# Quiz 7: Costs

Business

Q 1Q 1

Which of the following statements is (are) TRUE?
I) If TC = $40,000 and FC = $18,000, then VC = $58,000.
II) Because fixed cost does not vary with output, the fixed cost curve is a vertical line.
III) The total cost and variable cost curves always have the same shape and slope.
IV) When output is zero, total cost equals fixed costs.
A) I, II, and III
B) III
C) II, III, and IV
D) III and IV

Free

Multiple Choice

D

Q 2Q 2

A firm has a production function of , the rental rate of capital is $50, and the wage rate is $15. In the short run,
Is fixed at 80 units. The short-run marginal cost function is MC = ____.
A) 400 + (3Q/16)
B) 3/16
C) 3Q/16
D) 400

Free

Multiple Choice

B

Q 3Q 3

(Table: Detailers for Cars I) Carl's Detailing is a small business that travels to people's homes to meticulously clean their high-end sports cars. Carl hires detailers (labor) at a wage of $80 per worker per day. A van that is used to carry cleaning supplies to clients' homes has a fixed cost of $20 per day. The table shows the relationship between the number of cars cleaned and the number of detailers. The marginal cost of cleaning the first car is _____, and the marginal cost of cleaning the third car is _____.
A) $80; $480
B) $80; $240
C) $100; $260
D) $100; $300

Free

Multiple Choice

B

Q 4Q 4

Menard quit his high school teaching job, which paid $60,000 per year, to start a business that prepares students for the SAT exam. His first year in business generated the following revenues and costs: Menard's economic profit is $____.
A) 105,000
B) 100,000
C) 20,000
D) 15,000

Free

Multiple Choice

Q 5Q 5

(Figure: Total Cost and Quantity of Output III) The firm's average total cost curve appears in which of the following panels?
A) panel a
B) panel b
C) panel c
D) panel d

Free

Multiple Choice

Q 6Q 6

Use the following table to answer the question. At an output of 2, the variable cost is $____.
A) 1,200
B) 690
C) 380
D) 845

Free

Multiple Choice

Q 7Q 7

(Figure: Total Cost and Quantity of Output VI) Answer the following question.
At an output level of 1, the average total cost is $____.
A) 5
B) 3.3
C) 2
D) 1

Free

Multiple Choice

Q 8Q 8

A coffee shop's production function is given by Q = KL, where MP

_{L}= K and MP_{K}= L. The barista wage rate is $10 and the rental per square foot is $15. In the short run, store size is fixed at 500 square feet. The short-run average total cost of serving 1,500 cups of coffee is $_____. A) 6.03 B) 5.02 C) 2.34 D) 0.63Free

Multiple Choice

Q 9Q 9

Debbie, a popular wedding photographer, is able to photograph a wedding every Saturday of the year. She charges couples $4,000 for a complete set of photographs that cost her $2,200 to print and develop. Suppose that, on one Saturday, Debbie photographs her niece's wedding without charge, but her niece insists on paying Debbie $2,200 to cover her printing and developing costs. What is Debbie's economic cost of photographing her niece's wedding?
A) $0
B) $1,800
C) $2,200
D) $4,000

Free

Multiple Choice

Q 10Q 10

Suppose a firm's total cost curve is TC = Q

^{3}- Q^{2}+ Q + 10. At the quantity that minimizes average variable cost, the marginal cost is equal to $____. A) 1 B) 0.75 C) 0.5 D) 0.25Free

Multiple Choice

Q 11Q 11

A coffee shop's production function is given by Q = KL, where MP

_{L}= K and MP_{K}= L. The barista wage rate is $10 and the rental per square foot is $15. In the short run, store size is fixed at 500 square feet. The long-run average total cost of producing 1,500 cups of coffee is $_____. A) 6.03 B) 5.02 C) 2.34 D) 0.63Free

Multiple Choice

Q 12Q 12

Use the following table to answer the question. At an output of 4, the average fixed cost is $____.
A) 600
B) 533.33
C) 475
D) 250

Free

Multiple Choice

Q 13Q 13

A firm with a production function Q = KL (where K is units of capital and L is units of labor) has an expansion path that is given by K = 2L. The wage rate (W) is $20 and the rental on capital is $10. Assuming that the firm is using the optimal mix of inputs for any given output level, the quantity of output using three units of labor is ____.
A) 32
B) 18
C) 8
D) 2

Free

Multiple Choice

Q 14Q 14

Which of the following statements is (are) TRUE?
I) MC = ΔTC/ΔQ
II) MC = ΔVC/ΔQ
III) Marginal cost falls as returns to labor begin to diminish.
A) I, II, and III
B) I and II
C) II and III
D) I and III

Free

Multiple Choice

Q 15Q 15

Use the following table to answer the question. At an output of 5, the average variable cost is $____.
A) 350
B) 533.33
C) 475
D) 250

Free

Multiple Choice

Q 16Q 16

(Figure: Total Cost and Quantity of Output III) Which of the following statements is (are) TRUE? I. At point A, ATC > MC.
II) At point B, ATC = MC.
III) At point C, ATC < MC.
A) I and II
B) I, II, and III
C) III
D) I

Free

Multiple Choice

Q 17Q 17

Menard quit his high school teaching job, which paid $60,000 per year, to start a business that prepares students for the SAT exam. His first year in business generated the following revenues and costs: Menard's accounting profit is $____.
A) 105,000
B) 100,000
C) 20,000
D) 15,000

Free

Multiple Choice

Q 18Q 18

Which of the following statements is (are) TRUE?
I) Accounting profit equals total revenue minus accounting cost.
II) Economic cost equals accounting cost minus opportunity cost.
III) Economic profit equals accounting profit plus opportunity cost.
IV) Economic profit equals total revenue minus economic cost.
A) I and IV
B) I, II, III, and IV
C) II and IV
D) I, III, and IV

Free

Multiple Choice

Q 19Q 19

Suppose a firm's total cost function is given by TC = 6,000 + 2Q + 0.25Q

^{2}, where MC = 2 + 0.5Q. The output level that minimizes total cost is ____. A) 154.9 B) 175 C) 150 D) 0Free

Multiple Choice

Q 20Q 20

A fixed cost:
A) does not change with the level of the firm's output.
B) is associated with the firm's variable inputs.
C) decreases as the firm increases output.
D) captures the wear and tear of using capital in production.

Free

Multiple Choice

Q 21Q 21

A firm produces two goods, Q

_{1}and Q_{2}. For economies of scope to occur, it must be TRUE that: A) TC(Q_{1},0) + TC(0,Q_{2}) > TC(Q_{1},Q_{2}). B) TC(Q_{1},0) + TC(0,Q_{2}) < TC(Q_{1},Q_{2}). C) D) (TC(Q_{1}1,0) + TC(0,Q_{1}2))/(TC(Q_{1}1, Q_{1}2)) < 1.Free

Multiple Choice

Q 22Q 22

(Figure: Cost and Quantity of Output II)
The total cost of producing an output of 0 is $____.
A) 70
B) 30
C) 20
D) 0

Free

Multiple Choice

Q 23Q 23

Suppose a firm's total cost curve is TC = 5Q

^{2}+ 6Q + 125. The firm's average variable cost is AVC = ____. A) 10Q + 6 B) 5Q + 6 + (125/Q) C) 5Q + 6 D) 5Q^{2}+ 6QFree

Multiple Choice

Q 24Q 24

Suppose a firm's total cost curve is TC = Q

^{3}- Q^{2}+ Q + 10. Using calculus, the quantity that minimizes average variable cost for the firm is Q = ____. A) 1 B) 0.75 C) 0.5 D) 0.25Free

Multiple Choice

Q 25Q 25

(Figure: Cost and Quantity of Output Per Week I) At 6 units of output, FC is _____ and VC is _____.
A) $450; $250
B) $200; $250
C) $200; $150
D) $250; $200

Free

Multiple Choice

Q 26Q 26

(Figure: Total Cost and Quantity of Output II) What could cause the movement from TC

_{1}to TC_{2}? A) a decrease in the firm's fixed costs of production B) economies of scale C) a technological change that increases the productivity of inputs D) an increase in input pricesFree

Multiple Choice

Q 27Q 27

A firm has a production function of , the rental rate of capital is $50, and the wage rate is $15. In the short run,
Is fixed at 80 units. The short-run total cost function is TC = ____.
A) 400 + (3Q/16)
B) 400 + (Q/16)
C) 3Q/16
D) 400

Free

Multiple Choice

Q 28Q 28

(Figure: Capital and Labor I) The firm's total cost is given by curve _____ on the following graph.
A) A
B) B
C) C
D) D

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Multiple Choice

Q 29Q 29

A firm with decreasing returns to scale would see:
A) decreasing long-run marginal costs.
B) increasing long-run marginal costs.
C) constant long-run marginal costs.
D) More information is necessary to determine the answer.

Free

Multiple Choice

Q 30Q 30

A firm is producing 4 units of output at an average total cost of $40. When the firm produces 5 units of output, average total cost rises to $50. What is the marginal cost of the fifth unit of output?
A) $10
B) $30
C) $90
D) $120

Free

Multiple Choice

Q 31Q 31

(Figure: Cost and Quantity of Output II)
The variable cost of producing an output of 12 is $____.
A) 70
B) 30
C) 20
D) 0

Free

Multiple Choice

Q 32Q 32

(Figure: Cost and Quantity of Output Per Week II) Consider a firm with the following cost structure:
Which panel represents the cost curves of the firm?
A) panel a
B) panel b
C) panel c
D) panel d

Free

Multiple Choice

Q 33Q 33

A firm with a production function Q = KL (where K is units of capital and L is units of labor) has an expansion path that is given by K = 2L. The wage rate (W) is $20 and the rental on capital is $10. Assuming that the firm is using the optimal mix of inputs for any given output level, the quantity of output using four units of labor is ____.
A) 32
B) 18
C) 8
D) 2

Free

Multiple Choice

Q 34Q 34

To find the firm's generalized marginal cost curve in the short run, take the derivative of the _____ cost curve with respect to quantity Q while _____.
A) total; allowing both capital and labor costs to change
B) total; holding the cost of labor fixed
C) total; holding the cost of capital fixed
D) variable; allowing both capital and labor costs to change

Free

Multiple Choice

Q 35Q 35

(Figure: Total Cost and Quantity of Output VI) Answer the following question.
At an output level of 3, the average total cost is $____.
A) 6
B) 2.5
C) 2
D) 1

Free

Multiple Choice

Q 36Q 36

A firm has a production function of , the rental rate of capital is $15, and the wage rate is $10. In the short run,
Is fixed at 100 units. The short-run demand for labor is L = ____.
A) Q

^{2}/100 B) 100Q^{2}C) 5Q^{0.5}D) Q^{0.5}/100Free

Multiple Choice

Q 37Q 37

Suppose a firm's total cost and marginal cost are given by TC = 192 + 10Q + 3Q

^{2}and MC = 10 + 6Q. What is the output level that minimizes average total cost? A) 8 B) 1.5 C) 21 D) 4Free

Multiple Choice

Q 38Q 38

Suppose a firm's total cost function is given by TC = 6,000 + 2Q + 0.25Q

^{2}, where MC = 2 + 0.5Q. The output level that minimizes average total cost is ____. A) 154.9 B) 175 C) 150 D) 0Free

Multiple Choice

Q 39Q 39

A firm's long-run total cost curve is given by LTC = 2,000Q - 10Q

^{2}+ 1/3Q^{3}, and long-run marginal cost is given by LMC = 2,000 - 20Q + Q^{2}. What is the quantity of output that minimizes long-run average total cost? A) 15 B) 165 C) 500 D) 210Free

Multiple Choice

Q 40Q 40

A firm has a production function of , the rental rate of capital is $15, and the wage rate is $10. In the short run,
Is fixed at 100 units. The firm's short-run total cost is TC = ____.
A) 1,500 + Q

^{2}/10 B) 1,500 + Q^{2}C) 1,500Q D) 1,500 + Q^{0.5}Free

Multiple Choice

Q 41Q 41

(Figure: Average Total Cost and Quantity of Output III) Which of the following statements is (are) TRUE? I. At Q = 3, the marginal cost is $2.33.
II) At Q = 8, the marginal cost is $1.80.
III) The slope of the total cost (TC) curve at Q = 3 is $2.33.
A) II
B) I and III
C) II and III
D) I

Free

Multiple Choice

Q 42Q 42

(Figure: Cost and Quantity of Output Per Week I) The total cost of producing 7 units of output is:
A) $200.
B) $100.
C) $300.
D) $500.

Free

Multiple Choice

Q 43Q 43

Use the following table to answer the question. At an output of 3, the average total cost is $____.
A) 600
B) 533.33
C) 380
D) 250

Free

Multiple Choice

Q 44Q 44

The firm's long-run total cost is given by LTC = 5,000Q - 100Q

^{2}+ Q^{3}, and its long-run marginal cost is given by LMC = 5,000 - 200Q + 3Q^{2}. At what output level is the firm subject to diseconomies of scale? A) Q > 30 B) Q > 50 C) Q > 245 D) Q < 245Free

Multiple Choice

Q 45Q 45

Suppose that you close down your coffee shop and sell your coffee maker for $500. If you originally bought the coffee maker for $4,000 and it lost $1,000 because of depreciation (i.e., age and use), the sunk cost of the coffee maker is:
A) $3,500.
B) $3,000.
C) $2,500.
D) $1,500.

Free

Multiple Choice

Q 46Q 46

Use the following table to answer the question. At an output level of 1, the marginal cost is $____.
A) 35
B) 85
C) 60
D) 50

Free

Multiple Choice

Q 47Q 47

Sanjay's hair salon has a total cost function given by When Sanjay is minimizing the average total cost of production, the quantity produced is ____.
A) 3

^{1/2}B) 3 C) 6^{1/2}D) 6Free

Multiple Choice

Q 48Q 48

Suppose a firm's total cost curve is TC = Q

^{2}+ Q + 100. The firm's average total cost is ATC = ____. A) Q^{2}+ Q + 100 B) 2Q + 1 C) Q + 1 + (100/Q) D) Q + 1Free

Multiple Choice

Q 49Q 49

(Figure: Capital and Labor III) Suppose the firm is producing at point Z and wants to reduce its output to Q

_{1}. Which of the following statements is TRUE? A) In the short run, the firm will move to point A, where total costs of production are higher than at point C. B) The firm will move along its long-run expansion path from point Z to point A. C) In the short run, the firm will move to point A, where total costs of production are lower than at point C. D) In the long run, the firm will move to point A, where total costs of production are lower than at point C.Free

Multiple Choice

Q 50Q 50

Suppose a firm with a production function Q = KL (where MP

_{L}= K and MP_{K}= L) is producing 125 units of output by using 5 workers and 25 units of capital. The wage rate (W) per worker is $10 and the rental per unit of capital (R) is $2. If it decreases output to 45 units, long-run average total cost _____ at 125 units of output to _____ at 45 units of output. A) rises from $1.80; $2 B) rises from $0.80; $1.33 C) falls from $0.80; $0.60 D) falls from $1.80; $1.15Free

Multiple Choice

Q 51Q 51

A firm has a production function of Q = KL + L, where MP

_{L}= K + 1 and MP_{K}= L. The Wage rate (W) is $100 per worker and the rental (R) is $100 per unit of capital. In the short run, capital (K) is fixed at 4 and the firm produces 100 units of output. The firm's short-run total cost of producing 100 units of output is $____. A) 3,000 B) 2,400 C) 1,900 D) 1,500Free

Multiple Choice

Q 52Q 52

A firm with a production function Q = KL (where K is units of capital and L is units of labor) has an expansion path that is given by K = 2L. The wage rate (W) is $20 and the rental on capital is $10. Assuming that the firm is using the optimal mix of inputs for any given output level, the average total cost when producing 8 units of output is $____.
A) 10
B) 20
C) 80
D) 40

Free

Multiple Choice

Q 53Q 53

A firm with a production function Q = KL (where K is units of capital and L is units of labor) has an expansion path that is given by K = 2L. The wage rate (W) is $20 and the rental on capital is $10. Assuming that the firm is using the optimal mix of inputs for any given output level, the total cost when using two units of labor is $____.
A) 160
B) 120
C) 80
D) 40

Free

Multiple Choice

Q 54Q 54

Fran is considering permanently closing down her beauty salon. A consultant advises her that if she stays open for business, she will have operating revenues of $300,000 and operating costs of $280,000. In addition, Fran has paid $40,000 for fixtures that can be resold for $15,000 after she closes the beauty salon. Fran ____ close the beauty salon because ____.
A) should; the value when staying open is negative
B) should; closing results in greater value
C) should not; the value of closing is negative
D) should not; the value of staying open exceeds the value of closing

Free

Multiple Choice

Q 55Q 55

(Figure: Total Cost and Quantity of Output VI) Answer the following question.
At an output level of 5, the average total cost is $____.
A) 3
B) 2.5
C) 2.80
D) 1

Free

Multiple Choice

Q 56Q 56

(Figure: Total Cost and Quantity of Output IV) The short-run total cost curve is represented by the letters _____, and the long-run total cost curve is represented by the letters _____.
A) WXA; ZXY
B) ZXA; WXY
C) WXY; ZXA
D) ZXY; WXA

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Multiple Choice

Q 57Q 57

The presence of capital rental markets gives firms:
A) the ability to hire more labor in periods of high demand by keeping capital costs fixed.
B) reduced flexibility in substituting among various labor and capital inputs.
C) the ability to hire more capital in periods of high demand by keeping capital costs fixed.
D) the flexibility to adjust capital usage to output levels, making capital costs variable.

Free

Multiple Choice

Q 58Q 58

If the sign of the first derivative of ATC with respect to Q is positive:
A) ATC is increasing as Q increases.
B) ATC is decreasing as Q increases.
C) ATC is constant as Q increases.
D) TC is increasing as Q increases.

Free

Multiple Choice

Q 59Q 59

Use the following table to answer the question. At an output level of 1, the average total cost is $____.
A) 35
B) 85
C) 60
D) 50

Free

Multiple Choice

Q 60Q 60

A firm has a production function of Q = KL + L, where MP

_{L}= K + 1 and MP_{K}= L. The Wage rate (W) is $100 per worker and the rental (R) is $100 per unit of capital. In the short run, capital (K) is fixed at 4 and the firm produces 100 units of output. The firm's long run total cost of producing 100 units of output is $____. A) 3,000 B) 2,400 C) 1,900 D) 1,500Free

Multiple Choice

Q 61Q 61

Suppose a firm's total cost curve is TC = Q

^{2}+ Q + 100. The quantity that minimizes average total cost is Q = ____. A) 100 B) 20 C) 10 D) 0Free

Multiple Choice

Q 62Q 62

A firm is producing 50 units of output at a total cost of $1,000, with a per-unit variable cost of $8. What is the firm's average fixed cost?
A) $12
B) $4
C) $20
D) $28

Free

Multiple Choice

Q 63Q 63

Which of the following statements is (are) TRUE?
I) If marginal cost is rising, the average total cost must be rising.
II) The marginal cost curve intersects both the average total and average variable cost curves at their minimum points.
III) If marginal cost is less than average variable cost, the average variable cost curve is negatively sloped.
A) I, II, and III
B) I and III
C) II
D) II and III

Free

Multiple Choice

Q 64Q 64

A firm with a production function Q = KL (where K is units of capital and L is units of labor) has an expansion path that is given by K = 2L. The wage rate (W) is $20 and the rental on capital is $10. Assuming that the firm is using the optimal mix of inputs for any given output level, the quantity of output using two units of labor is ____.
A) 32
B) 18
C) 8
D) 2

Free

Multiple Choice

Q 65Q 65

To derive the short-run total cost curve for the firm, plug the short-run fixed _____ amount and the firm's short-run demand for _____ into the total cost function.
A) labor; capital
B) capital; capital
C) labor; labor
D) capital; labor

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Multiple Choice

Q 66Q 66

Gillian quit her sales job, which paid $60,000 per year, and became a middle school science teacher earning $48,000 per year. Gillian's opportunity cost of switching careers is $____.
A) 60,000
B) 48,000
C) 12,000
D) 0

Free

Multiple Choice

Q 67Q 67

Sanjay's hair salon has a total cost function given by . .
Sanjay's average total cost is ATC = ____.
A) 3Q + 6 + (9/Q)
B) 3Q + 6
C) 6Q + 6
D) 3Q

^{2}+ 6QFree

Multiple Choice

Q 68Q 68

A landscaping company is considering renting a backhoe (a type of excavating equipment) at $12,000 for the season. The variable cost of completing a landscaping project with the use of the backhoe is $500. Alternatively, without the use of the backhoe, the company would incur a variable cost of $1,000 per landscaping project and no fixed costs. If the landscaping company plans to complete more than _____ projects, the total cost of landscaping projects will be lower _____.
A) 24; with the backhoe
B) 18; with the backhoe
C) 44; without the backhoe
D) 12; without the backhoe

Free

Multiple Choice

Q 69Q 69

A firm with a production function Q = KL (where K is units of capital and L is units of labor) has an expansion path that is given by K = 2L. The wage rate (W) is $20 and the rental on capital is $10. Assuming that the firm is using the optimal mix of inputs for any given output level, the total cost when using one unit of labor is $____.
A) 160
B) 120
C) 80
D) 40

Free

Multiple Choice

Q 70Q 70

Suppose a firm's total cost curve is TC = 5Q

^{2}+ 6Q + 125. When the firm is minimizing its average total cost of production, the quantity produced is ____. A) 20 B) 15 C) 10 D) 5Free

Multiple Choice

Q 71Q 71

Which of the following is an example of a sunk cost fallacy?
A) "I paid $85 for this wool sweater, but it is too scratchy on my skin, so I think I'll give it to my mother-in-law."
B) "I'm not going to allow the sacrifice of 2,527 troops who have died in Iraq to be in vain by pulling out before the job is done."
C) "I will not buy an Under Armour hoodie until it goes on sale for at least 25% off."
D) "I'm going to buy another bag of popcorn because this popcorn is burnt."

Free

Multiple Choice

Q 72Q 72

(Figure: Cost and Quantity of Output I) The average fixed cost at 70 units of output is _____, and the firm's fixed cost of production is _____.
A) $43; $3,010
B) $11; $560
C) $0.10; $7
D) $7; $490

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Multiple Choice

Q 73Q 73

Sanjay's hair salon has a total cost function given by .
Sanjay's marginal cost is MC = ____.
A) 3Q + 6 + (9/Q)
B) 3Q + 6
C) 6Q + 6
D) 3Q

^{2}+ 6QFree

Multiple Choice

Q 74Q 74

Meera operates Ducks Unlimited, which raises mallard ducks to sell to dog food companies. Meera leases the land for $5,000 per month and hires workers at $1,000 per worker per month. With 4 workers, the average total cost is $____.
A) 5,500
B) 5,000
C) 4,500
D) 1,000

Free

Multiple Choice

Q 75Q 75

(Figure: Total Cost and Quantity of Output VI) Answer the following question.
At an output level of 4, the total cost is $____.
A) 9
B) 3
C) 2.25
D) 1

Free

Multiple Choice

Q 76Q 76

A firm is producing 10,000 units of output at a total cost of $5,000. If the firm increases output by 5,000 units and its total costs rise by $2,000, the firm has:
A) economies of scale.
B) economies of scope.
C) constant returns to scale.
D) diseconomies of scale.

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Multiple Choice

Q 77Q 77

Use the following table to answer the question. At an output level of 5, the total cost is $____.
A) 350
B) 250
C) 300
D) 280

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Multiple Choice

Q 78Q 78

Suppose that Bella's Bagels has a total cost function given by The quantity that minimizes average variable costs for Bella's Bagels is ____.
A) 1
B) 0.75
C) 0.5
D) 0.25

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Multiple Choice

Q 79Q 79

A firm has a production function of , the rental rate of capital is $15, and the wage rate is $10. In the short run,
Is fixed at 100 units. The short-run production function is Q = ____.
A) 10L

^{0.5}B) L^{0.5}C) 5L^{0.5}D) 5LFree

Multiple Choice

Q 80Q 80

Fran is considering permanently closing down her beauty salon. A consultant advises her that if she stays open for business, she will have operating revenues of $300,000 and operating costs of $280,000. In addition, Fran has paid $40,000 for fixtures that can be resold for $15,000 after she closes the beauty salon. The value of Fran's beauty salon, if she closes it, is $____.
A) -45,000
B) -35,000
C) -25,000
D) -5,000

Free

Multiple Choice

Q 81Q 81

Which of the following statements is (are) TRUE?
I) The firm's total cost is the sum of its fixed and variable costs.
II) Over the long term, the costs of the firm's inputs tend to become fixed.
III) In the long run, the firm can adjust the use of all of its inputs.
A) II
B) I
C) I and III
D) I, II, and III

Free

Multiple Choice

Q 82Q 82

Which of the following statements is (are) TRUE?
A) Short-run average total cost curves intersect the long-run average total cost curve at its minimum point.
B) It is not possible for two short-run average total cost curves to cross.
C) The long-run average total cost curve is derived by tracing out the lower envelope of the firm's short-run average total cost curves.
D) The long-run average total cost curve indicates that it is more costly to produce output in the long run, especially when input prices are rising because of inflation.

Free

Multiple Choice

Q 83Q 83

Menard quit his high school teaching job, which paid $60,000 per year, to start a business that prepares students for the SAT exam. His first year in business generated the following revenues and costs: Menard's economic cost of SAT preparation is $____.
A) 105,000
B) 100,000
C) 20,000
D) 15,000

Free

Multiple Choice

Q 84Q 84

Average variable cost is minimized at the quantity where:
A) ATC = MC.
B) AVC = MC.
C) AVC = TC.
D) AFC = MC.

Free

Multiple Choice

Q 85Q 85

Suppose a firm's total cost and marginal cost functions are given by TC = 18 + Q + 2Q

^{2}and MC = 1 + 4Q, respectively. What is the output level that minimizes average total cost? A) 5 B) 3 C) 4.45 D) 6Free

Multiple Choice

Q 86Q 86

Suppose a firm's total cost curve is TC = Q

^{2}+ Q + 100. The firm's average variable cost is AVC = ____. A) Q^{2}+ Q + 100 B) 2Q + 1 C) Q + 1 + (100/Q) D) Q + 1Free

Multiple Choice

Q 87Q 87

A business anticipates future operating revenues of $200 million, future operating costs of $150 million, and sunk costs of $60 million. This business should:
A) permanently shut down because the value of staying open is negative.
B) continue operations because the sunk costs are less than the future operating revenues.
C) continue operations because the future operating revenues are greater than the future operating costs.
D) permanently shut down because the ratio of future revenues to future costs is less than two.

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Multiple Choice

Q 88Q 88

Suppose a firm's total cost is given by TC = 100 + 4Q + 2Q

^{2}. Which of the following statements is (are) TRUE? I) AVC = 4Q + 2Q^{2}II) AFC = 100/Q III) ATC = 2Q + 4 + 100/Q IV) FC = 100 + 4Q A) I and II B) II and III C) III D) I and IVFree

Multiple Choice

Q 89Q 89

An entrepreneur gathers the following information to make a decision on whether to stay open for business or to shut down permanently:
Future operating revenues = $18 million
Future operating costs = $14 million
Sunk costs = $8 million
The entrepreneur should:
A) continue to operate because the operating revenues exceed the operating costs.
B) shut down because the operating revenues are insufficient to cover the operating costs and sunk costs.
C) shut down because the sunk costs are greater than zero.
D) continue to operate to help pay off the sunk costs.

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Multiple Choice

Q 90Q 90

Lilly's Lumberyard had the following revenues and costs last year: If Lilly did not own a lumberyard, she would earn $115,000 per year as a store manager for Home Depot. Lilly's Lumberyard had an economic cost of _____ and an economic profit of _____.
A) $225,000; -$75,000
B) $400,000; $35,000
C) $405,000; -$5,000
D) $210,000; $0

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Multiple Choice

Q 91Q 91

Which of the following statements is (are) TRUE?
I) If a firm has economies of scale, long-run average total cost rises with increases in output.
II) Diseconomies of scale are associated with the portion of the long-run average total cost curve that slopes upward.
III) For the long-run average total cost curve to slope downward, the total cost of production must increase less than proportionately with output.
IV) A firm may have economies of scale despite a production function with constant returns to scale.
A) I, II, and III
B) II, III, and IV
C) II and III
D) I

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Multiple Choice

Q 92Q 92

A firm's production function is given by Q = KL, where MP

_{L}= K and MP_{K}= L. The wage rate (W) = $50, and the rental per unit of capital (R) is $12.50. In the short run, capital (K) is fixed at 10 units. The short-run average total cost of producing 100 units of output is _____, and the long-run average total cost of producing 100 units of output is _____. A) $14.75; $8.80 B) $6.25; $5 C) $6.25; $4.20 D) $14.75; $9Free

Multiple Choice

Q 93Q 93

Long-run marginal cost is:
A) the derivative of the short-run total cost function with respect to Q.
B) the derivative of the long-run total cost function with respect to Q.
C) derived by plugging the firm's long-run input demands into the long-run total cost function.
D) derived by plugging the firm's short-run input demands into the long-run total cost function.

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Multiple Choice

Q 94Q 94

(Figure: Total Cost and Quantity of Output VI) Answer the following question.
At an output level of 0, the total cost is $____.
A) 5
B) 0
C) 2
D) 1

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Multiple Choice

Q 95Q 95

Suppose a firm's total cost curve is TC = 5Q

^{2}+ 6Q + 125. The firm's average total cost is ATC = ____. A) 10Q + 6 B) 5Q + 6 + (125/Q) C) 5Q + 6 D) 5Q^{2}+ 6QFree

Multiple Choice

Q 96Q 96

A firm with increasing returns to scale would see:
A) decreasing long-run marginal costs.
B) increasing long-run marginal costs.
C) constant long-run marginal costs.
D) More information is necessary to determine the answer.

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Multiple Choice

Q 97Q 97

(Figure: Cost and Quantity of Output II)
The total cost of producing an output of 24 is $____.
A) 70
B) 30
C) 20
D) 0

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Multiple Choice

Q 98Q 98

Meera operates Ducks Unlimited, which raises mallard ducks to sell to dog food companies. Meera leases the land for $5,000 per month and hires workers at $1,000 per worker per month. With 10 workers, the fixed cost is $____.
A) 6,000
B) 5,000
C) 4,000
D) 1,000

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Multiple Choice

Q 99Q 99

Corporate bankruptcy restructuring allows a firm to treat its debt payments as:
A) average fixed costs.
B) sunk costs.
C) marginal costs.
D) depreciation expenses.

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Multiple Choice

Q 100Q 100

If you have found the minimum of average total cost, the second derivative with respect to Q will be:
A) positive.
B) negative.
C) zero.
D) equal to marginal cost.

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Multiple Choice

Q 101Q 101

(Figure: Total Cost and Quantity of Output VI) Answer the following question.
At an output level of 2, the total cost is $____.
A) 5
B) 2.5
C) 2
D) 1

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Multiple Choice

Q 102Q 102

(Figure: Average Total Cost and Quantity of Output IV) _____ of scale occur between _____ units of output.
A) Economies; 4 and 6
B) Diseconomies; 1 and 5
C) Diseconomies; 5 and 9
D) Economies; 5 and 9

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Multiple Choice

Q 103Q 103

Suppose the total cost of producing goods Q

_{1}and Q_{2}jointly is given by TC = 100 + 50Q_{1}Q_{2}- (Q_{1}Q_{2})^{0.5}. The total cost of producing Q_{1}and Q_{2}in two separate facilities is given by TC = 75 + 3,000Q_{1}+ 1,000Q_{2}+ + ) If the firm produces Q_{1}= 40 and Q_{2}= 100, the firm should produce the goods _____ because of _____ of scope. A) jointly; economies B) in separate facilities; diseconomies C) jointly; diseconomies D) in separate facilities; economiesFree

Multiple Choice

Q 104Q 104

A firm with a production function Q = KL (where K is units of capital and L is units of labor) has an expansion path that is given by K = 2L. The wage rate (W) is $20 and the rental on capital is $10. Assuming that the firm is using the optimal mix of inputs for any given output level, the quantity of output using one unit of labor is ____.
A) 32
B) 18
C) 8
D) 2

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Multiple Choice

Q 105Q 105

(Figure: Average Total Cost and Quantity of Output II) Which of the following statements is (are) TRUE? I. The average cost at 2 units of output is $8.
II) The marginal cost between 2 and 5 units of output is constant.
III) The average cost at 9 units of output is $12.
A) I and II
B) II
C) III
D) I

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Multiple Choice

Q 106Q 106

Which of the following factors are likely to result in fewer fixed costs?
A) longer time horizons
B) stronger labor unions
C) unreliable resale markets
D) greater capital requirements for production

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Multiple Choice

Q 107Q 107

(Figure: Capital and Labor II) Suppose the firm is producing at point A. If the firm wants to increase output from Q

_{1}to Q_{2}, it will: A) not be able to because capital is fixed. B) move to point W in the short run and point Z in the long run. C) move to a point between W and Z in the short run. D) move to point Z in the short run and point W in the long run.Free

Multiple Choice

Q 108Q 108

A firm with a production function Q = KL (where K is units of capital and L is units of labor) has an expansion path that is given by K = 2L. The wage rate (W) is $20 and the rental on capital is $10. Assuming that the firm is using the optimal mix of inputs for any given output level, the total cost when using four units of labor is $____.
A) 160
B) 120
C) 80
D) 40

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Multiple Choice

Q 109Q 109

Suppose a firm's total cost is given by TC = 150 + 0.50Q + 1.5Q

^{2}. What is the firm's average variable cost of producing 10 units of output? A) $5.55 B) $15.50 C) $15 D) $17Free

Multiple Choice

Q 110Q 110

If the sign of the first derivative of ATC with respect to Q is negative:
A) ATC is increasing as Q increases.
B) ATC is decreasing as Q increases.
C) ATC is constant as Q increases.
D) TC is increasing as Q increases.

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Multiple Choice

Q 111Q 111

Suppose a firm's total cost and marginal cost are given by TC = 200 + 10Q + 9Q

^{2}and MC = 10 + 18Q. The output level that minimizes average total cost is ____. A) 22.22 B) 20 C) 18 D) 10Free

Multiple Choice

Q 112Q 112

If TC = 1,500 + 7.5Q + Q

^{2}, the cost function for ATC is ATC = ____. A) 1,500/Q B) 7.5 + Q C) 1,500/Q + 7.5 + Q D) QFree

Multiple Choice

Q 113Q 113

Meera operates Ducks Unlimited, which raises mallard ducks to sell to dog food companies. Meera leases the land for $5,000 per month and hires workers at $1,000 per worker per month. The marginal cost of adding the first worker is $____.
A) 6,000
B) 5,000
C) 4,000
D) 1,000

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Multiple Choice

Q 114Q 114

A firm with a production function Q = KL (where K is units of capital and L is units of labor) has an expansion path that is given by K = 2L. The wage rate (W) is $20 and the rental on capital is $10.
Insert TB725
Assuming that the firm is using the optimal mix of inputs for any given output level, the total cost when using three units of labor is $____.
A) 160
B) 120
C) 80
D) 40

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Multiple Choice

Q 115Q 115

Sanjay's hair salon has a total cost function given by .
Sanjay's average variable cost is AVC = ____.
A) 3Q + 6 + (9/Q)
B) 3Q + 6
C) 6Q + 6
D) 3Q

^{2}+ 6QFree

Multiple Choice

Q 116Q 116

A firm has a production function of , the rental rate of capital is $50, and the wage rate is $15. In the short run,
Is fixed at 80 units. The short-run demand for labor is L = ____.
A) 80
B) Q/80
C) Q
D) 80Q

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Multiple Choice

Q 117Q 117

(Figure: Average Total Cost Curve I) The short-run average total cost curve is given by ______, and the long-run average total cost curve is given by______.
A) CZW; AZY
B) CZY; AZW
C) AZY; CZW
D) AZW; CZY

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Multiple Choice

Q 118Q 118

(Table: Units of Output I) Which of the following is correct at 4 units of output?
A) AFC = 70; AVC = 21; ATC = 91
B) AFC = 17.50; AVC = 52.50; ATC = 70
C) AFC = 0.06; AVC = 0.02; ATC = 0.08
D) AFC = 280; AVC = 840; ATC = 1,320

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Multiple Choice

Q 119Q 119

Suppose a firm's total cost function is given by TC = 6,000 + 2Q + 0.25Q

^{2}, where MC = 2 + 0.5Q. The output level that minimizes variable cost is ____. A) 154.9 B) 175 C) 150 D) 0Free

Multiple Choice

Q 120Q 120

Fran is considering permanently closing down her beauty salon. A consultant advises her that if she stays open for business, she will have operating revenues of $300,000 and operating costs of $280,000. In addition, Fran has paid $40,000 for fixtures that can be resold for $15,000 after she closes the beauty salon. The value of Fran's beauty salon, if it remains open, is $____.
A) -45,000
B) -35,000
C) -25,000
D) -5,000

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Multiple Choice

Q 121Q 121

Use the following table to answer the question. At an output of 1, the total cost is $____.
A) 1,200
B) 1,000
C) 0
D) 200

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Multiple Choice

Q 122Q 122

Producing 200 units of good Y and 100 units of good X in the same factory costs the firm $50,000. In contrast, producing 200 units of good Y in one factory and 100 units of good X in another factory costs the firm $75,000. So, if the firm produces the two goods together, it achieves:
A) quadratic returns to scale.
B) diseconomies of scope.
C) economies of scope.
D) diseconomies of scale and diseconomies of scope.

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Multiple Choice

Q 123Q 123

Average total cost is minimized at the quantity where:
A) ATC = MC.
B) AVC = MC.
C) AVC = TC.
D) AFC = MC.

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Multiple Choice

Q 124Q 124

If TC = 1,500 + 7.5Q + Q

^{2}, the cost function for AFC is AFC = ____. A) 1,500/Q B) 7.5 + Q C) 1,500/Q + 7.5 + Q D) QFree

Multiple Choice

Q 125Q 125

A firm has a production function of , the rental rate of capital is $15, and the wage rate is $10. In the short run,
Is fixed at 100 units. The firm's short-run marginal cost is MC = ____.
A) 1,500 + Q/5
B) Q/5
C) 300Q
D) 1,500 + Q

^{0.5}Free

Multiple Choice

Q 126Q 126

Suppose a firm's total cost curve is TC = Q

^{2}+ Q + 100. The firm's marginal cost is MC = ____. A) Q^{2}+ Q + 100 B) 2Q + 1 C) Q + 1 + (100/Q) D) Q + 1Free

Multiple Choice

Q 127Q 127

Meera operates Ducks Unlimited, which raises mallard ducks to sell to dog food companies. Meera leases the land for $5,000 per month and hires workers at $1,000 per worker per month. With 4 workers, the variable cost is $____.
A) 6,000
B) 5,000
C) 4,000
D) 1,000

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Multiple Choice

Q 128Q 128

A firm has a production function of , the rental rate of capital is $50, and the wage rate is $15. In the short run,
Is fixed at 80 units. The short-run production function is Q = ____.
A) 80L
B) 80KL
C) 80
D) L

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Multiple Choice

Q 129Q 129

Suppose a firm's total cost curve is TC = 5Q

^{2}+ 6Q + 125. The firm's marginal cost is MC = ____. A) 10Q + 6 B) 5Q + 6 + (125/Q) C) 5Q + 6 D) 5Q^{2}+ 6QFree

Multiple Choice

Q 130Q 130

Anvi runs a coffee shop that has annual revenues of $300,000, supply costs of $60,000, and employee salaries of $60,000. She has the option of renting out the coffee shop for $80,000 per year, and she has three outside offers from competitors to work as a senior barista at Starbucks (for an annual salary of $30,000), at Simon's coffee house (for an annual salary of $40,000), and at Peet's coffee shop (for an annual salary of $60,000). She can only hold one job at a time. What should Anvi do?
A) She should rent out her coffee shop and take the job at Starbucks.
B) She should rent out her coffee shop and take the job at Simon's.
C) She should rent out her coffee shop and take the job at Peet's.
D) She should continue to run her coffee shop.

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Multiple Choice

Q 131Q 131

Bina's Umbrellas has a production function given by Q = 10K

^{0.5}L^{0.5}, where MP_{L}= 5K^{0.5}/L^{0.5}and MP_{K}= 5L^{0.5}/K^{0.5}. Bina is using 9 units of capital (K) in the short run. The wage (W) is $80 per day and the rental per unit of capital (R) is $5 per day. What is Bina's total cost of producing 60 umbrellas? A) $445 B) $365 C) $108 D) $276Free

Multiple Choice

Q 132Q 132

Use the following table to answer the question. At an output level of 4, the average variable cost is $____.
A) 35
B) 85
C) 60
D) 50

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Multiple Choice

Q 133Q 133

If TC = 1,500 + 7.5Q + Q

^{2}, the cost function for AVC is AVC = ____. A) 1,500/Q B) 7.5 + Q C) 1,500/Q + 7.5 + Q D) QFree

Multiple Choice

Q 134Q 134

The firm's long-run total cost is given by LTC = 100Q - 10Q

^{2}+ (1/3)Q^{3}, and long-run marginal cost is given by LMC = 100 - 20Q + Q^{2}. At what output level does the firm have economies of scale? A) Q < 15 B) Q < 175 C) Q < 4,000 D) Q < 88Free

Multiple Choice

Q 135Q 135

Meera operates Ducks Unlimited, which raises mallard ducks to sell to dog food companies. Meera leases the land for $5,000 per month and hires workers at $1,000 per worker per month. With 0 workers, the total cost is $____.
A) 6,000
B) 5,000
C) 4,000
D) 1,000

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Multiple Choice

Q 136Q 136

Use the following table to answer the question. At an output level of 2, the variable cost is $____.
A) 35
B) 85
C) 60
D) 50

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Multiple Choice

Q 137Q 137

Suppose a firm's total cost function is given by TC = 6,000 + 2Q + 0.25Q

^{2}, where MC = 2 + 0.5Q. a. What is the output level that minimizes total cost? b. What is the output level that minimizes average total cost?Free

Essay

Q 138Q 138

Jim owns Nickelback Bar, dedicated to the rock band Nickelback. Jim pays his landlord, a strip mall, a $3,000 monthly rent. If Jim breaks the lease before the end of the calendar year, he is required to pay $2,000 for each of the remaining months. Jim just purchased $40,000 of Nickelback-themed bar fixtures; the fixtures have absolutely no value in any alternative use. Each weekend, Jim contracts with a security company that provides four security guards for a total of $1,200.
a. Is the $1,200 payment to the security firm a variable cost, sunk cost, or avoidable fixed cost? Explain your answer.
b. Suppose that at the end of August Jim permanently shuts down his bar. What are Jim's sunk costs?

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Essay

Q 139Q 139

A firm has a production function given by
. Suppose that each unit of capital costs R and each unit of labor costs W.
a. Derive the long-run demands for capital and labor.
b. Derive the total cost curve.
c. Derive the long-run average and marginal cost curves.
d. How do marginal and average costs change with increases in output? Explain.

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Essay

Q 140Q 140

(Figure: Capital and Labor IV)
Graph the firm's total cost curve as it corresponds to points A, B, and C.

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Essay

Q 141Q 141

A firm has a production function of Q = KL + L, where MP

_{L}= K + 1 and MP_{K}= L. The wage rate (W) is $100 per worker and the rental (R) is $100 per unit of capital. a. In the short run, capital (K) is fixed at 4 and the firm produces 100 units of output. What is the firm's total cost? b. In the long run, what is the total cost of producing 100 units of output?Free

Essay

Q 142Q 142

Suppose that a windshield business changes from paying its workers an hourly wage rate to a piece rate system (i.e., paying workers for each windshield installed). The new compensation scheme increases workers' productivity by 44%, with only a negligible effect on their earnings. Graphically illustrate how the change in compensation affects the total cost of windshield installation.

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Essay

Q 143Q 143

A firm with a production function Q = KL (where K is units of capital and L is units of labor) has an expansion path that is given by K = 2L. The wage rate (W) is $20 and the rental on capital is $10. Complete the following table, assuming that the firm is using the optimal mix of inputs for any given output level.

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Essay

Q 144Q 144

Suppose that Bella's Bagels has a total cost function given by
Find the quantity that minimizes average variable costs for Bella's Bagels.

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Essay

Q 145Q 145

(Figure: Capital and Labor IV)
Where the firm is producing at point Y, graph the:
a. short-run total cost curve, showing the total cost at 10, 20, and 30 units of output.
b. long-run total cost curve, showing the total cost at 10, 20, and 30 units of output.
c. short-run ATC curve, showing the ATC at 10, 20, and 30 units of output.
d. long-run ATC curve, showing the ATC at 10, 20, and 30 units of output.

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Essay

Q 146Q 146

Answer the following questions.
a. Marcie is enrolled in a Principles of Microeconomics class but mistakenly buys a macroeconomics book from eBay and cannot return it. She paid $80 for the book. Marcie's friend tells Marcie to read the macroeconomics book or otherwise she will have lost her $80. Explain whether you agree with Marcie's friend.
b. Peter is taking Intermediate Economics and decides to drop the course after the second midterm. Peter paid $180 for the course's textbook, which can be resold for $70 on barnesandnoble.com. What is Peter's sunk cost for the textbook?

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Essay

Q 147Q 147

Fran is considering permanently closing down her beauty salon. A consultant advises her that if she stays open for business, she will have operating revenues of $300,000 and operating costs of $280,000. In addition, Fran has paid $40,000 for fixtures that can be resold for $15,000 after she closes the beauty salon.
a. What is the value of Fran's beauty salon if it remains open?
b. What is the value of Fran's beauty salon if she closes it?
c. Explain whether Fran should close down the beauty salon.

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Essay

Q 148Q 148

Given the cost function TC = 200 + 4Q + 2Q

^{2}, the average cost equation is_____. This means that the average variable cost portion is _____ and average fixed costs portion is _____.Free

Essay

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Essay

Q 150Q 150

Assume a company has the long-run production function featured in the accompanying table. Suppose the price of capital and labor per unit both equal $50. Graph the company's long-run average cost curve.

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Essay

Q 151Q 151

A coffee shop's production function is given by Q = KL, where MP

_{L}= K and MP_{K}= L. The barista wage rate is $10 and the rental per square foot is $15. In the short run, store size is fixed at 500 square feet. The short-run average total cost of serving 1,500 cups of coffee is _____, and the long-run average total cost of producing 1,500 cups of coffee is _____.Free

Essay

Q 152Q 152

Menard quit his high school teaching job, which paid $60,000 per year, to start a business that prepares students for the SAT exam. His first year in business generated the following revenues and costs:
a. What is Menard's economic cost of SAT preparation?
b. What is Menard's accounting profit?
c. What is Menard's economic profit?

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Essay

Q 153Q 153

Determine whether each of the following statements is TRUE or FALSE.
a. The slope of the total cost curve is equal to marginal cost, or the change in variable cost divided by the change in output.
b. AFC = ATC - AVC
c. The average total cost cannot equal marginal cost.
d. Total cost can increase as a result of an increase in variable cost.

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Essay

Q 154Q 154

Suppose a firm's total cost curve is TC = Q

^{2}+ Q + 100. a. Find the firm's marginal cost, average total cost, and average variable cost. b. Use calculus to find the output level that minimizes average total cost. c. Show that ATC = MC at this output level. d. Show that this is the minimum ATC by examining the second derivative.Free

Essay

Q 155Q 155

(Figure: Total Cost and Quantity of Output VI) Answer the following questions.
a. Complete the following table.
b. Use your answers in the table to graph the firm's ATC curve.

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Essay

Q 156Q 156

A firm has a production function given by
. Suppose that each unit of capital costs R and each unit of labor costs W.
a. Derive the long-run demands for capital and labor.
b. Derive the total cost curve for this firm.
c. Derive the long-run average and marginal cost curves.
d. How do marginal and average costs change with increases in output? Explain.
e. Confirm that the value of the Lagrange multiplier you get from the cost minimization problem is equal to the marginal cost curve.

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Essay

Q 157Q 157

Suppose a firm's total cost and marginal cost are given by TC = 200 + 10Q + 9Q

^{2}and MC = 10 + 18Q. What output level minimizes average total cost?Free

Essay

Q 158Q 158

(Figure: Supply and Quantity I) Refer to the graph. Do you agree or disagree with the following statement? Why?
"If the firm can sell its product for $30 and it's selling 12 units, it should close its doors and produce nothing, since it is losing money."

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Essay

Q 159Q 159

Suppose that a firm is producing 100 units of output at a total cost of $20,000.
a. Give a numerical example of this firm with economies of scale as it expands output.
b. Give a numerical example of this firm with constant economies of scale as it expands output.
c. Give a numerical example of this firm with diseconomies of scale as it expands output.

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Essay

Q 160Q 160

Suppose a firm's total cost curve is
a. Use calculus to find the quantity that minimizes average variable cost for the firm.
b. Demonstrate that average variable cost is equal to marginal cost at this quantity.

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Essay

Q 161Q 161

Suppose a firm's total cost curve is TC = 5Q

^{2}+ 6Q + 125. a. Find the firm's marginal cost, average total cost, and average variable cost. b. Use calculus to find the output level that minimizes average total cost. c. Show that ATC = MC at this output level. d. Show that this is the minimum ATC by examining the second derivative.Free

Essay

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Essay

Q 163Q 163

(Figure: Cost and Quantity of Output IV) Using the information provided in Figure 7.18, graph the firm's MC, ATC, and AVC curves in one diagram.
Indicate the minimum points on the AVC and ATC curves. In a separate diagram, show the firm's AFC curve.

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Essay

Q 164Q 164

Sanjay's hair salon has a total cost function given by
a. What are Sanjay's average total cost, average variable cost, and marginal cost?
b. Find the quantity that minimizes ATC.

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Essay

Q 165Q 165

A firm has a production function of
, the rental rate of capital is $15, and the wage rate is $10. In the short run,
is fixed at 100 units.
a. What is the short-run production function?
b. What is the short-run demand for labor?
c. What are the firm's short-run total cost and short-run marginal cost? Use calculus.

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Essay

Q 166Q 166

Gillian quit her sales job, which paid $60,000 per year, and became a middle-school science teacher earning $48,000 per year. What is Gillian's opportunity cost of switching careers?

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Essay

Q 167Q 167

SeakayakingUK is a small business that makes sea kayaks. The owner, Nigel, hires labor at a wage of $100 per day per worker. The factory costs $200 per day whether or not any kayaks are made. The table shows the relationship between the number of kayaks produced and the number of workers. Calculate and graph the marginal and average costs (fixed, variable, total). What do you observe about the relationship between average cost and marginal cost?

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Essay

Q 168Q 168

Consider the table. What important characteristic describes this firm's production process?

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Essay

Q 169Q 169

A firm has a production function of
, the rental rate of capital is $50, and the wage rate is $15. In the short run,
is fixed at 80 units.
a. What is the short-run production function?
b. What is the short-run demand for labor?
c. What are the firm's short-run total cost and short-run marginal cost?

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Essay

Q 170Q 170

Meera operates Ducks Unlimited, which raises mallard ducks to sell to dog food companies. Meera leases the land for $5,000 per month and hires workers at $1,000 per month per worker. Complete the following table, which shows how the number of workers varies with the number of ducks raised.

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Essay

Q 171Q 171

Answer the following questions.
a. Define economies of scope using these cost functions: TC(Q

_{1},Q_{2}), TC(Q_{1},0), and TC(0,Q_{2}). b. Why do economies of scope arise?Free

Essay

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Essay

Q 173Q 173

A firm has a production function of
, the rental rate of capital is $60, and the wage rate is $30. In the short run,
is fixed at 100 units.
a. What is the short-run production function?
b. What is the short-run demand for labor?
c. What are the firm's short-run total cost and short-run marginal cost?

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Essay

Q 174Q 174

Jasmine started a lawn-fertilizing business and is considering purchasing a powered fertilizer spreader or a self-propelled spreader. The powered spreader has a fixed cost of $4,000 for the season, whereas the self-propelled spreader has a fixed cost of only $100 for the season. The variable costs of fertilizing a lawn with the powered spreader and self-propelled spreader are $7 and $15, respectively.
a. Draw the total cost curves of fertilizing lawns using the powered spreader and the self-propelled spreader.
b. If Jasmine is expected to fertilize 400 lawns for the season, which production method should she choose?
c. How many lawns does Jasmine have to fertilize for it to make sense to use the powered spreader?

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Essay

Q 175Q 175

Amy owns Accurate Accounting, Inc., and her business costs for the year are as follows:
Building rent = $30,000
Accounting staff = $200,000
Supplies (e.g., paper, pencils, ink, toner) = $10,000
Annual software license = $15,000
Accurate Accounting, Inc. prepared 600 corporate tax returns for the year. Complete the following table.

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Q 176Q 176

A firm's long-run total cost function is given by LTC = 115,000Q - 500Q

^{2}+ Q^{3}, where long-run marginal cost is given by LMC = 115,000 - 1,000Q + 3Q^{2}. At what range of output does this firm have economies of scale?Free

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Q 177Q 177

Answer the following questions.
a. If TC = 1,500 + 7.5Q + Q

^{2}, what are the cost functions for VC, FC, ATC, AVC, and AFC? b. If VC = 50Q and FC = 800, what are the cost functions for TC, ATC, AVC, and AFC? c. If ATC = , what are the cost functions for TC, FC, VC, AVC, and AFC?Free

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Q 178Q 178

A company's long-run total cost can be written as LTC = 3,000Q - 50Q

^{2}+ 1/3Q^{3}and its long-run marginal cost by LMC = 3,000 - 100Q + Q^{2}. This company will undergo economies of scale at a quantity of _____ and diseconomies of scale at a quantity of _____.Free

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Q 179Q 179

Suppose the total cost of producing goods Q

_{1}and Q_{2}jointly is given by TC = 100 + 50Q_{1}Q_{2}- (Q_{1}Q_{2})^{0.5}. The total cost of producing Q_{1}and Q_{2}in two separate facilities is given by TC = 75 + 3,000Q_{1}+ 1,000Q_{2}+ Q_{1}^{2}+ Q_{2}^{2}. Use the SCOPE measure to determine whether there are economies or diseconomies of scope for Q_{1}= 10 and Q_{2}= 20.Free

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