Economics Quiz 4

A firm's basic goal is best described as

• maximizing total revenue.

• maximizing sales.

• maximizing profit.

• minimizing total cost.

Which of the following is part of a firm's opportunity costs?

• I. wages

• II. utility costs

• III. interest on a bank loan

• IV. interest forgone on funds used to buy capital equipment

Wanda takes $3,000 from her savings account that pays 5 percent interest per year and uses the funds to purchase a computer for $3,000 for her business. At the end of the year the computer is worth $2,000. Wanda pays an implicit rental rate of ________ a year.

• $1,150

• $4,000

• $3,150

• zero

The short run is a period of time in which

• the quantity used of at least one factor of production is fixed.

• the quantities used of all factors of production are fixed.

• output prices are fixed.

• factor of production prices are fixed.

An example of a variable factor of production in the short run is

• a building.

• capital equipment.

• an employee.

• land.

The long run is distinguished from the short run because only in the long run

• output prices can vary.

• factor of production prices can vary.

• the quantities of all factors of production can be varied.

• the firm no longer maximizes its profit.

The above table shows the total product of producing baseball hats. The marginal product of the 4th worker is equal to

• 25 baseball hats.

• 21 baseball hats.

• 7 baseball hats.

• 6.25 baseball hats.

The law of diminishing returns states that as

• the size of a plant increases, the firm's fixed cost decreases.

• the size of a plant increases, the firm's fixed cost increases.

• a firm uses more of a variable input, given the quantity of fixed inputs, the marginal product of the variable input eventually diminishes.

• a firm uses more of a variable input, given the quantity of fixed inputs, the firm's average total cost will decrease eventually.

The law of diminishing returns occurs because

• the marginal product of an additional worker is greater than the marginal product of the previous worker.

• the marginal product of a variable input, such as labor, depends in part on the amount of fixed inputs, such as capital.

• total production decreases as more of the variable inputs are used.

• adding more and more workers leads to a decrease in the quantity of capital.

In the figure above, curve C is the ________ curve.

• average fixed cost

• average variable cost

• average total cost

• marginal cost