Question

1. Explicit costs ______.

do not involve outlays of cash

are greater than implicit costs

involve outlays of cash

are less than implicit costs

2. Opportunity costs can vary from person to person and ______________________.

can be calculated easily most of the time

can even be different for the same person at different points in time

are always known and predictable

represent explicit costs only

3. An example of an implicit cost would be ______.

transportation expenses

salaries

rental costs

leisure time

4. Economic costs ______.

only take into account implicit costs

are not the same as opportunity costs

consist of implicit costs

include the total of both explicit and implicit costs

5. When a firm seeks to find an input combination that minimizes the total costs of producing a particular level of output, this is defined as the ______.

cost reduction problem

production maximization problem

cost minimization problem

output optimalization problem

6. Each Isocost line demonstrates ______.

Write the general equation of an Isocost line.

the set of combinations of goods and services i.e., outputs that yield different total costs

labor costs in the short run

the set of combinations of labor and capital that yield the same total costs

combination of L and K that yield multiple total costs

7. If the quantity demanded of capital does not change by a large amount when the price of capital increases by a large amount, we say that the demand elasticity of capital is ______.

elastic

cross-elastic

inelastic

none of the above

8. When the long-run average cost curve is u-shaped, the marginal cost curve will bisect (intersect) the average cost curve at __________________.

its maximum

its minimum

its average value

none of the above

9. Average cost in the long-run is defined as _____.

TVC/Q

TC/Q

TVC + TFC/Q

none of the above

10. Economies of scale is a characteristic of production where ______.

average costs increase as output increases

total cost decreases as output increases

average cost decreases as output increases

average cost decreases as output decreases

11. Which of the following factors of production is more likely to be fixed in the short run?

The number of workers.

Changes in electricity consumed.

The location of a manufacturing plant.

The amount of materials used.

12. If a company has $1000 in variable costs and $200 in fixed costs when it produces 200 units of output and sells the units for $20 per unit, average total costs would equal ______.

$10

$6

$50

$60

13. Economies of scope occur when the total cost of producing given quantities of two goods in the same firm is ______.

more than the total cost of producing those quantities in two single product firms

more than the average cost of producing those quantities in the same firm

less than the average cost of producing those quantities in the same firm

less than the total costs of producing those quantities in two single product firms

14. Does this firm experience economies or diseconomies of scale? What type of returns to scale does this firm experience? Show your work that justifies your response.

Q = ∛L

Answer 1

Answer.)

Q1.) involve outlays of cash

An explicit cost is a direct payment made to others in the course of running a business, such as wage, rent.

Q2.) can even be different for the same person at different points in time

Opportunity cost can vary from person to person depending on how each person values each alternatives.

Q3.) leisure time

Q4.) include the total of both explicit and implicit costs

The economic cost include both the accounting cost and the opportunity cost .

Q5.) cost minimization problem