Economics and Production Costs Quiz

A hat maker pays $500 per month in rent for his production facility. This cost is best described as …

• an opportunity cost.

• an external cost.

• a variable cost.

• a fixed cost.

• a marginal cost.

A restaurant can only fit a certain number of tables in its space, limiting its production in the short run. What does this illustrate about production costs?

• Long-run flexibility

• Short-run limitations due to fixed inputs

• Variable costs

• Economies of scale

If two workers can produce 22 units of output, and the addition of a third worker increases output to 30 units, the marginal product of the third worker is:

• 4

• 30

• 8

• 22

You own a small deli that produces sandwiches, soups, and other items for customers in your town. Which of the following is a fixed input in the production function at your deli?

• the dining room where customers eat their meals

• loaves of bread used to make sandwiches

• cans of tomato sauce used to make soups

• employees hired to help make the food

• electricity to power the lights and appliances.

A small business owner earns $150,000 in total revenue from her shop in one year. Her explicit costs (such as rent, wages, and materials) total $90,000. She also gave up a $40,000/year job to run her business. What is her economic profit?

• $60,000

• $110,000

• $20,000

• $150,000

A freelance graphic designer earns $80,000 in total revenue in a year. Her explicit costs (software subscriptions, marketing, and supplies) are $25,000. She gave up a $30,000/year job to freelance full-time. What is her accounting profit?

• $55,000

• $25,000

• $30,000

• $80,000

A bookstore brings in $90,000 in annual revenue. Its explicit costs (rent, wages, utilities) total $70,000. The owner could earn $25,000 working another job. Based on this information, what should the owner do?

• Stay in business, because accounting profit is positive

• Shut down, because economic profit is negative

• Stay in business, because economic profit is positive

• Shut down, because accounting profit is negative

Refer to the data. When two workers are employed:

• total product is 20.

• total product is 18.

• average product is 10.

• total product cannot be determined from the information given.

Refer to the data. The marginal product of the fourth worker:

• is 5.

• is 7.

• is 71/2.

• cannot be calculated from the information given

A small factory produces custom mugs. When it has 3 workers, it produces 150 mugs per day. When a 4th worker is hired, total output rises to 190 mugs per day. What is the Marginal Product of Labor (MPL) of the 4th worker?

• 40 mugs

• 190 mugs

• 10 mugs

• 150 mugs