Economic profit is the difference between total revenue and 7) The change in total cost that results from a change in output

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Homework 5—Chapter 8 1) Five months ago Wilson opened up a health club. Which of the following is an implicit cost related to the health club? A) Wilson paid $120 for an outside laundry service to clean the towels used at the club.Document Preview:

Homework 5—Chapter 8 1) Five months ago Wilson opened up a health club. Which of the following is an 6) Cy recently went into the business of producing and selling cardboard boxes. implicit cost related to the health club? For this business, which of the following is most likely to be a fixed cost? A) Wilson paid $120 for an outside laundry service to clean the towels used at A) fire insurance the club. B) labor costs B) Wilson paid $100 for the pest control exterminator to spray the health club. C) paper costs C) Wilson previously worked as an accountant, earning $3,000 a month. D) adhesive costs D) Wilson usually eats four hamburgers a day, priced at $3 each. E) b, c, and d are equally likely to be fixed costs 2) Economic profit is the difference between total revenue and 7) The change in total cost that results from a change in output is __________ A) explicit costs. cost. B) implicit costs. A) average fixed C) sunk costs. B) average variable D) the sum of explicit and implicit costs. C) average total D) marginal 3) Consider the following information about a business Diane opened last year: price = $10, quantity sold = 25,000; implicit cost = $55,000; explicit cost = 8) The short run is $160,000. What was Diane’s economic profit? A) a period of time in which all inputs are fixed. A) $35,000 B) a period of time in which all inputs are variable. B) $195,000 C) a period of time in which some inputs are fixed. C) -$35,000 D) always less than a year. D) $90,000 E) a and d E) There is not enough information provided to answer this question. 9) The law of diminishing marginal returns holds for a situation in which 4) If a firm earns normal profit, then it has generated revenues A) all inputs are variable. A) equal to the sum of implicit and explicit costs. B) all inputs are fixed. B) greater than total opportunity costs. C) some inputs are variable and some inputs are fixed. C) sufficient to cover explicit costs, but not…