Question

1. Total revenue minus total cost is equal to

a. the rate of return

b.marginal revenue

c.profit

d.net cost

2. The Wax Works sells 400 candles at a price of $10 per candle. The Wax Works' total costs for producing 400 candles are $500. The Wax Works' economic profit is ____

3.if diminishing marginal returns have already set in for The Picture Perfect Framing Store and the marginal product of the fifth picture framer is 20, then the marginal product of the sixth picture framer must be

a. negative

b. zero

c. less than 20

d. greater than 20

4. Refer to the table below. Suppose output varies, ceteris paribus, with labor input in the following manner displayed above. After how many units of labor do diminishing returns set in?

Labor	0	1	2	3	4	5
Output	0	10	20	30	40	50

a. 3

b.4

c.5

d.they do not set in

5. You own a business that answers telephone calls for physicians after their offices close. You have an incentive to substitute capital for labor if the

a.price of capital increases

b. price of labor decreases.

c. price of capital decreases.

d. marginal product of labor increases

6. Total cost is calculated as

a.the sum of total fixed cost and total variable cost.

b.the product of average total cost and price.

c. the sum of all the firm's explicit costs.

d. the sum of average fixed cost and average variable cost

7. The formula for the total fixed cost is

a.TFC = TC + TVC.

b.TFC = TVC -TC

c.. TFC = TC/TVC.

d.TFC = TC -TVC

8.The Lawn Ranger, a landscaping company, has total costs of $4,000 and total variable costs of $1,000. The Lawn Ranger's total fixed costs are _____

9.Wilbur's Widgets, a widget company, produces 100 widgets. Its average fixed cost is $5 and its total variable cost is $300. What is the total cost of producing 100 widgets?

10. The formula for average fixed costs is

a.TFC - q.

b.TFC/q

c.q/TFC

d.%q/%TFC.

11.________ are likely a fixed cost of a firm.

a.Wages paid to employees

b.The payments for supplies

c. Lease payments for office space

d. Travel expenses to meet with clients

12. Diminishing marginal returns implies

a.decreasing average variable costs.

b.decreasing marginal costs.

c.increasing marginal costs

d.decreasing the average fixed costs.

13.In the short run when the marginal product of labor ________, the marginal cost of an additional unit of output ________.

a.rises; rises

b. falls; falls

c. rises; falls

d. falls; doesn't change

14.If marginal cost is between average variable cost and average total cost, then

a.both average variable cost and average total cost are increasing.

b. both average variable cost and average total cost are decreasing.

c.average variable cost is increasing and average total cost is decreasing

d.average variable cost is decreasing and average total cost is increasing.

15.  The marginal cost curve intersects the average total cost curve at the ________ value of the average total cost curve.

a.maximum

b.minimum

c.zero

d.average

Answer 1

(1) Total revenue minus total cost is equal to profit.

Answer: Option (C).

(2) Output produced = 400 candles.

Price of candles = $10

Total revenue = (400) ($10)

Total Revenue = $4000.

Total cost of producing 400 candles = $500.

economic profit = Total revenue - Total cost

economic profit = $4000 - $500.

economic profit = $3500.

Answer: Economic profit is $3500.

(3) if diminishing marginal returns have already set in for The Picture Perfect Framing Store and the marginal product of the fifth picture framer is 20, then the marginal product of the sixth picture framer must be smaller than 20.

Diminishing marginal returns implies a decrease in marginal returns as the number of input increases.

Answer: Option (C)

(4)

Labor	Output	Marginal produt
0	0
1	10	10
2	20	10
3	30	10
4	40	10
5	50	10

Marginal product = (Change in Output / Change in labor)

diminishing returns do not set in.

Diminishing marginal returns when marginal product decreases as the labor quantity of labor increases.

Answer: Option (D)

(5) You have an incentive to substitute capital for labor if the price of capital decreases.

Answer: Option (C).

(6) Total cost = Total fixed cost + Total variable cost.

Answer: Option (A)

(7) Total cost = Total fixed cost + Total variable cost.

TC = TFC + TVC

TFC = TC - TVC

Answer: Option (D)

(8) Total cost = Total fixed cost + Total variable cost.

$4000 = Total Fixed cost + $1000.

Total fixed cost = $4000 - $1000.

Total fixed cost = $3000.

(9) AFC of producing 100 widgets = $5.

TFC = AFC * Output.

TFC = $5 * 100

TFC = $500.

TVC= $300

Total cost = Total fixed cost + Total variable cost.

Total cost = $500 + $300

Total cost = $800.

(10) AFC = TFC / q

Answer: Option (B)

(11) Lease payment for the office space is likely a fixed cost of a firm.

Answer: Option (C)

(12) Diminishing marginal returns implies increasing marginal costs.

Answer: Option (C)

(13) In the short run when the marginal product of labor rises, the marginal cost of an additional unit of output falls

Answer: Option (C)

(14) Answer: Option (B).

(15) MC intersects ATC at its minimum point.

Answer: Option (B)