Chapter 7 pt. 1 (most questions of exam 1) Flashcards
Explicit costs would include
rent
Which of the following is not an explicit cost?
The firm owner’s time
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% 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
$39,000
Paul’s Plumbing is a small business that employs 12 people. Which of the following is the best example of an implicit cost incurred by this firm?
The accounting services provided free of charge to the firm by Paul’s wife, who is an accountant.
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?
$26,000
The sum of the explicit and implicit costs incurred in the production process is called
total cost
Which of the following is most likely to be true of economic and accounting profits?
Economic profits are less than accounting profits
The difference between a firm’s total revenues and total costs when all explicit and implicit costs are included is the firm’s
economic profit
A firm has $200 million in total revenue and explicit costs of $100 million. Suppose its owners have invested $80 million in the company. The firm’s economic profit is
$100 million
An economist left his $100,000-a-year teaching position to work full-time in his own consulting business. In the first year, he had total revenue of $200,000 and the business explicit costs are $150,000. He made a(n)
economic loss
Suppose a firm has total revenue of $200 million, explicit costs of $190 million and implicit costs of of $20 million. This firm’s accounting profit is
$10 million
When total revenue minus total cost is equal to zero, the firm is
earning a normal profit
Which of the following is an example of a fixed input?
The acreage of a farmer’s land, property tax that doesn’t vary with changing production of a firm, and the size of a firm’s plant
Variable inputs are defined as any resource that
changes as output changes
The short run is a period of time in which
a firm uses at least one fixed output
