Econ chapter 9
David's firm experiences diminishing marginal product for all ranges of inputs. The total cost curve associated with David's firm:
gets steeper as output increases
Analyzing the behavior of the firm enhances our understanding of:
what decisions lie behind the market supply curve
economic profit:
will never exceed accounting profit
If Kevin's children run a lemonade stand for a day and sell 200 glasses of lemonade at $0.50 each, their total revenues are:
$100
Ryan sells 200 plastic ball point pens at $0.50 each. His total costs are $25. His profits are:
$75
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 product?
15 bouguets
Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Murphy can paint five houses per week. What is the maximum total output possible if Eldin hires Murphy?
2 houses
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 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?
5000
Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q = 132). Then the marginal product of the 13th worker is a. 8 units of output. b. 10 units of output. c. 122 units of output. d. 132 units of output.
8 units of output
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 a: (i) and (ii) only b: (iv) only c: (iii) and (iv) only d: (i), (ii), (iii), and (iv)
c. (iii) and (iv)
When adding another unit of labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor, the firm is experiencing:
diminishing marginal product
economists normally assume that the goal of a firm is to
earn profits as large as possible, even if it means reducing output
Total revenue minus both explicit and implicit costs is called:
economic profit
suppose that christine owns her own CPA firm. She uses only two inputs in her business: her hours worked (labor) and a computer (capital). In the short run, Christine most likely considers:
labor to be a variable and capital to be fixed
Economists assume that the typical person who starts her own business does so with the intention of:
maximizing profits
The things that must be forgone to acquire a good are called:
opportunity costs.
marginal product of labor can be defined as the change in:
output divided by the change in labor
Total revenue equals:
price x quantity
a production function is a relationship between inputs and:
quantity of output
a total-cost curve shows the relationship between the:
quantity of output produced and the total cost of production
Expicit costs:
require an outlay of money by the firm
Profit is defined as:
total revenue minus total cost
The amount of money that a firm pays to buy inputs is called:
total cost
The amount of money that a firm receives from the sale of its output is called:
total revenue
