Penn ECON102 Quiz 5

Question 1

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 borrowed $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 ______.

$5,000; - $35,400

- $35,000; - $5,000

$75,000; $40,400

$67,000; $115,400

Question 2

Economists assume that firms

maximize the quantity of output produced

act as though they intend to make profit as large as possible

maximize both profit and the amount of output produced

maximize total revenue

Question 3

Labor	Marginal Product
0
1	8
2	10
3	13
4	12
5	8
6	7
7	4
8	3

Consider the table above. If 4 workers are hired, how much output is produced?

4

12

31

43

Question 4

Labor	Output
1	0
2	8
3	14
4	18
5	20

Consider the table above. What is the average product when 4 workers are hired?

80

20

4.5

2

Question 5

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

11 loaves of bread

Question 6

Diminishing marginal productivity would take place when

worker wages are reduced.

an office gets too crowded for the number of workers.

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

Consider the figure above. Which graph represents a production function?

(a)

(b)

(c)

(d)

Question 8

Consider the figure above. Which curve is marginal cost?

A

B

C

D

Question 9

Labor	Output	Variable Cost	Fixed Cost	Total Cost
0	0			12
1	10	5
2	18			22
3	24	15
4	28	20		32

Consider the table above. What is the average total cost at 3 units of labor?

$1

$1.13

$9

$27

Question 10

What is the time difference between the short run and the long run?

1 month

6 months

1 year

it depends on the industry