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Exam 12: The Costs of Production

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Question 181

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Scenario 12-8 Ellie has been working for an engineering firm and earning an annual salary of $80,000.She decides to open her own engineering business.Her annual expenses will include $15,000 for office rent,$3,000 for equipment rental,$1,000 for supplies,$1,200 for utilities,and a $35,000 salary for a secretary/bookkeeper.Ellie will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500. -Refer to Scenario 12-8.Ellie's annual economic costs will equal

A) $55,200.
B) $75,200.
C) $80,500.
D) $135,700.

E) A) and B)
F) All of the above

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Question 182

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Pete owns a shoe-shine business.Which of the following costs would be implicit costs? (i) shoe polish (ii) rent on the shoe stand (iii) wages Pete could earn delivering newspapers (iv) Interest that Pete's money was earning before he spent his savings to set up the shoe-shine business

A) (i) and (ii) only
B) (iv) only
C) (iii) and (iv) only
D) (i) ,(ii) ,(iii) ,and (iv)

E) A) and D)
F) C) and D)

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Question 183

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Diminishing marginal product exists when the production function becomes flatter as inputs increase.

Figure 12-8 -Refer to Figure 12-8.Quantity C represents the output level where the firm

Scenario 12-7 Wanda owns a lemonade stand.She produces lemonade using five inputs: water,sugar,lemons,paper cups,and labor.Her costs per glass are as follows: $0.01 for water,$0.02 for sugar,$0.03 for lemons,$0.02 for cups,and $0.10 for the opportunity cost of her labor.She can sell 300 glasses for $0.50 each. -Refer to Scenario 12-7.What are Wanda's implicit costs per glass?

Which of the following costs of publishing a book is a fixed cost?

A firm produces 400 units of output at a total cost of $1,200.If total variable costs are $1,000,

If marginal cost is below average total cost,then average total cost

The Wacky Widget company has total fixed costs of $100,000 per year.The firm's average variable cost is $10 for 10,000 widgets.At that level of output,the firm's average total costs equal

Gloria has decided to start her own snow removal business.To purchase the necessary equipment,Gloria withdrew $2,000 from her savings account,which was earning 3% interest,and borrowed an additional $4,000 from the bank at an interest rate of 7%.What is Gloria's annual opportunity cost of the financial capital that has been invested in the business?

Profit is defined as total revenue

Table 12-16 Listed in the table are the long-run total costs for three different firms. -Refer to Table 12-16.Firm C is experiencing diseconomies of scale.

In the long run,when marginal cost is above average total cost,the average total cost curve exhibits

Variable costs usually change as the firm alters the quantity of output produced.

Scenario 12-14 If Farmer Brown plants no seeds on his farm,he gets no harvest.If he plants 1 bag of seeds,he gets 5 bushels of wheat.If he plants 2 bags,he gets 9 bushels.If he plants 3 bags,he gets 12 bushels.A bag of seeds costs $120,and seeds are his only cost. -Refer to Scenario 12-14.Farmer Brown's marginal-cost curve is

Figure 12-5 -Refer to Figure 12-5.Curve C represents which type of cost curve?

Which of the following expressions is correct?

Table 12-5 -Refer to Table 12-5.The marginal product of the fourth worker is

Analyzing the behavior of the firm enhances our understanding of

The amount of money that a firm receives from the sale of its output is called