Ch 9 Micro-JTCC

Economic cost can best be defined as

• any contractual obligation that results in a flow of money expenditures from an enterprise to resource suppliers.

• any contractual obligation to labor or material suppliers.

• a payment that must be made to obtain and retain the services of a resource.

• all costs exclusive of payments to fixed factors of production.

Maria’s Mexican Cantina is a restaurant that has been around for 30 years. In that time they have remained in the same building and only changed inputs such as staff and the menu. Based on this, we can conclude that Maria’s

• has only ever operated in the short run.

• experienced a long run change whenever it changed personnel.

• has operated in the long run, even though it chose to keep the building input fixed.

• only operated in the long run if other firms entered or left the industry at this time.

Production costs to an economist

• consist only of explicit costs.

• reflect opportunity costs.

• never reflect monetary outlays.

• always reflect monetary outlays.

Accounting profits equal total revenue minus

• total explicit costs.

• total implicit costs.

• total economic costs.

• economic profits.

Which of the following definitions is correct?

• Accounting profit + economic profit = normal profit.

• Economic profit − accounting profit = explicit costs.

• Economic profit = accounting profit − implicit costs.

• Economic profit − implicit costs = accounting profits.

An explicit cost is

• omitted when accounting profits are calculated.

• a money payment made for resources not owned by the firm itself.

• an implicit cost to the resource owner who receives that payment.

• always in excess of a resource's opportunity cost.

To the economist, total cost includes

• explicit and implicit costs.

• neither implicit nor explicit costs.

• implicit, but not explicit, costs.

• explicit, but not implicit, costs.

The basic characteristic of the short run is that

• barriers to entry prevent new firms from entering the industry.

• the firm does not have sufficient time to change the size of its plant.

• the firm does not have sufficient time to cut its rate of output to zero.

• a firm does not have sufficient time to change the amounts of any of the resources it employs.