Chapter 7 - Costs of Production

A company called QuickTech sold 10,000 units of its product for $50 each last year. The explicit costs including depreciation amounted to $400,000. What was QuickTech's accounting profit for the year?

• $100,000
• $300,000
• $500,000
• $900,000

Suppose a local bakery generated a profit of $120,000 this year and produced 20,000 loaves of bread. What was the bakery's average profit per loaf?

• $0.60
• $6.00
• $60.00
• $600.00

If Company A produces 50,000 widgets at a total cost of $750,000, what is their average total cost per widget?

• $5.00
• $15.00
• $25.00
• $50.00

Innovative Widgets Inc. incurs a variable cost of $80,000 for producing 10,000 units of its product. What is the average variable cost per unit?

• $8.00
• $80.00
• $800.00
• $8,000.00

When a factory doubles its inputs of labor and capital, and the output also doubles, this factory is experiencing:

• Diseconomies of scale
• Economies of scale
• Constant returns to scale
• Diminishing marginal productivity

A tech company hiring additional software developers notices that each new developer contributes less additional output than the previous developer. This situation exemplifies:

• Economies of scale
• Diseconomies of scale
• Diminishing marginal productivity
• Constant returns to scale

BigBox Inc. has been expanding its operations and increasing its output. However, its long-run average costs have started to rise. This suggests that BigBox Inc. is likely facing:

• Economies of scale
• Constant returns to scale
• Diminishing marginal returns
• Diseconomies of scale

TechNovel Inc. earned $1,000,000 in total revenues last fiscal year. The explicit costs were $600,000 and the implicit costs were $200,000. Calculate TechNovel's economic profit.

• $200,000
• $400,000
• $800,000
• $1,200,000

Widget Corp. found that as it increased its production from 10,000 units to 20,000 units, its long-run average costs fell from $10 per unit to $8 per unit. This demonstrates:

• Diseconomies of scale
• Diminishing marginal productivity
• Economies of scale
• Constant returns to scale

Which of the following would be considered an explicit cost for a bakery?

• The potential income from converting the bakery into a café
• Wages paid to the bakery staff
• The value of the family recipe used for baking
• The interest lost on savings the owner used to start the bakery