Question

1-Suppose in one year Leo's Lemonade Stand sells 5,000 cups of lemonade at a price of $0.25 per cup. Leo incurs the following costs for the year:
cups: $40
sugar: $20
lemons: $150
water: $75
wages for Linda (the friend Leo hires to help him): $400

Recall Leo also uses $100 from his savings account to buy materials to build the stand. He forgoes $5 in interest income that he could have earned if he had left the money in his savings account. Leo could have spent 30 hours mowing lawns at a rate of $15 per hour if he had not been working at his lemonade stand.

Leo's economic profit is ______ and his accounting profit is _________.

a.$10; $465

b.$465; $10

c.$110; $565

d.$445; $465

2- If a firm produces 130 units of output when 10 units of an input are used, and 137 units of output when 11 units of the input are used, what is the marginal product of the 11^th unit?

a.137

b.12.5

3-As output increases, the marginal product _______ and the slope of the total cost curve becomes _______.

a.decreases; flatter

b.decreases; steeper

c.increases; flatter

d.increases; steeper

c.11

d.7

4-

Output	Total Cost
0	$380
1	400
2	450
3	530
4	640
5	780

What is the average fixed cost of the 2^nd unit of output?

a.$25

b.$190

c.$225

d.Cannot be determined with the information given.

5-What is the marginal cost of the 4^th unit of output?

a.$65

b.$110

c.$140

d.$160

Answer 1