Exam 6: Costs

Tom is going to quit his job to pursue his PhD in economics,which will take him 6 years to complete.He currently makes $55,000 per year as a high school teacher.While going to school,he will receive a stipend of $24,000 per year plus $6,000 per year to help cover food and rent.His living expenses are the same regardless of what he does.What is Tom's opportunity cost of pursuing his PhD?

A firm pays $5 for each unit of capital.Labor costs $5 per hour for the first 10 hours and $10 per hour for every hour thereafter.Draw the isocost curves for total costs of $50 and $100.

Why might a police officer not pull over someone speeding two miles over the speed limit?

Learning by doing,which leads to lower costs in the long run,is often

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.The average cost of the 5th T-shirt is

Average fixed cost (AFC)

Which of the following will cause the average cost curve of making cigarettes to shift?

If the marginal cost of producing a good is increasing as a firm produces more of the good,then which of the following must be TRUE?

A consumer purchases a book by driving across town to a bookstore,standing in line for five minutes to pay the cashier,and then pays $5.The same book is purchased by another consumer who spends 2 minutes placing the order over the Internet for $10.The book necessarily cost the first consumer less.

Which of the following is most likely to have increasing opportunity costs?

The Nifty Gum Co.has purchased a large parcel of land for $1 million.The company recently discovered that the land is contaminated and is worthless to all possible buyers.The opportunity cost of the land is

Suppose that capital and labor must be kept in a fixed proportion to produce a particular good.For example,digging a trench requires one worker who has one shovel.What does this imply about returns to scale?

A pizza parlor's rent is

Suppose a firm can only vary the quantity of labor hired in the short run.An increase in the cost of capital will

If increasing returns to scale are present,the long-run average cost increases as more output is produced.

The marginal cost curve intersects the average fixed cost curve at its minimum.

When you have diminishing marginal returns to labor

Assume baseball player salaries are fully determined before the season starts.From the point of view of the baseball team owner,player salaries during the course of the season are then

If a firm buys a delivery van for $18,000 and can resell it in 2 years for $7,500,the opportunity cost is

An old friend takes you out to dinner and pays for your meal.Which of the following best represents your opportunity cost?