Economics Quiz

Explain why fixed cost has no influence on marginal cost.

What does the vertical distance between the ATC and AVC curves represent?

Draw properly labeled graphs of AFC, AVC, ATC, and MC.

Suppose that a firm produces 100,000 units in a year and sells them all for $5 each. The explicit costs of production are $350,000 and the implicit costs of production are $100,000. What is the firm's accounting profit and economic profit?

Suppose that Wally’s Wind Chimes produces 2,000 wind chimes in a year and sells them all for $25 each. The explicit costs of production are $25,000 (the salary they pay to their workers and the rent they pay for their storefront) and the implicit costs of production are $23,250 (the money Wally could make managing a restaurant instead and the interest Wally could earn if he liquidated all of his capital). What is Wally’s Wind Chimes’ accounting profit and economic profit?

Add the marginal product column to the table above. Then graph a correctly labeled marginal product curve, and identify where diminishing returns sets in and where negative returns sets in.

When does the production function begin experiencing diminishing marginal returns?

When does the production function begin experiencing negative marginal returns?

A _______ is an organization that employs factors of production to produce a good or service that it hopes to sell profitably.

The goal of each firm is to make _______.