Exam 11: The Cost of Doing Business

_____ profit is total revenue minus explicit costs.

(Figure: Costs) In the figure, what level of output has the lowest AVC?

(Figure: Production Function Data 0) In the table, what is the MPP of the second unit of labor? Labor (L) Total Product (TP) 0 0 1 85 2 150 3 200 4 240

(Figure: Cost Schedule) In the figure, the average fixed cost to produce three units is: Quantity Fixed Cost Variable Cost Marginal Cost 0 \ 11 \ 0 - 1 11 3 \ 3 2 11 8 5 3 11 14 6 4 11 23 9 5 11 36 13

If the costs to make 12 cakes total $1,200, the average cost is:

(Figure: Production Function Data 0) In the table, the MPP of the fifth unit of labor is 30. What is the total product of five units of labor? Labor (L) Total Product (TP) 0 0 1 85 2 150 3 200 4 240

Explain why fixed costs exist only in the short run. Provide an example.

(Figure: Cost Schedule) In the figure, the average variable cost to produce three units is: Quantity Fixed Cost Variable Cost Marginal Cost 0 \ 11 \ 0 - 1 11 3 \ 3 2 11 8 5 3 11 14 6 4 11 23 9 5 11 36 13

_____ is a reduction in costs that occurs when a business expands into multiple product lines.

_____ is the positive difference between revenue and cost.

(Figure: Cost Schedule) In the figure, what is the average total cost to produce 3 units? Quantity Fixed Cost Variable Cost Marginal Cost 0 \ 11 \ 0 - 1 11 3 \ 3 2 11 8 5 3 11 14 6 4 11 23 9 5 11 36 13

Ernesto owns a house painting company. Total sales for the past year were $75,000. His bills for running the business were $30,000. Stan, who owns a furniture-making company, previously asked Ernesto to come work for him at a salary of $40,000. What is Ernesto's accounting and economic profit? Would Ernesto make more money working for Sam or working for himself? Explain your answer.

(Figure: Long-Run and Short-Run Average Total Cost Curves) In the figure, at 5,000 units of output, the firm is experiencing:

_____ is the additional output that is obtained with the addition of another worker, assuming that physical capital and other inputs are fixed.

(Figure: Cost Schedule) In the figure, what is the average total cost to produce 2 units? Quantity Fixed Cost Variable Cost Marginal Cost 0 \ 11 \ 0 - 1 11 3 \ 3 2 11 8 5 3 11 14 6 4 11 23 9 5 11 36 13

Daisy owns a deli and has paid her rent in advance for five years. This nonrefundable rent is considered a _____ cost.

Doreen's expenses for her landscaping business included rent of $1,000, payroll of $3,000, utilities of $600, and gas for the lawnmowers of $500. What are her monthly variable costs?

Because of increasing marginal costs, the _____ cost curve is generally upward sloping in the relevant range.

_____ is the point at which businesses have taken advantage of every known benefit of mass production.

(Figure: Costs) In the figure, what is variable cost at 40 units?