Question

4. Working with Numbers and Graphs Q4

Suppose that explicit costs are $13,000 and implicit costs equal zero.

If economic profit is $14,000, then accounting profit is_________________.

5. Working with Numbers and Graphs Q5 If accounting profit is $106,000 greater than economic profit, it implies that(explicit or implicit costs)___________ equal 6. Working with Numbers and Graphs Q6 If marginal physical product is rising, what does marginal cost look like? Marginal cost is rising. Marginal cost first rises and then declines. Marginal cost first declines and then rises. Marginal cost is declining. 7. Working with Numbers and Graphs Q7 If the average total cost (ATC) curve is continually declining, what does this imply about the marginal cost (MC) curve? The MC curve is continually declining. The MC curve is below the ATC curve. There are no implications because there is no relationship between the ATC curve and the MC curve. The MC curve is above the ATC curve. 8. Working with Numbers and Graphs Q8 When total fixed costs are zero, total cost is (less,greater,equal?) total variable costs. .

Answer 1

(4) Explicit cost = $13000

implicit cost=$0

Accounting profit = Revenue - Explicit cost

Economic profit = Revenue - explicit cost - implicit cost

=> Economic profit = Accounting profit - implicit cost

$14000 = Accounting profit - $0

Accounting profit = $14000 + $0

Accounting profit = $14000

(5)  

Accounting profit = Revenue - Explicit cost

Economic profit = Revenue - explicit cost - implicit cost

=> Economic profit = Accounting profit - implicit cost

=> Accounting profit = Economic profit + Implcit cost. ---------- (1)

Accounting profit is $106000 greater than economic profit

Accounting profit = $106000 + Economic profit ---------(2)

Put eq (2) in eq (1)

$106000 + Economic profit = Economic profit + Implicit cost

=> Implicit cost = $106000.

If accounting profit is $106,000 greater than economic profit, it implies that implicit costs equal $106000.

(6) If the marginal physical product is rising, then the marginal cost is declining.  

Answer: Option (D)

(7) If the average total cost (ATC) curve is continually declining, this implies the marginal cost (MC) curve is below the ATC curve.

Answer: Option (B)

(8) Total Cost = Total Variable cost + Total Fixed cost.

If the total fixed cost is zero, then the total cost is equal to total variable cost.