Q-27) Use the information below to answer questions: Farah needs to decide whether to keep producing and selling cookies, or quit and take up a job at a bank instead. If Farah takes up the job at the bank, she could earn $ 144,000 per year. However, if Farah produces and sells cookies, then it would cost her % 140,000 per year, but she would earn $ 360,000 per year in revenues.
• Farah's accounting profit IS …………………….and Farah’s economic profit …………………..
Q-28) Marginal product is
A) total amount of output produced.
B) total amount of output produced divided by the quantity of labor employed.
C) total amount of output produced divided by price of the output.
D) the increase in output that results from a one-unit increase in the quantity of labor
employed with all other inputs remaining the same.
Q-29) Average product is
A) total amount of output produced divided by price of the output.
B) total amount of output produced divided by the quantity of labor employed.
C) the increase in output that results from a one-unit increase in the quantity of labor
employed with all other inputs remaining the same.
D) total amount of output produced.
Q-30) ʺDiminishing marginal returnsʺ refer to a situation in which the
A) marginal cost of the last worker hired is less than the marginal cost of the previous worker hired.
B) marginal product of the last worker hired is less than the marginal product of the previous worker hired.
C) average product of the last worker hired is less than the average product of the previous worker hired.
D) average cost of the last worker hired is less than the average cost of the previous worker hired.
Q-31) The average product of labor exceeds the marginal product of labor
A) when the average product of labor is at its maximum.
B) when the marginal product of labor is at its maximum.
C) when the average product of labor is rising.
D) when the average product of labor is falling.
Q-32) Marginal cost is equal to
A) the change in total cost divided by the change in total revenue.
B) the change in total cost divided by the change in quantity.
C) quantity divided by total cost.
D) total cost divided by quantity.
Q-33) The economic information that MC gives us is:
The value of all resources used in the production process
The amount by which total cost increases when one more is produced
The amount that fixed cost increases when one more is produced
The amount that profits go up when one more is produced
Q-34) When marginal productivity (MP) is at its maximum, which is true?
Profit is at a maximum C. MC is at a minimum
AVC is at a minimum D. The firm is profitable
Q-35)Marginal cost tends to
A) first decrease and then increase as the quantity produced is increased.
B) always increase as the quantity produced is increased.
C) always decrease as the quantity produced is increased.
D) first increase and then decrease as the quantity produced is increased.
27. Farah's accounting profit = 360,000 - 140,000 = $220,000
Farah’s economic profit = 220,000 - 144,000 = $76,000
28. Ans: The increase in output that results from a one-unit increase in the quantity of labor employed with all other inputs remaining the same.
29. Ans: Total amount of output produced divided by the quantity of labor employed.
30. Ans: Marginal product of the last worker hired is less than the marginal product of the previous worker hired.
31. Ans: When the average product of labor is at its maximum.
32. Ans: The change in total cost divided by the change in quantity.
33.Ans: The amount by which total cost increases when one more is produced.
34. Ans: MC is at a minimum.
35. Ans: First decrease and then increase as the quantity produced is increased.
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