Econ 160 Final

Explicit costs are payments the firm makes for
inputs such as wages and salaries to its employees, whereas implicit costs are non-expenditure costs that occur through the use of self owned resources such as foregone income.

The explicit costs of going to college include
tuition costs and the cost of books, whereas the implicit costs include foregone income.

Accounting profit equals sales revenue minus explicit costs

A normal profit is considered a cost because
this is the amount required to ensure continued supply of the product.

Wendy’s builds a new restaurant.
long-run adjustment

Harley-Davidson Corporation hires 200 more production workers.
short-run adjustment

A farmer increases the amount of fertilizer used on his corn crop.
short-run adjustment

An Alcoa aluminum plant adds a third shift of workers.
short-run adjustment

Complete the following table by calculating marginal product and average product from the data given. (Equations)
ATC=TC/Q therefore TC=ATC(Q)
AFC=TFC/Q therefore TFC=AFC(Q)
AVC=TVC/Q therefore TVC=AVC(Q)

Advertising expenditures
variable cost

variable cost

Interest on company-issued bonds
fixed cost

Shipping charges
variable cost

Payments for raw materials
variable cost

Real estate taxes
fixed cost

Executive salaries
fixed cost

Insurance premiums
fixed cost

Wage payments
variable cost

Depreciation and obsolescence charges
fixed cost

Sales taxes
variable cost

Rental payments on leased office machinery
fixed cost

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

You are considering whether to drive your car or fly 1,000 miles to Florida for spring break. In making your decision you should consider
the variable cost of the trip, the opportunity cost of time, and the need for transportation in Florida.

Long-run average total cost falls as the firm realizes _____ and later rises when the firm experiences ______.
economies of scale, diseconomies of scale

The minimum efficient scale is the
smallest level of output needed to attain all economies of scale and minimum long-run average total cost.

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