Which of the following statements is true Select one: a. If economic profit is negative, accounting profit must also be negative. b. When economic profit is zero, the firm could have done better putting their resources in some other industry of comparable risk. c. If accounting profit is positive, economic profit must be negative. d. None of the above statements is true. e. Implicit costs are the opportunity cost of the owner's resources

Which of the following statements is true Select one: a. If economic profit is negative, accounting profit must also be negative. b. When economic profit is zero, the firm could have done better putting their resources in some other industry of comparable risk. c. If accounting profit is positive, economic profit must be negative. d. None of the above statements is true. e. Implicit costs are the opportunity cost of the owner's resources

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: The Cost Of Production

Section12.1: What Are Costs?

Problem 1QQ

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Ball Bearings, Inc., faces costs of production as follows:a. Calculate the company’s average fixed cost, average variable cost, average total cost,and marginal cost at each level of production.b. The price of a case of ball bearings is $50. Seeing that he can’t make a profit, thechief executive officer (CEO) decides to shut down operations. What is the firm’sprofit/loss? Was this a wise decision? Explain.c. Vaguely remembering his introductory economics course, the chief financial officertells the CEO it is better to produce 1 case of ball bearings, because marginal revenueequals marginal cost at that quantity. What is the firm’s profit/loss at that level ofproduction? Was this the best decision? Explain
10. Suppose a firm must pay an annual tax, which is a fixed sum, independent of whether itproduces any output.a. How does this tax affect the firm’s fixed, marginal, and average costs?b. Now suppose the firm is charged a tax that is proportional to the number of items itproduces. Again, how does this tax affect the firm’s fixed, marginal, and average costs?
What is the rule in using the marginal analysis in making the optimal decision? a. the optimal output level is the point where the marginal benefit/marginal revenue is equal to the marginal cost. b. the optimal output level is the point where the marginal benefit/marginal revenue exceeds the marginal cost c. when the marginal costs start to exceed the marginal benefits (marginal revenue), the net benefits (profits) increase. d. as long as marginal benefit (marginal revenue) is greater than marginal cost, the net benefits (profits) decrease
1. Why do marginal costs tend to rise, and marginal benefits tend to fall? Explain. 2. Is it possible to avoid Diminishing Marginal Return? Why? Explain 3. Suppose that the Law of Diminishing Returns sets in immediately (that is, there is no range of output over which the Division of Labor holds). What would the short run marginal cost, average cost, and average variable cost curves look like? Explain.
Jane quit her job at Telus where she earned $36,000 a year. She cashed in $40,000 in corporate bonds that earned 10% interest annually to buy a mini-bus. Jane has decided to buy the mini-bus and set up a commuter service between Maple Ridge and Vancouver. There are 300 people who will pay $800 a year each for the commuter service; $650 from each person goes for gas, maintenance, insurance, depreciation, etc.
In 2012, Barrick Gold’s two most productive mines were Cortez and Goldstrike in Nevada, USA. Table 4.5 reports their financial performance. The “average cash cost” includes operating cost, royalties, and taxes, while the “average cost” includes the cash cost as well as amortization.a. Suppose that each mine produces at the rate where the (upward-sloping) marginal cost equals the price of gold. Illustrate the shifts in Goldstrike’s marginal cost curve, selling price, and production between 2010 and 2012. (Hints: The marginal cost curve changes over time. You have only one data point on each curve. Assume any other data necessary to draw the figures.)b. Use the 2012 data to compare the (i) short-run break-even conditions for Cortez and Goldstrike; and (ii) the long-run break-even conditions for the two mines.c. If the price of gold falls to $600 per ounce, how should Barrick adjust production at the two mines?
QUESTION 17 Whenever marginal revenues are higher than marginal costs, a. a firm should stop its production in order to maximize profits. b. a firm should decrease its production in order to maximize profits. c. a firm should increase its production in order to maximize profits. d. none of them are correct.
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At a current level of production of 10,000 per day in its Garner plant, the marginal cost of producing a Jess Jones Sausage is 50 cents. If the average cost of production is 40 cents, at that level of production, Select one: a. the average cost of production will increase if output is increased above 10,000 sausages per day. O b. the average cost of production will remain 40 cents if output is increased above 10,000 sausages per day. c. the average cost of production will decline if output is increased above 10,000 sausages per day. O d. the average fixed cost of production will increase if output is increased above 10,000 sausages per day.