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Exam 12: The Costs of Production

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Question 41

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Imagine Tom's annual salary as an assistant store manager is $30,000,he owns a building that rents for $10,000 yearly,and his financial assets generate $1,000 per year in interest.One day,after deciding to be his own boss,he quits his job,evicts his tenants,and uses his financial assets to establish a bicycle repair shop.To run the business,he outlays $15,000 in cash to cover all the costs involved with running the business,and earns revenues of $50,000.Which of the following statements is true?

A) Tom has an opportunity cost of $41,000.
B) Tom earns an accounting profit of $35,000.
C) Tom experiences an economic loss of $6000.
D) All of these are true.

E) A) and C)
F) A) and B)

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Question 42

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Mika's Manicures leases a space in the local mall for $4,500 a month.For this business,this expense would be considered an:

A) implicit cost of $4,500.
B) explicit cost of $4,500.
C) explicit cost of $0.
D) This is neither an implicit or explicit cost; it is a fixed cost of $4,500.

E) A) and B)
F) A) and C)

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Question 43

Multiple Choice

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Imagine Tom's annual salary as an assistant store manager is $30,000,he owns a building that rents for $10,000 yearly,and his financial assets generate $1,000 per year in interest.One day,after deciding to be his own boss,he quits his job,evicts his tenants,and uses his financial assets to establish a bicycle repair shop.To run the business,he outlays $15,000 in cash to cover all the costs involved with running the business,and earns revenues of $50,000.What are Tom's economic profits?

Sanford wants to start up his own business,and needs $50,000 to get it off the ground.He can either withdraw it from his savings account,where he currently earns 2 percent,or he can take out a loan for $50,000 and pay 2 percent interest.Sanford should compare:

Suppose Chip's Chips produces bags of potato chips.An example of a fixed cost for this company would be:

If a firm decreases production,then its:

When a firm is on the portion of its long run ATC curve that slopes upward,it is experiencing:

A firm currently employs four workers in a sandwich shop,and produces sandwiches at a total cost per sandwich (ATC) of $3.The sandwiches sell for $5.If the marginal cost of hiring another worker to produce sandwiches is $5.50 per sandwich,then:

Average variable costs:

Suppose Larry's Lariats produced 25,000 lassos and sold each for $10.What was the total revenue for the company?

The marginal cost curve:

If a firm stops production,then its:

Average total cost:

The increase in output that is generated by an additional unit of input is called the:

The amount that a firm receives from the sale of goods and services is called:

The fixed cost curve:

A soda factory employs seven workers and produces 500 bottles of soda a day.The company reduces the workforce to six workers and output is now 450 bottles a day.The seventh worker:

Suppose Bev's Bags makes large handbags and small handbags.They sold 70,000 large bags for $45 each and 25,000 small bags for $15 each.If the company had total costs of $2,000,000,what was the profit for this company?

Suppose Larry's Lariats produces lassos in a factory,and uses nine feet of rope to make each lasso.The rope is put into a machine that automatically cuts it to the right length,then seals the ends to prevent fraying.The rope is then hand tied,dipped,and wound before being placed in a packaging machine to prepare it for retail sale.Which of the following would be considered a fixed cost for this company?

A college student is thinking about running an ice-cream truck over the summer.Which of the following would likely be a one-time expense of the business?