Exam 8: A: Costs and the Supply of Goods

You purchased an automobile two years ago for $10,000. Its current market price is $5,000, and the expected market value one year from now is $4,500. If the interest rate is 10 percent, how much will it cost you to keep the car for an additional year (over and above operation and maintenance costs)?

One advantage of team production over contracting out is that

Mr. Hudson notes that if he produces 10 pairs of shoes per day, his average fixed cost (AFC) is $14 and his marginal cost is $8; if he produces 20 pairs of shoes per day, his MC is $15. What is his AFC when output is 20 pairs of shoes per day?

If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing

A business owned by a single individual who is fully liable for its debts is called

The normal rate of return on equity capital is also known as

If most businesses in an industry are earning a 13 percent rate of return on their assets, but your firm is earning 23 percent, your rate of economic profit is

Figure 8-10 -Using Figure 8-10, calculate the firm's approximate average total cost when it produces 12 units.

Which of the following would cause a firm's cost curve to shift downward?

A 10-cent-per-box tax on producers of cigars will

What amount must be earned to induce investors to continue to supply the funds necessary to maintain a firm's capital assets?

The long-run average total cost curve

In the long run, a firm might experience rising per-unit costs due to

A homeowner will be away from her house for six months. The monthly mortgage payment on the house is $1,000. The owner's cost of utilities is $100 if the house is unoccupied but $300 if the owner rents it out. If the owner wishes to minimize her losses from the house while away, she should rent the house for as much as the market will bear, as long as monthly rent is greater than which of the following? (Assume wear and tear to be zero regardless of whether the house is occupied.)

Sally leaves her $34,000 secretarial position and invests her savings of $15,000 (on which she was earning 6 percent interest) to start her own agency. After expenses, her net income was $38,900. Her economic profit was

If fixed costs are $200,000 and variable costs are $30 per unit over the relevant range of output, when 10,000 units are produced, the average total cost will be

Figure 8-2 -The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-2. If the marginal cost curve were constructed, at what output would it cross the AVC curve?

Use the table below to answer the following question. What is the marginal cost of producing the third unit of output?

Economies of scale imply that within some range a firm can increase the size of operation and

The long-run average total cost (LRATC) curve