Homework Answers
5) Opportunity cost
6) Economic profit
= total revenue -(explict + implicit costs)
= (6000*5) - (40000+30000)
= 30000-70000
= -40000
option(A)
7) Diminishing marginal product
8) change in output/change in labor
ANSWERS :
5.
First option : opportunity cost
( Businessperson misses the value of his/her time he/she would have otherwise used in doing a job and earned salary. So the value of his time is opportunity cost.)
6.
First Option : - $40,000 .
( her opportunity cost is what she missed the earnings of having worked in another farm = $30,000.
Her accounting profit = Revenue - Total cost = 6000*5 - 40000 = - 10000 ($)
So,
Economic profit = Accounting profit - opportunity cost = - 10000 - 30000 = - 40000 ($) : First option )
7.
Option d : diminishing marginal product .
(Increase in one labour results into lower products output compared to that for the previous labour, so marginal output is declining)
8.
Option b. : output divided by change in labour.
(Marginal product of labour is the effect on output by changing labour input).
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