chap 7

Economists assume that the typical person who starts her own business does so with the intention of

• donating the profits from her business to charity.

• capturing the highest number of sales in her industry.

• maximizing profits.

• minimizing costs.

Economists normally assume that the goal of a firm is to

• maximize its total revenue.

• maximize its profit.

• minimize its explicit costs.

• minimize its total cost.

Total revenue equals

• price x quantity.

• price/quantity.

• (price x quantity) - total cost.

• output - input.

Explicit costs

• require an outlay of money by the firm

• include all of the firm's opportunity costs.

• include the value of the business owner’s time.

• Both b and c are correct.

A production function describes

• how a firm maximizes profits.

• how a firm turns inputs into output.

• the minimal cost of producing a given level of output.

• the relationship between cost and output.

The marginal product of labor can be defined as the change in

• profit divided by the change in labor.

• output divided by the change in labor.

• labor divided by the change in output.

• labor divided by the change in total cost.

When a firm's only variable input is labor, then the slope of the production function measures the

• quantity of labor.

• quantity of output.

• total cost.

• marginal product of labor.

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 5, Q = 125) and (L = 6, Q = 162). Then the marginal product of the 6th worker is

• 25 units of output.

• 27 units of output.

• 37 units of output.

• 162 units of output.

Some costs do not vary with the quantity of output produced. Those costs are called

• marginal costs.

• average costs.

• fixed costs.

• explicit costs.

In the short run, a firm incurs fixed costs

• only if it incurs variable costs.

• only if it produces no output.

• only if it produces a positive quantity of output.

• whether it produces output or not.