review exercise 13 14_sp08_sol

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

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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? a. \$0 b. \$3,000 c. \$12,000 d. \$15,000 ANS: C PTS: 1 DIF: 2 REF: 13-1 TOP: Implicit costs MSC: Applicative 26. Economists normally assume that the goal of a firm is to a. maximize its total revenue. b. maximize its profit. c. minimize its explicit costs. d. minimize its total cost. ANS: B PTS: 1 DIF: 1 REF: 13-1 TOP: Profit maximization MSC: Definitional 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. a. Louis says her profit is \$34,100 and Greg says her profit is \$6,500. b. Louis says her profit is \$34,100 and Greg says she lost \$6,500. c. Louis says her profit is \$35,000 and Greg says she lost \$5,000. d. Louis says her profit is \$33,500 and Greg says her profit is 33,500. ANS: B PTS: 1 DIF: 3 REF: 13-1 TOP: Economic profit MSC: Applicative Figure 13-1 The figure below depicts a production function for a firm that produces cookies.

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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 a. diminishing marginal product of workers. b. diminishing marginal cost of cookie production. c. decreasing cost of cookie production. d. increasing marginal product of workers. ANS: A PTS: 1 DIF: 2 REF: 13-2 TOP: Marginal product of labor MSC: Analytical Figure 13-2 The figure below depicts a total cost function for a firm that produces cookies.
58. Refer to Figure 13-2. Which of the following is true of the production function (not pictured) that underlies this total cost function? (i) Total output increases as the quantity of inputs increases, but at a decreasing rate.

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## This note was uploaded on 09/15/2009 for the course ECON 201 taught by Professor Shoonlai during the Summer '09 term at Miami University.

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

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