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econ study - possible level for the plant It follows that(a...

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Linda is president of a small corporation in the catering business. At the end of the year, her accountant calculates the following costs attributable to the business: Interest paid to banks: 40,000, depreciation on equipment: 80,000, and supplies/utilities: 50,000. The equity of the corporation, a measure of the value of its assets less debt, is estimated to be $200,000. Linda forgoes a return of 10% per year by keeping the equity in the corporation. The total revenue this year was $185,000. This means that the company (a) earned an economic profit of $15,000. (b) incurred an economic loss of $20,000. (c) incurred an economic loss of $5,000. (d) earned zero economic profit. (e) earned an economic profit of $5,000. An efficiency expert is hired to examine production in a plant producing engines for automobiles. Labor is the only variable input. The firm measures output per unit of labor input and finds it to be at the maximum
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Unformatted text preview: possible level for the plant. It follows that (a) the marginal product of labor is equal to the average product of labor. (b) the plant is operating at the maximum possible level of production. (c) the marginal product of labor is also at a maximum. (d) the plant hasn't yet reached the point of diminishing marginal returns. Economies of scale implies that (a) long-run marginal costs exceed long-run average costs. (b) long-run average cost decreases. (c) long-run total costs decrease. (d) short-run average cost decreases. An improvement in technology in an industry (a) produces an upward-sloping market supply curve. (b) shifts the average cost curve upward due to increased labor productivity. (c) shifts the marginal cost curve upward and causes production and profit to rise. (d) results in short-run economic profits and a decline in price below the initial market price, in the long run....
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