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- Which of the following equations calculates the profits of a firm? O A. Total revenues - Fixed costs OB. Total costs - Fixed costs OC. Total revenues - Total costs O D. Total revenues + Total costsA firm is producing the profit-maximizing amount of output when it is producing where its curve intersects its curve. Select one: total cost; total revenue O average total cost; average variable cost O marginal cost; average total cost O marginal cost; marginal revenue O marginal cost; average variable costYou learn that a firm's average total costs (ATC) and average variable costs (AVC) are exactly equal. What does that mean? O Marginal cost is zero O ATC and AVC must be equal to zero O Average fixed costs (AFC) are zero O Economic profit is positive O Economic profit is negative
- What is the law of diminishing returns? Why does marginal product eventuallydiminish?b. Explain the relationship between marginal product and average product. Lin’s makes fortune cookies. Anyone can make and sell fortune cookies, so thereare dozens of producers. All fortune cookies are the same and buyers and sellersknow this fact. In what type of market does Lin’s operate? What determines theprice of fortune cookies? What determines Lin’s marginal revenue?d. What is the shape of the AFC curve and why does it have this shape?A firm will operate so long as the price O A. exceeds average variable cost. OB. equals the opportunity cost. O C. exceeds average fixed cost. O D. exceeds average total cost.Under which of the folowing examples is t likaly that the accounting profit is positive and the economic profit is negative? OA Using a restaurant you purchased to sell Menican food instead of talian food. OR It you use a diamond mine as a touriet atraction instead of using it for mining. Oc Opering a bank branch near a university campus. OD. Such a scenario, where accounting cost is positive and economic profit is negafive, is not possibie.
- A firm will at the output where marginal cost increases O a. begin to experience diminishing returns O b. become profitable O c. begin to experience increasing returns O d. start to experience lossesQUESTION 2 When the article said that Bird was making 19% gross margin profit, this is O A. Accounting profit O B. Economic Profit O C. Neither accounting nor economic profit. D. Cannot tell from the article what kind of profit сA computer company produces affordable, easyto-use home computer systems and has fixed costs of$250. The marginal cost of producing computers is $700for the first computer, $250 for the second, $300 for thethird, $350 for the fourth, $400 for the fifth, $450 for thesixth, and $500 for the seventh.a. Create a table that shows the company’s output,total cost, marginal cost, average cost, variablecost, and average variable cost.b. At what price is the zero-profit point? At whatprice is the shutdown point?c. If the company sells the computers for $500, is itmaking a profit or a loss? How big is the profitor loss? Sketch a graph with AC, MC, and AVCcurves to illustrate your answer and show theprofit or loss.d. If the firm sells the computers for $300, is itmaking a profit or a loss? How big is the profitor loss? Sketch a graph with AC, MC, and AVCcurves to illustrate your answer and show theprofit or loss.
- In the Widgit industry, fixed costs are more than marginal cost. Also, Average Total Cost increases after a company produces 1,000 Widgits. What must be true about the marginal cost of the 1001 Widgit? O a. The marginal cost of the 1001 Widgit is LESS than the marginal cost of the 1000 widgit O b. The marginal cost of the 1001 Widgit is the SAME as the marginal cost of the 1000 Widgit O c. None of these are correct O d. The marginal cost of the 1001 Widgit is MORE than the marginal cost of the 1000 widgit O e. The 1001 widgit could cost more or less or the same as the 1000 widgitWhen firms in a competitive market are experiencing zero economic profits, one can assume that O they should be producing a different product. s there is currently no better way to use society's scarce resources. O they will eventually go bankrupt. O accounting losses are being experienced by these firms.27 ces The marginal costs (MC), average variable costs (AVC), and average total costs (ATC) for a firm are shown in the figure below. Instructions: Use the tool provided 'Profit/Loss' to illustrate the area of profit (or loss) that occurs at the profit-maximizing level of output, indicated by Pt. A. Drag the points to move or resize. O Price/Cost $50 $40 $30 $20 $10 0 10 20 30 Quantity MC 40 P = MR ATC AVC 50 Instructions: Enter your answers as a whole number. The profit-maximizing level of output is Tools Pt. A Profit/Loss units and profit is $
