Exam 15: Entry, Exit, and Long-Run Profitability

Average cost is:

In a long-run equilibrium, economic profits are:

Alana operates a small hair salon in Dallas. If some salons leave the industry, Alana's _____ curve will shift to the _____.

Average cost equals:

The formula for calculating accounting profit is total revenue minus _____ costs.

The two main types of implicit opportunity costs are:

Juan earns a yearly salary of $120,000 in his job and $1,000 per year in interest on his savings. After he quits his job to start a company, he uses all his savings to purchase manufacturing equipment for his company. Given the above information and the data summarizing his first year in business in the table, how much accounting profit or loss does Juan earn? Table\\ \begin{array}{|l|l|} \hline \text { Revenue } & \begin{array}{l} \text { Bills paid for } \\ \text { inputs } \end{array} \\ \hline \$ 300,000 & \$ 175,000 \\ \hline \end{array}

Which of the following government policies would create a direct barrier to entry for new sellers in a market?

As output increases, fixed costs:

Maia is thinking of opening a restaurant. She forecasts revenues of $200,000 per year and explicit financial costs of $140,000 per year. She can pursue this opportunity only if she quits her current job as a hair stylist, where she earns $45,000 per year. She would also need to invest $110,000 of her savings to set up the restaurant-funds on which she would otherwise be earning a 6% return. Based on this information, what are Maia's implicit opportunity costs?

If firms are making economic losses, then in the long run:

As output rises, average fixed costs:

When a product is characterized by network effects, then the product _____ when more customers use the product.

Why do average variable costs eventually rise if a company's output increases enough?

Nikos' lawn-mowing service is a profit-maximizing, competitive firm. If Nikos mows ten lawns per day at a price of $27 per lawn and has a total cost of $280, of which $30 is a fixed cost, what should Nikos do in the short run?

How do a company's accounting profit and economic profit compare in size?

Junko earns a yearly salary of $130,000 in her job and $1,000 per year in interest on her savings. After she quits her job to start a company, she uses all her savings to purchase manufacturing equipment for her company. Given the above information and the data summarizing her first year in business in the table, how much accounting profit or loss does Junko earn? { \text { Table } } \\ \begin{array} { | l | l | } \hline \text { Total revenue } & \text { Bills paid } \\ \hline \$ 350,000 & \$ 200,000 \\ \hline \end{array}

How long does it take for a company to be in the long run?

If your company has losses, then its:

Which of the following is FALSE?