Pennsylvania State University - ECON 102 Quiz 05. All Correct answers Reviewed and indicated. 100% Score

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ECON 102 Quiz 5 Question 1 1 / 1 pts Bob used to earn $40,000 per year in his job as a nurse, but he quit in order to open his own pizza shop. Bob used $10,000 from his own savings account and borr... owed $200,000 more from his bank. The interest rate is 4%. In Bob’s first year of business he earned $80,000 in revenue and the cost of ingredients (flour, tomato sauce, cheese, etc.) was $67,000. For his first year of business, Bob’s accounting profit was _______, and his economic profit was ______. Correct! Remember the difference between accounting profit and economic profit is in the way costs are calculated. Accounting profit takes into account explicit costs only, whereas economic profit considers both explicit and implicit costs. Question 2 1 / 1 pts Economists assume that firms maximize the quantity of output produced Correct! act as though they intend to make profit as large as possible maximize both profit and the amount of output produced maximize total revenue The best way to predict a firm’s behavior is to assume that they are maximizing profit. Question 3 1 / 1 pts Labor Marginal Product 0 Consider the table above. If 4 workers are hired, how much output is produced? 4 Correct! 43 Sum the marginal products up to L = 4. Question 4 Consider the table above. What is the average product when 4 workers are hired? The average product of labor is calculated as Q/L. Question 5 1 / 1 pts Bob’s Bakery can produce 35 loaves of bread per day when 5 workers are hired. When 6 workers are hired, 46 loaves of bread are produced per day, ceteris paribus. Bob pays his workers $10 per day. What is the marginal product of the sixth worker? 46 loaves of bread $460 $110 Correct! 11 loaves of bread The marginal product of labor is the extra output associated with the last worker hired. Question 6 0 / 1 pts Diminishing marginal productivity would take place when worker wages are reduced. Correct Answer an office gets too crowded for the number of workers. You Answered union workers are hired. worker wages are increased. Given a fixed office size, continuing to add workers will eventually result in the new hires being less productive than the earlier hires. Question 7 1 / 1 pts Consider the figure above. Which graph represents a production function? Correct! Graph (a) shows a production function. If output is on the vertical axis and labor is on the horizontal axis, then output expands as additional labor is hired – but at a diminishing rate. This is according to the law of diminishing marginal productivity. Question 8 1 / 1 pts Consider the figure above. Which curve is marginal cost? Correct! D Marginal cost is U shaped and intersects ATC and AVC at their minimum points. Question 9 Consider the table above. What is the average total cost at 3 units of labor? $1 Correct! ATC = TC/Q = 27/24 Question 10 1 / 1 pts What is the time difference between the short run and the long run? 1 month 6 months 1 year Correct! it depends on the industry The short run is the time period such that at least one input to production is fixed. In the long run all factors of production may vary. Quiz Score: 9 out of 10 [Show More]

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