review exercise 13 14_sp08_sol - Chapter 13 The Costs of...

Chapter 13
The Costs of Production
17.The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is
a. an explicit cost.
b. an accounting cost
c. an implicit cost.
d. forgone accounting profit.
ANS: C PTS: 1 DIF: 2 REF: 13-1
TOP: Implicit costs MSC: Interpretive
Scenario 13-1
Joe wants to start his own business. The business he wants to start will require that he purchase a factory
that costs $400,000. Joe currently has $500,000 in the bank earning 3 percent interest per year.
18. Refer to Scenario 13-1 . If Joe purchases the factory with his own money, what is the annual implicit
opportunity cost of purchasing the factory?
26. Economists normally assume that the goal of a firm is to
39.Dolores used to work as a high school teacher for $40,000 per year but quit in order to start her own
catering business. To buy the necessary equipment, she withdrew $20,000 from her savings, (which
paid 3 percent interest) and borrowed $30,000 from her uncle, whom she pays 3 percent interest per
year. Last year she paid $25,000 for ingredients and had revenue of $60,000. She asked Louis the
accountant and Greg the economist to calculate her profit for her.
Figure 13-1
The figure below depicts a production function for a firm that produces cookies.

55. Refer to Figure 13-1 . As the number of workers increases,
a. total output increases, but at a decreasing rate.
b. marginal product increases, but at a decreasing rate.
c. marginal product increases at an increasing rate.
d. total output decreases.
ANS: A PTS: 1 DIF: 2 REF: 13-2
TOP: Production function MSC: Analytical
56. Refer to Figure 13-1 . With regard to cookie production, the figure implies
Figure 13-2
The figure below depicts a total cost function for a firm that produces cookies.