# ECO Ch 6,7, & 9

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Refer to the data. Total fixed cost is: A.) \$150.00. B.) \$100.00. C.) \$50.00. D.) \$6.25.
C.) \$50.00
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Marginal cost is the: A.)change in average total cost that results from producing one more unit of output. B.) rate of change in total fixed cost that results from producing one more unit of output. C.) change in average variable cost that results from producing one more unit of output. D.) change in total cost that results from producing one more unit of output.
D.) change in total cost that results from producing one more unit of output
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An explicit cost is:
a money payment made for resources not owned by the firm itself
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Economies and diseconomies of scale explain:
why the firm's long-run average total cost curve is U-shaped.
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The law of diminishing marginal utility states that:
as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point
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Which of the following best expresses the law of diminishing returns?
As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra or marginal output will decline.
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If a firm wanted to know how much it would save by producing one less unit of output, it would look to:
MC
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Refer to the data. The marginal cost of the fifth unit of output is:
\$80.00
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Entrepreneur's potential earnings as a salaried worker = \$50,000 Annual lease on building = \$22,000 Annual revenue from operations = \$380,000 Payments to workers = \$120,000 Utilities (electricity, water, disposal) costs = \$8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = \$80,000 Entrepreneur's forgone interest on personal funds used to finance the business = \$6,000 Refer to the data. Creamy Crisp's implicit costs, including a normal profit, are:
\$136,000
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To the economist, total cost includes:
explicit and implicit costs, including a normal profit
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The utility of a good or service:
is the satisfaction or pleasure one gets from consuming it.
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Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is:
Relatively inelastic
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Why do people tend to eat more at all-you-can-eat buffet restaurants than at restaurants where each item is purchased separately?
Once the all-you-can-eat meal is purchased, consumers view additional trips back to the buffet as having a price of zero.
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The concept of price elasticity of demand measures:
the sensitivity of consumer purchases to price changes
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Production costs to an economist:
reflect opportunity costs
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The law of diminishing marginal utility explains why:
demand curves slope downward
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Total fixed cost (TFC):
the cost of the firms fixed inputs, fixed costs do not change with output
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If demand for a product is elastic, the value of the price elasticity coefficient is:
greater than one
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Accounting profits are typically:
greater than economic profits because the former do not take implicit costs into account
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The fact that most medical care purchases are financed through insurance:
increases the amount of health care consumed by reducing the price of additional units of care
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Marginal utility is the:
change in total utility obtained by consuming one more unit of a good.
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Normal profit is:
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In which of the following cases will total revenue increase?
Price rises and demand is inelastic.
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The price elasticity of demand coefficient measures:
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In the long run:
all costs are variable costs
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Other things the same, if a price change causes total revenue to change in the opposite direction, demand is:
relatively elastic
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Refer to the data. The marginal cost curve would intersect the average variable cost curve at about:
units of output
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Marginal product:
may initially increase, then diminish, and ultimately become negative.
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Refer to the diagram. In the P1P2 price range, demand is:
relatively elastic
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The Illinois Central Railroad once asked the Illinois Commerce Commission for permission to increase its commuter rates by 20 percent. The railroad argued that declining revenues made this rate increase essential. Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike. It can be concluded that:
the RR felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic.
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Refer to the data. Diminishing returns begin to occur with the hiring of the _________ unit of labor.
third
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Fixed cost is:
any cost which does not change when the firm changes its output.
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Prashanth decides to buy a \$75 ticket to a particular New York professional hockey game rather than a \$50 ticket for a particular Broadway play. We can conclude that Prashanth:
has a higher "marginal utility to price ratio" for the hockey game than for the play
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Refer to the data. The price elasticity of demand is unity:
in the \$4-\$3 price range only.
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The demand for a luxury good whose purchase would exhaust a big portion of one's income is:
relatively price elastic
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If a variable input is added to some fixed input, beyond some point the resulting extra output will decline. This statement describes:
the law of diminishing returns
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A perfectly inelastic demand schedule: