Lecture 4 (Part 2 & 3)

Which of the following is an example of an implicit cost?

• Payment of salaries to employees

• Purchase of raw materials

• Payment of production utility bills

• Use of own house for production

__________ profit includes both explicit and implicit costs into calculation.

• Accounting

• Economic

• Total

The total revenue of a firm is RM45,000. The explicit cost and implicit cost are RM19,000 and RM5,000 respectively. What is the accounting profit for the firm?

• RM26,000

• RM21,000

• RM40,000

• RM19,500

Average total cost is

• total cost per unit of output

• total variable cost per unit of output

• the additional cost incurred for every additional unit of output

• total cost of production

When output increases from 100 to 150 units, the total cost increases from RM1,300 to RM1,800. Calculate the marginal cost.

• 10

• 0.1

• 50

• 500

When marginal cost (MC) equals average total cost (ATC)

• ATC decreases

• ATC increases

• ATC is at minimum

• ATC is negative

Which of the following curves represent average variable cost (AVC)?

• A

• B

• C

• D

__________ decreases as output increases because the same amount of costs is being spread over a larger number of units of output.

• Average fixed cost (AFC)

• Average variable cost (AVC)

• Marginal cost (MC)

___________ curve shows the combinations of labour and capital used in a long-run production to produce a certain level of output.

• Indifference

• Production possibility

• Isoquant

When inputs increase by 50%, output increases by 25%. This is referring to _________.

• increasing return to scale

• constant return to scale

• decreasing return to scale

• negative return to scale