Exam 10: Decision Making by Individuals and Firms

While eating pizza, you discover that the marginal benefit of eating one more slice is greater than the marginal cost of that slice. You conclude that:

Use the following to answer questions -(Table: Marginal Analysis of Sweatshirt Production I) Look at the table Marginal Analysis of Sweatshirt Production I. The profit at the optimal quantity of sweatshirts is:

Expenses associated with factors of production may be _____ costs.

Money that must be paid for the use of factors of production such as labor and capital is an:

Suppose Eastland College does not have a summer program and could rent out the campus to various summer sports camps for $100,000. The potential revenue of the summer camps represents:

Suppose Bob has a part-time business washing cars. He has washed nine cars on a given day; the marginal benefit of washing the tenth car is $20 and the marginal cost is $12. Bob should:

Pauli's Pizza offers one slice for $2, two slices for $3.50, three slices for $4.50, and four slices for $5.00. The marginal cost of the third slice is:

Use the following to answer questions Scenario: Betty's Cookie Shop Betty runs a cookie shop where she sells cookies for $1 each. She employs five people, each of whom worked a total of 500 hours last year; she paid them $10 per hour. Her costs of equipment and raw materials add up to $75,000. Her business ability is legendary, and other companies have offered to pay Betty $100,000 to come to work for them. She also knows she could sell her cookie shop for $150,000. The bank in town pays an annual interest rate of 3% on all funds deposited with it. -(Scenario: Betty's Cookie Shop) Betty's explicit costs are equal to:

Use the following to answer questions -(Table: Marginal Analysis of Sweatshirt Production I) Look at the table Marginal Analysis of Sweatshirt Production I. The optimal quantity of sweatshirts to produce is:

For most firms, economic profit is:

Use the following to answer questions Scenario: Accounting and Economic Profit Rather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year, Tommy Wang quit his job, which paid $60,000 per year, and started Wang's Wicker Furniture Store. He rented a showroom for $20,000 for the year, purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising. Instead of using the capital for his own business, he could rent it to a rival firm and earn $5,000 a year. In his first year, his revenue was $150,000. -(Scenario: Accounting and Economic Profit) Look at the scenario Accounting and Economic Profit. The accounting profit of Wang's Wicker Furniture Store is:

Until recently Rosemarie worked as an accountant, earning $30,000 annually. Then she inherited a piece of commercial real estate that had been renting for $12,000 annually. Rosemarie decided to leave her job and operate a Peruvian restaurant in the space she inherited. At the end of the first year, her books showed total revenues of $260,000 and total costs of $230,000 for food, utilities, cooks, and other supplies. Her economic profit at the end of one year is:

Use the following to answer questions : -(Table: TC's Pizza Parlor) Look at the table TC's Pizza Parlor. Assume that the marginal benefit is constant in intervals of production. Suppose five slices of pizza are being produced. What is the marginal benefit of producing one more slice of pizza?

In economics, the assumption is that consumers and firms will make choices that maximize the _____ of each activity.

Accounting profit differs from economic profit because:

The costs economists use in the concept of economic profit are:

In central Florida, the demand for real estate has been increasing rapidly for years. Therefore, the _____ cost of capital is _____ in central Florida's orange groves.

Accountants use only _____ costs in their computations of short-run total cost.

The dormitories of Eastland College are part of its:

In economic analysis, at the optimal quantity of an activity: