Harvey quit his job at State University, where he earned $65,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $70,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 20,000 units of software at $50 for each unit. Of the $50 per unit, $45 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.

The economic profits of Harvey's firm in the first year were

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Multiple Choice

• $100,000.
• $77,000.
• $23,000.
• $1,000,000.

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The table shows three short-run cost schedules for three plants of different sizes that a firm might build in the long run.

Plant 1	Plant 2	Plant 3
Output	ATC	Output	ATC	Output	ATC
10	$ 10	10	$ 15	10	$ 20
20	9	20	10	20	15
30	8	30	7	30	10
40	9	40	10	40	8
50	10	50	14	50	9

What is the long-run average cost of producing 50 units of output?

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Multiple Choice

• $9
• $10
• $14
• $33

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Use the following data to answer the question.

Inputs of Labor	Total Product
0	0
1	10
2	22
3	36
4	48
5	58
6	66
7	63

When three units of labor are hired, the marginal product (MP) of the last worker is

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Multiple Choice

• 12.

14.

• 108.
• 28.

Bottom of Form

Harvey quit his job at State University, where he earned $62,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $4,000 a year. To start the business, he cashed in $50,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 10,000 units of software at $72 for each unit. Of the $72 per unit, $60 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.

The accounting profit of Harvey's firm in the first year was

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Multiple Choice

• $120,000.
• $71,000.
• $49,000.
• $720,000.

Bottom of Form

The following is cost information for the Creamy Crisp Donut Company.

Entrepreneur's potential earnings as a salaried worker = $60,000

Annual lease on building = $30,000

Annual revenue from operations = $250,000

Payments to workers = $100,000

Utilities (electricity, water, disposal) costs = $8,000

Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000

Entrepreneur's forgone interest on personal funds used to finance the business = $6,000

Creamy Crisp's total economic costs are

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Multiple Choice

• $284,000.
• $138,000.
• $34,000.
• $144,000.

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Suppose that a business incurred implicit costs of $400,000 and explicit costs of $4 million in a specific year. If the firm sold 100,000 units of its output at $48 per unit, its accounting

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Multiple Choice

• profits were $400,000 and its economic profits were $0.
• losses were $0 and its economic losses were $800,000.
• profits were $400,000 and its economic profits were $800,000.
• profits were $800,000 and its economic profits were $400,000.

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The following is cost information for the Creamy Crisp Donut Company.

Entrepreneur's potential earnings as a salaried worker = $40,000

Annual lease on building = $25,000

Annual revenue from operations = $420,000

Payments to workers = $150,000

Utilities (electricity, water, disposal) costs = $8,000

Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000

Entrepreneur's forgone interest on personal funds used to finance the business = $6,000

If, other things equal, Creamy Crisp's revenue fell to $309,000,

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Multiple Choice

• its implicit costs would exceed its economic costs.
• it would earn a normal profit but not an economic profit.
• it would suffer an economic loss.
• its accounting profit would fall to $0.

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Round Things, Inc.'s production process exhibits constant returns to scale. Currently their long-run average cost is $20/unit. If Round Things doubles its use of all inputs, its new long-run average total cost will be

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Multiple Choice

• Less than $20/unit.
• $20/unit.
• greater than $40/unit.
• greater than $20/unit but less than $40/unit.

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Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed.

Number of Workers	Units of Output
0	0
1	45
2	100
3	160
4	230
5	320
6	400

Average product is at a maximum when

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Multiple Choice

• two worker(s) is/are hired.
• five worker(s) is/are hired.
• six worker(s) is/are hired.
• four worker(s) is/are hired.

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Answer the question on the basis of the following cost data.

Output	Total Cost
0	$ 24
1	33
2	41
3	48
4	54
5	61
6	69

The average total cost of producing 6 units of output is

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Multiple Choice

• $7.5.
• $4.
• $8.
• $11.5.

Bottom of Form

Answer the question on the basis of the following cost data.

Output	Total Cost
0	$ 24
1	33
2	41
3	48
4	54
5	61
6	69

The total variable cost of producing 4 units of output is

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Multiple Choice

• $7.50.
• $30.
• $13.50.
• $6.

Bottom of Form

The following is cost information for the Creamy Crisp Donut Company.

Entrepreneur's potential earnings as a salaried worker = $40,000

Annual lease on building = $25,000

Annual revenue from operations = $420,000

Payments to workers = $150,000

Utilities (electricity, water, disposal) costs = $8,000

Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000

Entrepreneur's forgone interest on personal funds used to finance the business = $6,000

Creamy Crisp's implicit costs, including a normal profit, are

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Multiple Choice

• $126,000.
• $183,000.
• $111,000.
• $189,000.

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Assume that in the short run a firm is producing 500 units of output, has average total costs of $300, and has average variable costs of $220. The firm'stotal fixedcosts are.

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Multiple Choice

• $40,000.
• $6.25.

$0.16.

• $80.

Bottom of Form

The following is cost information for the Creamy Crisp Donut Company.

Entrepreneur's potential earnings as a salaried worker = $48,000

Annual lease on building = $20,000

Annual revenue from operations = $280,000

Payments to workers = $118,000

Utilities (electricity, water, disposal) costs = $8,000

Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000

Entrepreneur's forgone interest on personal funds used to finance the business = $6,000

Creamy Crisp's explicit costs are

Top of Form

Multiple Choice

• $280,000.
• $146,000.
• $0.
• $152,000.

Bottom of Form

Answer the question on the basis of the following cost data.

Output	Total Cost
0	$ 24
1	33
2	41
3	48
4	54
5	61
6	69

The average variable cost of producing 4 units of output is

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Multiple Choice

• $7.50.
• $30.
• $13.50.
• $6.00.

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Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed.

Number of Workers	Units of Output
0	0
1	30
2	70
3	122
4	165
5	190
6	210

The marginal product of the sixth worker is

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Multiple Choice

• 210 units of output.
• 25 units of output.

20 units of output.

15 units of output.

Bottom of Form

The following is cost information for the Creamy Crisp Donut Company.

Entrepreneur's potential earnings as a salaried worker = $55,000

Annual lease on building = $23,000

Annual revenue from operations = $320,000

Payments to workers = $130,000

Utilities (electricity, water, disposal) costs = $8,000

Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000

Entrepreneur's forgone interest on personal funds used to finance the business = $6,000

Creamy Crisp's total revenues exceed its total costs, including a normal profit, by

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Multiple Choice

• $302,000.
• $161,000.
• $159,000.
• $18,000.

Bottom of Form

Harvey quit his job at State University, where he earned $65,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $70,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 20,000 units of software at $50 for each unit. Of the $50 per unit, $45 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.

The explicit costs of Harvey's firm in the first year were

Top of Form

Multiple Choice

$100,000.

$900,000.

$23,000.

$1,000,000.

Bottom of Form

Suppose that, when producing 10 units of output, a firm's AVC is $22, its AFC is $5, and its MC is $30. This firm's

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Multiple Choice

• ATC is $35.
• ATC is $57.
• total cost is $270.
• total cost is $30.

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Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and has average variable costs of $150. The firm'stotal variablecosts are.

Top of Form

Multiple Choice

• $15,000.
• $20,000.
• $50.
• $5,000.

Bottom of Form