question

Total cost is the

answer

market value of the inputs a firm uses in production.

question

The amount of money that a firm receives from the sale of its output is called

answer

total revenue.

question

Pete owns a shoe-shine business. His accountant most likely includes which of the following costs on his financial statements?

answer

the cost of shoe polish

question

Economists assume that the goal of the firm is to maximize total

answer

profits

question

Which of the following would be an example of an implicit cost? (i) forgone investment opportunities (ii) wages of workers (iii) raw materials costs

answer

(i) only

question

Which of the following can be added to profit to obtain total revenue?

answer

total cost

question

A certain firm manufactures and sells computer chips. Last year it sold 2 million chips at a price of $10 per chip. For last year, the firm's

answer

total revenue was $20 million.

question

When a firm is making a profit-maximizing production decision, which of the following principles of economics is likely to be most important to the firm's decision?

answer

The cost of something is what you give up to get it.

question

An example of an explicit cost of production would be the

answer

lease payments for the land on which a firm's factory stands.

question

Grace is a self-employed artist. She can make 20 pieces of pottery per week. She is considering hiring her sister Kate to work for her. Kate can make 18 pieces of pottery per week. What would be the total output of Grace's firm if she hired her sister?

answer

38 pieces of pottery

question

A production function describes

answer

how a firm turns inputs into output.

question

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=6,Q=147) and (L=7,Q=174). The marginal product of the seventh worker is

answer

27 units of output

question

Which of these assumptions is often realistic for a firm in the short run?

answer

The firm can vary the number of workers it employs but not the size of its factory.

question

The marginal product of an input in the production process is the increase in

answer

quantity of output obtained from an additional unit of that input.

question

Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers the firm produces 90 units of output. Fixed costs of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. Given this information, what is the average total cost of production when the firm hires 7 workers?

answer

81 cents

question

Harry's Hotdogs is a small street vendor business owned by Harry Huggins. Harry is trying to get a better understanding of his costs by categorizing them as fixed or variable. Which of the following costs are most likely to be considered fixed costs?

answer

the cost of bookkeeping services

question

A firm produces 300 units of output at a total cost of $1,000. If fixed costs are $100,

answer

average variable cost is $3

question

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost?

answer

the cost of the steel that is used in producing automobiles

question

The Wacky Widget company has total fixed costs of $100,000 per year. The firm's average variable cost is $10 for 10,000 widgets. At that level of output, the firm's average total costs equal

answer

$20

question

Cindy's Car Wash has average variable costs of $2 and average fixed costs of $3 when it produces 100 units of output (car washes). The firm's total cost is

answer

$500

question

Marginal cost is equal to average total cost when

answer

average total cost is at its minimum.

question

Which of the following measures of cost is best described as "the cost of a typical unit of output if total cost is divided evenly over all the units produced?"

answer

average total cost

question

In the short run, a firm that produces and sells cell phones can adjust

answer

how many workers to hire.

question

A local potato chip company plans to operate out of its current factory, which is estimated to last 25 years. All cost decisions it makes during the 25-year period

answer

are short-run decisions.

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When a factory is operating in the short run

answer

it cannot adjust the quantity of fixed inputs.

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The length of the short run

answer

is different for different types of firms

question

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

answer

economies of scale.

question

Constant returns to scale occur when the firm's long-run

answer

average total costs are constant as output increases.

question

Since the 1980s, Wal-Mart stores have appeared in almost every community in America. Wal-Mart buys its goods in large quantities and, therefore, at cheaper prices. Wal-Mart also locates its stores where land prices are low, usually outside of the community business district. Many customers shop at Wal-Mart because of low prices. Local retailers, like the neighborhood drug store, often go out of business because they lose customers. This story demonstrates that

answer

there are economies of scale in retail sales.

question

When comparing short-run average total cost with long-run average total cost at a given level of output,

answer

short-run average total cost is typically above long-run average total cost.

question

When the marginal product of an input declines as the quantity of that input increases, the production function exhibits

answer

diminishing marginal product

question

Which of the following expressions is correct?

answer

average total cost = (total cost)/(quantity of output)

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