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Worksheetschap 7
Total questions: 15
Worksheet time: 8mins
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.
Which of the following costs of publishing a book is a fixed cost?
author royalties of 5% per book
the costs of paper and binding
shipping and postage expenses
composition, typesetting, and jacket design for the book
For a large firm that produces and sells automobiles, which of the following costs would be a variable cost?
the $20 million payment that the firm pays each year for accounting services
the cost of the steel that is used in producing automobiles
the rent that the firm pays for office space in a suburb of St. Louis
All of the above are correct.
Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that marginal cost of the third worker hired is $40, and the average total cost when three workers are hired is $50. What is the total cost of production when three workers are hired?
$50
$90
$120
$150
When a factory is operating in the short run,
it cannot alter variable costs.
total cost and variable cost are usually the same.
average fixed cost rises as output increases.
it cannot adjust the quantity of fixed inputs.
One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,
output is not variable.
the number of workers used to produce the firm's product is fixed.
the size of the factory is fixed.
there are no fixed costs.
