Question

4.

Profits and losses are determined by___________

adding total cost to total revenue

subtracting implicit costs from total revenue

subtracting total costs from total revenue

subtracting explicit costs from total revenue

5.

As a waiter you earn $60,000 per year, including tips. Someone offers you a new job as an economic consultant, which pays $100,000 per year. In order to be a consultant, you’ll need to rent an office and purchase supplies and new computer equipment. We can conclude which of the following?

If the explicit cost for the consulting job is $20,000 per year, your accounting profit is equal to $20,000.

If the explicit cost for the consulting job is $20,000 per year, your economic profit is equal to $80,000.

If the explicit cost for the consulting job is $30,000 per year, your accounting profit is equal to $10,000.

If the explicit cost for the consulting job is $25,000 per year, your economic profit is equal to $15,000.

6.

The cookie company in the mall hires workers to produce cookies. The workers are paid $75 per day, and the cost of renting the space in the mall is $250 per day.

Number of workers	Daily output (cookies)
1	200
2	400
3	600
4	700

If two workers are hired, the total variable costs are_____

$400

$200

$75

$150

7.

Billy Bob runs a seafood restaurant. Last year he earned $50,000 in revenue. He had explicit costs of $20,000. Billy Bob could have made $30,000 working for the county and could have received an additional $20,000 if he rented out his building and equipment. Calculate Billy Bob’s economic profit.

$20,000

-$20,000

$0

$30,000

8.

A pizza business has the cost structure described below. The firm’s fixed costs are $20 per day.

Output (pizzas per day)	Total cost of output (fixed + variable)
0	$20
5	$80
10	$120
15	$150
20	$175
25	$195
30	$210
35	$230
40	$255

What are the firm’s marginal costs (MC) at an output of 35 pizzas?

$4.00

$0.57

$230.00

$9.20

9.

Billy Bob runs a seafood restaurant. Last year he earned $50,000 in revenue. He had explicit costs of $20,000. Billy Bob could have made $30,000 working for the county and could have received an additional $20,000 if he rented out his building and equipment. Calculate Billy Bob’s accounting profit and implicit costs are __________

$20,000 and $30,000, respectively.

$0, and $70,000, respectively.

$50,000 and $20,000, respectively.

$30,000, and $50,000, respectively.

10.

A pizza business has the cost structure described below. The firm’s fixed costs are $20 per day.

Output (pizzas per day)	Total cost of output (fixed + variable)
0	$20
5	$80
10	$120
15	$150
20	$175
25	$195
30	$210
35	$230
40	$255

What are the firm’s average variable costs (AVC) at an output of 25 pizzas?

$0.80

$195

$7.80

$7.00

Answer 1

4. The total profit is calculated by deducting the total cost from the total revenue.

Profit

Ans: subtracting total cost from the total revenue.

5. The accounting profit is calculated by deducting the explicit costs from the total revenue, the explicit costs are the direct costs that is paid out of the pocket. The economic profit is calculated by deducting the total cost from the total revenue and here the total cost is the sum of both the explicit and the implicit costs. The implicit costs are measured in terms of opportunity cost.

Economic profit= Total revenue- (explicit +implicit costs).

  

  

Ans: If the explicit cost for the consulting job is $25,000 per year, your economic profit is equal to $15,000.

6. The variables costs are that changes with the level of production and the fixed costs are those which remain fixed, here the rent is a fixed cost and the variable costs are wages to the workers.

Ans:.

7.

Economic profit= Total revenue- (explicit +implicit costs).

Ans:

8. The marginal cost is the addition made to the total product when an additional unit of the commodity is produced.

  .

9.

Accounting profit

  

Ans: $30,000, and $50,000, respectively.

10. Ans: 7.