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Question
Figure 15-15
Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
Refer to Figure 15-15. Why won't regulators require that Erickson Power produce the economically efficient output level?
A) because there is insufficient demand at that output level
B) because at the economically efficient output level, the marginal cost of producing the last unit sold exceeds the consumers' marginal value for that last unit
C) because Erickson Power will earn zero profit
D) because Erickson Power will sustain persistent losses and will not continue in business in the long run
Answer
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Suppose two countries use different combinations of inputs, such as labor and capital, to produce the same product. This implies all of the following except that
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B) the relative input prices.
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The typical shape of an isoquant is
A) convex towards the origin.
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An expansion path shows
A) the level of sales necessary for a firm if it wants to expand.
B) the level of long-run average cost at different scales of operation.
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B) is equivalent to minimizing cost for a given level of output.
C) necessitates using only relatively low-priced inputs.
D) will maximize total revenue.
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Golda Rush quit her job as a manager for Home Depot to start her own hair dressing salon, Goldilocks. She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest) and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year. In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 on equipment and hairdressing material. Based on this information, what is the amount of her implicit costs?
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C) $42,000
D) $41,500
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Which of the following would be categorized as an opportunity cost?
a. not being able to spend your $10,000 savings if you sink the money in your business
b. the cost of purchasing supplies for your house-cleaning business
c. the cost of purchasing auto insurance for your dry-cleaning delivery business
A) a only
B) a and c only
C) b and c only
D) all of the above