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Unformatted text preview: Chap 13 Questions for Review Answers 1. The relationship between a firm's total revenue, profit, and total cost is profit equals total revenue minus total costs. 2. An accountant would not count the owners opportunity cost of alternative employment as an accounting cost. An example is given in the text in which Caroline runs a cookie business, but she could instead work as a computer programmer. Because she's working in her cookie factory, she gives up the opportunity to earn $100 per hour as a computer programmer. The accountant ignores this opportunity cost because money does not flow into or out of the firm. But the cost is relevant to Carolines decision to run the cookie factory. 3. Marginal product is the increase in output that arises from an additional unit of input. Diminishing marginal product means that the marginal product of an input declines as the quantity of the input increases.the quantity of the input increases....
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This note was uploaded on 01/16/2012 for the course PSYCH 373 taught by Professor Marthafaircloth during the Spring '09 term at Campbell.
- Spring '09