10. MICRO-CH-13

Accounting profit is equal to total revenue minus

• implicit costs

• explicit costs

• the sum of implicit and explicit costs

• marginal costs

• variable costs

Economic profit is equal to total revenue minus

• implicit costs

• explicit costs

• the sum of implicit and explicit costs

• marginal costs

• variable costs

Madelyn owns a small pottery factory. She can make 1,000 pieces of pottery per year and sell them for $100 each. It costs her $20,000 for the raw materials. She has invested $100,000 in her factory and equipment: $50,000 from her savings and $50,000 borrowed at 10% (she could have loaned her money out at 10% too). She could work at a competing pottery factory for $40,000 per year. The accounting profit at Madelyn's pottery factory is

• $30,000

• $35,000

• $70,000

• $75,000

• $80,000

Madelyn owns a small pottery factory. She can make 1,000 pieces of pottery per year and sell them for $100 each. It costs her $20,000 for the raw materials. She has invested $100,000 in her factory and equipment: $50,000 from her savings and $50,000 borrowed at 10% (she could have loaned her money out at 10% too). She could work at a competing pottery factory for $40,000 per year. The economic profit at Madelyn's pottery factory is

• $30,000

• $35,000

• $70,000

• $75,000

• $80,000

If there are implicit costs of production,

• economic profit will exceed accounting profit

• accounting profit will exceed economic profit

• economic profit and accounting profit will be equal

• economic profit will always be zero

• accounting profit will always be zero

If a production function exhibits diminishing marginal product, its slope

• becomes flatter as the quantity of the input increases.

• becomes steeper as the quantity of the input increases.

• is linear (a straight line).

• Any of the answers could be correct.

If a production function exhibits diminishing marginal product, the slope of the corresponding total-cost curve

• becomes flatter as the quantity of output increases.

• becomes steeper as the quantity of output increases.

• is linear (a straight line).

• Any of the answers could be correct.

The marginal product of labor as production moves from employing one worker to employing two workers is

• 0

• 10

• 17

• 23

• 40

The production process described by the table exhibits

• constant marginal product of labor

• increasing marginal product of labor

• diminishing marginal product of labor

• increasing returns to scale

• decreasing returns to scale

Which of the following is a variable cost in the short run?

• wages paid to factory labor

• payment on the lease for factory equipment

• rent on the factory

• interest payments on borrowed financial capital

• salaries paid to upper management