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Exam 9: Businesses and the Costs of Production

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Question 161

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Susie purchased a nonrefundable ticket to a soccer match for $20. It will cost her $10 worth of gas and wear and tear to drive to the match and $5 to park her car. On the day of the match, Susie's boss offers her $100 to come to work instead. In considering what to do, which of the above would be considered a sunk cost?

A) The $20 ticket to the match.
B) The $10 cost to drive to the match.
C) The $5 cost to park at the stadium.
D) The $100 offered by Susie's boss.

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

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Question 162

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The following is cost information for the Creamy Crisp Donut Company.Entrepreneur's potential earnings as a salaried worker = $40,000Annual lease on building = $25,000Annual revenue from operations = $420,000Payments to workers = $150,000Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Creamy Crisp's implicit costs, including a normal profit, are

A) $126,000.
B) $183,000.
C) $111,000.
D) $189,000.

E) B) and C)
F) None of the above

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Question 163

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Why do economists say we should ignore sunk costs?

Which of the following is most likely to be a variable cost?

The fixed cost of the firm is $500. The firm's total variable cost is indicated in the table. The average variable cost of the firm when 5 units of output are produced is

The following is cost information for the Creamy Crisp Donut Company.Entrepreneur's potential earnings as a salaried worker = $50,000Annual lease on building = $22,000Annual revenue from operations = $380,000Payments to workers = $120,000Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Creamy Crisp Donut Company

When the total product curve is falling, the

Economic profit is found by subtracting accounting costs from total revenue.

In the long run, a firm can increase its output quantity, but it will be limited by the size of its existing production plant.

Assume a firm is operating at minimum average total cost in the short run. If there is a decrease in output, it follows that

When the Defense Department ordered 132 new airplanes, the cost per plane was estimated to be $580 million. A cut in the order to 75 planes increased the per plane cost to $800 million. This change in per unit cost can be explained by

If the law of diminishing returns applies to study time,

What are some of the sources of cost savings for recent business start-ups in the U.S. economy such as Intel, Starbucks, Microsoft, Instagram, Amazon, and Cisco Systems?

Answer the question on the basis of the following information. When six workers are employed,

When a bakery manager reports that at her bakery, productivity of her 15 workers last month was 1,800 loaves per worker, she is referring to the

Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.The total revenues of Harvey's firm in the first year were

At the Amarillo Piano Company, the average product of labor stays constant at 5, regardless of how much labor is employed. This implies that

Use the following data to answer the question. Diminishing returns begin to occur with the hiring of the _________ unit of labor.

Which of the following gadgets is hoped to deliver a Third Industrial Revolution?

What is the law of diminishing returns? Include its two assumptions.