Ref 21-6 Figure: Short-Run Costs II) Use Figure: 21-6 Short-Run Costs II. Curve 1 is the _____ cost curve.

marginal

The _____ is the amount by which an additional unit of activity increases its total cost.

marginal cost

Feng is thinking of mowing lawns over the summer. His friend Jason mows lawns, and he says the marginal cost of mowing the fourth lawn in a day is $40. Feng thinks about it and realizes that the total cost of mowing four lawns is:

not possible to determine from the information provided.

The total cost curve is:

positively sloped.

As production increases and the fixed cost is divided by larger quantities of output, average fixed cost drops. This is referred to as the _____ effect.

spreading

The larger the output, the more output over which fixed cost is distributed. Called the _____ effect, this leads to a _____ average _____ cost as output rises

spreading; lower; fixed

The implicit cost of capital is:

the opportunity cost of capital used by a business.

The sum of fixed and variable costs is _____ cost.

total

Average total cost is:

total cost divided by output.

Average variable cost is:

total variable cost divided by quantity.

Because resources are scarce, the true cost of anything is its opportunity cost.

true

Suppose Bob has a part-time, car washing business. He has washed nine cars on a given day; the marginal benefit of washing the tenth car is $20 and the marginal cost is $12. Bob should:

wash the tenth car

Buford Bus Manufacturing installs a new assembly line. As a result, the output per worker increases. The marginal cost of output at Buford:

will decrease (the MC curve will shift down).

(Ref 17-1 Table: Marginal Cost of Sweatshirts) Use Table 17-1: Marginal Cost of Sweatshirts. The marginal cost of the fourth sweatshirt is:

$15

(Ref 17-5 Table: Marginal Analysis of Sweatshirt Production II) Use Table 17-5: Marginal Analysis of Sweatshirt Production II. The profit at the optimal quantity of sweatshirts is:

$16

(Ref 21-6 Figure: Short-Run Costs II) Use Figure 21-6: Short-Run Costs II. At 6 units of output, average total cost is approximately:

$170

(Ref. 21-9 Table: Workers and Output) Use Table 21-9: Workers and Output. After graduation, you achieve your dream of opening an art shop that specializes in selling mud statues. You pay $10 per day on a loan from your uncle, regardless of how much you produce. You also pay $10 per day to each of the workers who you hire to make the mud statues. The variable cost of producing 25 statues is:

$20

(Ref 21-3 Figure: The Average Total Cost Curve) Use Figure 21-3: The Average Total Cost Curve. The total cost of producing three pairs of boots is approximately:

$216

Kaile Cakes produces 10 cakes per day. The marginal cost of the tenth cake is $24, and average total cost of 10 cakes is $6. The average total cost of 9 cakes is:

$4

(Ref 21-3 Figure: The Average Total Cost Curve) Use Figure 21-3: The Average Total Cost Curve. The total cost of producing five pairs of boots is approximately:

$408