Question

In: Economics

1. Kathy produces handbags and in a month she produced and sold 50 of them. On...

1. Kathy produces handbags and in a month she produced and sold 50 of them. On an average her cost of producing each handbag is $50. The market price of the handbag is $65. This will lead Kathy to earn a total revenue of

	a.	$2,000.
	b.	$6,500.
	c.	$5,750.
	d.	$3,250.

2. A firm Average Variable Cost of producing a box of pencil is $1 and it's Average Total Cost is $3 if 500 pencil boxes are produced. Based on this we can say that the firm's Total Fixed Cost is

	a.	$4.
	b.	$1,500.
	c.	$1,600.
	d.	$1,000

3. Marginal Cost rises when the output increases. This is due to

	a.	the reason that the firm experienced diseconomies of scale.
	b.	the reason that the firm experienced economies of scale.
	c.	the reason that the firm experienced diminishing marginal product.
	d.	the reason that the firm experienced rising average fixed cost.

4. MPL (Marginal Product of Labor) is

	a.	the additional profit earned by an additional labor.
	b.	the increase in output when an additional labor is hired.
	c.	the increase in labor necessary to generate a one unit increase in output.
	d.	the additional cost when an additional labor is hired.

5. Maya produces custom printed shirts. Her material costs for each custom shirt is $5 and takes one hour to produce it. Alternatively she can also do a part-time job at a local grocery store which can give her $10 an hour. If she is able to sell each custom shirt for $30 then what would be her accounting profit?

	a.	$25.
	b.	$20.
	c.	$15.
	d.	$15.

Expert Solution

1. TR = P*Q = 65 * 50 = 3250

option d is the correct answer

2.

AFC = ATC - AVC = 3-1 = 2

FC = AFC * Q = 2*500 = 100

option d is the correct answer

3. correct answer is option c. the reason that the firm experienced diminishing marginal product

4. correct answer is option b. the increase in output when an additional labor is hired

5.

Accounting profit = Revenue - Explicit cost

= 30 - 5

= 25

option a is the correct answer

Rahul Sunny answered 2 years ago

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