Exam 6: Production Costs

A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20,000 a year, and take over a store building that he owns and currently rents to his brother for $6,000 a year. His expenses at the sushi bar would be $50,000, for food and $2,000 for gas and electricity. What are his implicit costs?

Exhibit 6-8  Costs schedules for producing pizza By filling in the blanks in Exhibit 6-8, the fixed cost of producing 6 pizzas is shown to be equal to:

Total fixed costs are costs that are fixed with respect to:

Exhibit 6-14  Cost curves In Exhibit 6-14, constant returns to scale only exist for output levels between:

Normal profit is defined as a(n):

Exhibit 6-13  Cost curves In Exhibit 13, TFC is shown by the graph labeled:

Exhibit 6-12  Cost schedule for producing pizza By filling in the blanks in Exhibit 6-12, the AVC of 4 pizzas is shown to be equal to:

The short run is a period of time:

Exhibit 6-3  A marginal product curve As shown in Exhibit 6-3, the marginal product of labor for the last worker hired when 5 workers are employed per day is:

If the minimum points of all the possible short-run average total cost curves become successively lower as quantity of output increases, then:

In the long run, total fixed cost:

Each potential short-run average total cost curve is tangent to the long-run average cost curve at:

Economic profit is:

Exhibit 6-8  Costs schedules for producing pizza By filling in the blanks in Exhibit 6-8, the total cost of producing 5 pizzas is shown to be equal to:

If a firm has total revenue of $200 million, explicit costs of $190 million, and implicit costs of $30 million, its economic profit is:

Assume both the marginal cost and the average variable cost curves are U-shaped. At the minimum point on the AVC curve, marginal cost must be:

Sam quits his job as an airline pilot and opens his own pilot training school. He was earning $40,000 as a pilot. He withdraws $10,000 from his savings where he was earning 6 percent interest and uses the money in his new business. He uses a building he owns as a hanger and could rent it out for $5,000 per year. He rents a computer for $1,200, buys office supplies for $500, rents an airplane for $6,000, pays $1,300 for fuel and maintenance, and hires one worker for $30,000. Sam's total revenue from pilot training classes this year equaled $90,400. Sam's explicit costs this year equals:

Which of the following is true if the total cost curve is rising?

A firm estimates that when output is 10, its total costs are $900. It also finds that when output is 11, its total costs are $920. The marginal cost of the eleventh unit of output is:

If two workers can produce 22 units of output, and the addition of a third worker increases output to 30 units, the marginal product of the third worker is