Question

In the long run, which of the following resources are variable?

A) Land

B) Labor

C) Capital

D) All of the above.

Suppose Gerry knows the average total cost of producing seven bottles of wine is $13, while the average total cost of producing eight bottles of wine is $14. What is the marginal cost of the eighth bottle of wine?

A) The marginal cost is $21.

B) The marginal cost is $1.

C) The marginal cost is $5.

D) None of the above are correct.

If a firm is earning a positive accounting profit it must also be earning a positive economic profit.

A) True

B) False

Answer 1

Answer
option D
a long run is where all the inputs are variable and a short run is a period where one of the input is fixed.
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ANswer
option

TC=ATC*Q
TC(7)=13*7=91
TC(8)=14*8=112
MC(n)=(TC(n)-TC(p))/(n-p)
MC(n)=marginal cost of n th unit
TC(n)=Total cost of n units of output
TC(p)=Total cost of p unit of output
here, n>p.
MC(8)=(112-91)/(8-7)
=21
the MC is $21
option A
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False

Economic profit =Accounting profit -implicit costs
if accounting profit is positive then also the economic profit might be negative.