Question

2. Tom quit his $65.000 a year corporate lawyer job to open up his own law practice. In Tom's in your in business his total revenuequaled S150,000. Tom's explicit cost during the year totaled $85,000. What i Tom's conomic profit for his first year in business 2.50 8. $20,000 c. $65,000 d. $85.000 3.A production function describes a. how a firm maximizes profits. bhow a firm turns inputs into output c. the minimal cost of producing a given level of output d. the relationship between cost and output. 4.Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her busband Wi to work for her. Together Kate and William can arrange 35 bouquets per day. What is William's m product? a. 55 bouquets . 35 bouquets c. 22.3 bouquets d. 15 bouquets 5.Let L represent the number of workers hired by a firm, and let Q represent that firm's quantit Assume two points on the firm's production function are (L =5,Q-125) and (L-6,0 - 152) marginal product of the oth worker is a. 25 units of output b. 27 units of output. c. 37 units of output d. 162 units of output

Answer 1

2. Answer – a. $0

Total Revenue = 150,000

Explicit cost = 85,000

Accounting Profit = TR – Explicit cost

Accounting Profit = 150,000 – 85,000 = 65,000

Implicit cost (salary as a lawer that he left) = 65,000

Economic Profit = Accounting Profit – Implicit cost

Economic Profit = 65,000 – 65,000 = 0

3. Answer – b. how a firm turns inputs into outputs.

Production function describes the relationship between inputs and outputs.

4. Answer – d. 15 bouquets

Single person arranges 20 bouquets a day.

One additional increases the total bouquets to 35.

Therefore additional person arranges, 35 – 25 = 15 bouquets

5. Answer = b. 27 units of output

At 5 labour, total quantity = 125

At 6 labour, total quantity = 152

MP = TP at n – TP at n-1

MP = 152 – 125 = 27