Question

11.) Economies of scale will allow which of the following types of cities to lower their average total cost of clearing snow by investing in larger snow plow fleets? Cities with a.) more people. b.) more existing snow plows. C.) less snowfall. d.) larger budgets. e.) more snowfall. 12.) Which of the following is false? a) Economic profit is always higher than accounting profit. b) Accounting profit is the difference between total revenue and explicit costs c) Economic profit is the difference between total revenue and implicit costs. d) a and c are false e) a, b, and c are false 13.) Here is some information that relates to a business Karen opened last year: price =$5, quantity sold 15,000, implicit cost $4,500; explicit cost $8,500. What did profits equal for the year? a) b) c) d) $66,500 $62,000 $52,000 $70,500 14.) Debbie recently went into the business of producing greeting cards. For this business, which of the following is likely to be a fixed cost? a) paper costs b) labor costs the six month lease for the factory c) d) long distance telephone costs e) a, b, and d 15.) Which of the following statements is true? a) Since fixed costs are constant as output changes in the short run, it follows that average fixed cost is constant in the short run, too. b) Marginal cost is the additional cost of producing an additional unit of output Changes in variable costs are reflected dollar-for-dollar in total cost. c) b and c d) e) a and b

Answer 1

Answer 11. e. More snowfall

Reason- In economies of scale, when there is more snowfall, the average total cost decreases.

Answer 12. a) and c) are false

Reason- Economic profit are lower than accounting profit. Economic profit is equal to total revenue minus explicit cost and implicit cost.

Answer 13. B. $62000

Reason- Economic profit=( 5*15000)-(4500+8500)= $62000

Answer 14. c) The six month lease for the factory

Reason- Fixed cost are there irrespective of the quantity produced. Labor cost, telephone bills and paper cost depend on the output produced.

Answer 15. d) b and c

Reason- part A is false because AFC =TFC/Q When Q rises, AFC falls.

MC= TCn-TCn-1