MICRO CH. 8 & 9

A firm produces 5000 waterproof cellphone cases, which they sell for $30 each. They have $35,000 in fixed costs and $85,000 in total costs every year. What are the variable costs?

$50,000

A firm produces 5000 waterproof cellphone cases, which they sell for $30 each. They have $35,000 in fixed costs and $85,000 in total costs every year. What is the average total cost?

$17

A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20,000 a year, and move into a storage building that he owns and currently rents to his brother for $6,000 a year. His estimated expenses at the sushi bar would be $50,000 for food and $2,000 for gas and electricity. The chef's implicit costs are equal to _____.

$26,000

Accounting profit equals_____.

economic profit plus implicit costs

Amanda, aged 6, opens a lemonade stand. She makes all the lemonade from a mix she found in her parents' pantry. Her stand is an old box she found in the garage. The pitcher and paper cups were taken from the kitchen. Which of the following is true?

Amanda's explicit costs are zero

Explicit costs are _____

actual cash payments for resources purchased

Harvey develops gaming apps from home instead of working as an engineer and earning $50,000 a year. He has invested $20,000 to upgrade to the hardware that he needs and estimates his expenses at $17,000 a year. Downloads generated $130,000 in revenue during the first year. What is his economic profit?

$43,000

Harvey develops gaming apps from home instead of working as an engineer and earning $50,000 a year. He has invested $20,000 to upgrade to the hardware that he needs and estimates his expenses at $17,000 a year. Downloads generated $130,000 in revenue during the first year. What is his accounting profit?

$93,000

If variable cost rises from $60 to $100 as output increases from 15 to 20 units, the marginal cost of the twentieth unit is _____

$8

In the range of increasing marginal returns, total product is _____

increasing at an increasing rate

John moved his office from a building he was renting downtown to the carriage house he owns behind his house. Which of the following statements shows how his costs change?

His explicit costs will fall, while his implicit costs will rise.

Maryann and Don want to open their own deli. To do so, Maryann must give up her job, where she earns $20,000 per year, and Don must give up his part-time job, where he earns $10,000 per year. They must liquidate their money market fund, which earns $1,000 in interest annually. The rent on the building is $10,000 per year, and the expenses of necessities such as utilities, corned beef, and pickles are $35,000 annually. _____ is the explicit cost per year of operating the deli.

$45,000

Resources that can be increased or decreased in the short run are called ____

variable resources

The difference between a firm's total revenue and what must be paid to attract resources from their best alternative use is called _____

economic profit

The production function is defined as _____

The relationship between the amount of resources employed and total product

Total cost is calculated as ____

FC + VC

Two friends, Diane and Sam, own and run a bar. Diane tends the bar on Mondays, Wednesdays, and Fridays and receives a wage in addition to tips. Sam tends the bar on Tuesdays, Thursdays, and Saturdays and receives only tips. Which of the following represents an implicit cost of operating the bar?

Sam's time

Which of the following are implicit costs for a typical firm?

the opportunity costs of the capital owned and used by the firm

Which of the following is most likely to be a fixed resource for a word processing firm?

the building

Which of the following is true of marginal cost when marginal returns are increasing?

It is positive and decreasing

A firm in a perfectly competitive market____

has to accept the market price for its product

A perfectly competitive firm's short-run supply curve is the same as _____

the portion of its marginal cost curve above the minimum average variable cost

Adam's Apples, a small firm studying apples in a perfectly competitive market, decides to cut its production to half this year. Which of the following is likely to occur in this case?

the market price of apple will not be affected

at its present rate of output, Barrel O' Biscuits, a perfectly competitive firm, finds that its marginal cost exceeds its marginal revenue and its price exceeds its average variable cost. To maximize profit, the firm should _____

decrease output

For a perfectly competitive firm operating at the profit-maximizing output level in the short run, _____

marginal cost equals price

If a firm is producing at an output level where the total revenue curve intersects the total cost curve, which of the following is true of the firm?

its profit is zero

In the long run, the entry of new firms in a competitive industry _____

eliminates economic profits

In the short run, if a firm shuts down, its loss is equal to _____

its fixed cost

Long-run equilibrium for a perfectly competitive firm occurs when _____

price (P) = marginal cost (MC) = short-run average total cost (SRATC) = long-run average cost (LRAC)

Suppose the equilibrium price in a perfectly competitive industry is $100, and a firm in the industry charges $112. Which of the following is likely to happen?

the firm will not be able to sell any of its output

The demand curve for the output of a perfectly competitive firm is _____

perfectly elastic

The price charged by a perfectly competitive firm is determined by _____

market demand and market supply

The significance of the minimum point on the average variable cost curve is that _____

it is the point of indifference between producing at a loss and shutting down.

Which of the following firms is most likely to be a perfectly competitive firm?

a farm that grows soybeans

Which of the following is not necessarily a characteristic of a perfectly competitive market structure?

low prices

Which of the following is true of a perfectly competitive market?

each seller supplies only a small fraction of the total amount in a market

For perfectly competitive firms, which of the following correctly shows the relationship among market price (P), average revenue (AR), and marginal revenue (MR)?

price = average revenue (AR) = marginal revenue (MR)