Exam 11: The Cost of Doing Business

_____ profit is total revenue minus accounting costs.

_____ occur when long-run average total cost does not change as output increases.

Ted's firm, Cleaning Way, produces laundry detergent. Ted is considering adding a new product line, hand soap. In terms of costs, what might Ted be hoping to achieve?

_____ occurs when long-run average total cost increases as output increases.

Brittany is considering opening a clothing store. She is concerned because she spent $60,000 earning a degree in biology and will not be using it. The $60,000 is an example of a _____ cost.

(Figure: Costs) In the figure, which represents AFC?

_____ is responsible for the upward slope of the marginal cost curve.

When Flora quits her job earning $85,000 a year to open hers own business, the income that she gives up is considered _____ cost.

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

The short run is defined as:

(Figure: Costs) In the figure, which of the following levels of output has the lowest AFC?

Average total cost must be _____ whenever marginal cost is less than average total cost.

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

To derive marginal physical product of labor, _____ the change in labor.

In economy seating on a commercial airline flight, passengers often pay different fares. In terms of short-run costs, explain why this occurs.

Costs that have already occurred or been legally agreed to are _____ costs.

(Figure: Long-Run and Short-Run Average Total Cost Curves) In the figure, which average total cost (ATC) would a firm typically choose in order to maximize profit when it expects to produce a larger level of output with a lot of physical capital?

(Figure: Cost Schedule) In the figure, the average variable cost to produce four 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

Gerald, a certified public accountant, informs his client, Simon, a small business owner, that Simon's production expenses for the last year were $40,000. Revenues were $100,000. Simon gave up a job that paid $70,000 to open his business. What is Simon's economic profit or loss?

In the short run, _____ cost is the sum of fixed costs and variable costs.