Review Chapter 13

Economists normally assume that the goal of a firm is to

• maximize its total revenue

• maximize its profit

• minimize its explicit costs

• minimize its total cost

The amount of money that a firm pays to buy inputs is called

• total cost

• variable cost

• marginal cost

• fixed cost

Kirsten sells 300 glasses of lemonade at $0.50 each.  Her total costs are $125.  Her profits are

• $25

• $124.50

• $125

• $150

An example of an opportunity cost that is also an implicit cost is

• a lease payment

• the cost of raw materials

• the value of the business owner’s time

• All of the above are correct

Scenario 13-4

Wanda owns a lemonade stand.  She produces lemonade using five inputs:  water, sugar, lemons, paper cups, and labor.  Her costs per glass are as follows:  $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor.  She can sell 300 glasses for $0.50 each.

Refer to Scenario 13-4.  What are Wanda’s explicit costs per glass?

• $0.18

• $0.10

• $0.08

• $0.02

Scenario 13-4

Wanda owns a lemonade stand.  She produces lemonade using five inputs:  water, sugar, lemons, paper cups, and labor.  Her costs per glass are as follows:  $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor.  She can sell 300 glasses for $0.50 each.

Refer to Scenario 13-4.  What are Wanda’s implicit costs per glass?

• $0.18

• $0.10

• $0.08

• $0.02

Scenario 13-4

Wanda owns a lemonade stand.  She produces lemonade using five inputs:  water, sugar, lemons, paper cups, and labor.  Her costs per glass are as follows:  $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor.  She can sell 300 glasses for $0.50 each.

Refer to Scenario 13-4.  What are Wanda’s total costs per glass?

• $0.18

• $0.10

• $0.08

• $0.02

Scenario 13-4

Wanda owns a lemonade stand.  She produces lemonade using five inputs:  water, sugar, lemons, paper cups, and labor.  Her costs per glass are as follows:  $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor.  She can sell 300 glasses for $0.50 each.

Refer to Scenario 13-4.  What are Wanda’s total accounting profits?

• $150

• $126

• $96

• $24

Scenario 13-4

Wanda owns a lemonade stand.  She produces lemonade using five inputs:  water, sugar, lemons, paper cups, and labor.  Her costs per glass are as follows:  $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor.  She can sell 300 glasses for $0.50 each.

Refer to Scenario 13-4.  What are Wanda’s total economic profits?

• $150

• $126

• $96

• $54

Which of the following is the best example of a variable cost?

• monthly wage payments for hired labor

• annual property tax payments for a building

• monthly rent payments for a warehouse

• annual insurance payments for a warehouse