CHAPTER 13 - ECO111

Total revenue equals

• a.

  price x quantity.

• b.

  price/quantity.

• c.

  (price x quantity) - total cost.

• d.

  output - input.

If Kelsey sells 300 glasses of lemonade at $0.50 each, her total revenues are

• a.

  $150.

• b.

  $299.50.

• c.

  $300.

• d.

  $600.

Zoe sells 200 glasses of lemonade at $0.50 each.  Her total costs are $25.  Her profits are

• a.

  $25.

• b.

  $75.

• c.

  $100.

• d.

  $175.

Those things that must be forgone to acquire a good are called

• a.

  implicit costs.

• b.

  opportunity costs.

• c.

  explicit costs.

• d.

  accounting costs.

A firm's opportunity costs of production are equal to its

• a.

  explicit costs only.

• b.

  implicit costs only.

• c.

  explicit costs + implicit costs.

• d.

  explicit costs + implicit costs + total revenue.

Dianne has decided to start her own photography studio. To purchase the necessary equipment, Dianne withdrew $10,000 from her savings account, which was earning 3% interest, and borrowed an additional $5,000 from the bank at an interest rate of 8%. What is Dianne's annual opportunity cost of the financial capital that has been invested in the business?

• a.

  $300

• b.

  $400

• c.

  $700

• d.

  $1,650

Implicit costs     

• a.

  do not require an outlay of money by the firm.         

       

• b.

  do not enter into the economist's measurement of a firm's profit.    

• c.

  are also known as variable costs.

• d.

  are not part of an economist’s measurement of opportunity cost.

The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is

• a.

  an explicit cost.

• b.

  an accounting cost

• c.

  an implicit cost.

• d.

  forgone accounting profit.

Katherine gives piano lessons for $15 per hour.  She also grows flowers, which she arranges and sells at the local farmer’s market.  One day she spends 5 hours planting $50 worth of seeds in her garden.  Once the seeds have grown into flowers, she can sell them for $150 at the farmer’s market.  Which of the following statements is correct regarding Katherine’s profits from selling flowers?

• a.

  Katherine’s accounting profits are $100, and her economic profits are $25.

• b.

  Katherine’s accounting profits are $100, and her economic profits are $75.

• c.

  Katherine’s accounting profits are $25, and her economic profits are $100.

• d.

  Katherine’s accounting profits are $75, and her economic profits are $125.

Economic profit is equal to

• a.

  total revenue minus the explicit cost of producing goods and services.

• b.

  total revenue minus the opportunity cost of producing goods and services.

• c.

  total revenue minus the accounting cost of producing goods and services.

• d.

  average revenue minus the average cost of producing the last unit of a good or service.