# Review 3. Table The following table presents cost and revenue information for Soper s Port Vineyard.

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1 Review 3 Chapters 10, 11, 12, 13, 14 are included in Midterm 3. There will be questions. Most of the questions will be definitional, make sure you read the text carefully. Table 14-2 The following table presents cost and revenue information for Soper s Port Vineyard. COSTS REVENUES Total Marginal Quantity Total Cost Cost Demanded Price Revenue Quantity Produced Marginal Revenue 1. Refer to Table Consumers are willing to pay \$120 per unit of port wine. What is the total revenue from selling 7 units? a. \$120 b. \$700 c. \$820 d. \$ Refer to Table Consumers are willing to pay \$120 per unit of port wine. What is the total revenue from selling 4 units? a. \$120 b. \$217 c. \$263 d. \$ Refer to Table Consumers are willing to pay \$120 per unit of port wine. What is the marginal revenue from selling the 3rd unit? a. \$50 b. \$80 c. \$120 d. \$ Refer to Table Consumers are willing to pay \$120 per unit of port wine. What is the average revenue when 4 units are sold? a. \$50 b. \$120 c. \$125 d. \$130 1

2 Name: 5. Refer to Table Consumers are willing to pay \$120 per unit of port wine. What is the marginal cost of the 1st unit? a. \$50 b. \$75 c. \$80 d. \$ Refer to Table Consumers are willing to pay \$120 per unit of port wine. What is the marginal cost of the 8th unit? a. \$0 b. \$100 c. \$120 d. \$ Refer to Table Consumers are willing to pay \$120 per unit of port wine. What is Soper's Port Vineyard's economic profit at their profit maximizing point? a. \$78 b. \$243 c. \$278 d. \$375 Figure Refer to Figure This graph represents the tobacco industry. The industry creates a. positive externalities. b. negative externalities. c. no externalities. d. no equilibrium in the market. 2

3 Name: 9. Refer to Figure This graph represents the tobacco industry. Without any government intervention, the equilibrium price and quantity are a. \$1.90 and 38 units, respectively. b. \$1.80 and 35 units, respectively. c. \$1.60 and 42 units, respectively. d. \$1.35 and 58 units, respectively. 10. Refer to Figure This graph represents the tobacco industry. The socially optimal price and quantity are a. \$1.90 and 38 units, respectively. b. \$1.80 and 35 units, respectively. c. \$1.60 and 42 units, respectively. d. \$1.35 and 58 units, respectively. Table 12-5 Income Tax rate \$0 to \$40,000 20% Over \$40,000 50% 11. Refer to Table What is the marginal tax rate for a person who makes \$35,000? a. 20% b. 30% c. 40% d. 50% 12. Refer to Table What is the marginal tax rate for a person who makes \$60,000? a. 20% b. 30% c. 40% d. 50% 13. Refer to Table What is the average tax rate for a person who makes \$60,000? a. 20% b. 30% c. 40% d. 50% 14. XYZ corporation produced 300 units of output but sold only 275 of the units it produced. The average cost of production for each unit of output produced was \$100. Each of the 275 units sold was sold for a price of \$95. Total profit for the XYZ corporation would be a. -\$3,875. b. \$26,125. c. \$28,500. d. \$30,000. 3

4 Name: Scenario 13-1 Joe wants to start his own business. The business he wants to start will require that he purchase a factory that costs \$400,000. Joe currently has \$500,000 in the bank earning 3 percent interest per year. 15. Refer to Scenario Suppose Joe purchases the factory using \$200,000 of his own money and \$200,000 borrowed from a bank at an interest rate of 6 percent. What is Joe s annual opportunity cost of purchasing the factory? a. \$3,000 b. \$6,000 c. \$15,000 d. \$18, Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 176 units of output per day when 16 workers are hired (holding other inputs fixed). Then the marginal product of the 16th worker is a. 10 units of output. b. 11 units of output. c. 16 units of output. d. 176 units of output. Table 13-2 Number of Workers Output Refer to Table What is the marginal product of the fourth worker? a. 65 b. 70 c. 75 d Refer to Table At which number of workers does diminishing marginal product begin? a. 2 b. 3 c. 4 d. 5 4

5 Name: Table 13-3 Number of Workers Number of Machines Output (corks produced per hour) Marginal Product of Labor Cost of Workers Cost of Machines Total Cost 19. Refer to Table Each worker at Gallo's cork factory costs \$12 per hour. The cost of each machine is \$20 per day regardless of the number of corks produced. If Gallo's produces at a rate of 70 corks per hour and operates 8 hours per day, what is Gallo s total labor cost per day? a. \$72 b. \$96 c. \$480 d. \$576 Table 13-6 Adrian's Premium Chocolates produces boxes of chocolates for its mail order catalogue business. She rents a small room for \$150 a week in the downtown business district that serves as her factory. She can hire workers for \$275 a week. There are no implicit costs. Number of Workers Boxes of Chocolates Produced per Week Marginal Product of Labor Cost of Factory Cost of Workers Total Cost of Inputs , , Refer to Table What is the marginal product of the second worker? a. 110 b. 200 c. 260 d

6 Name: 21. Refer to Table What is the total cost associated with making 890 boxes of premium chocolates per week? a. \$1,250 b. \$1,325 c. \$1,400 d. \$1, Refer to Table During the week of July 4th, Adrian doesn't box any chocolates. What are her costs during the week? a. \$0 b. \$150 c. \$275 d. \$ Refer to Table One week, Adrian earns a profit of \$125. If her revenue for the week is \$1100, how many boxes of chocolate did she produce? a. 140 b. 330 c. 780 d. 950 Table 13-9 Output Total Cost Refer to Table What is the total fixed cost for this firm? a. \$20 b. \$30 c. \$40 d. \$ Refer to Table What is average fixed cost when output is 40 units? a. \$1.00 b. \$3.32 c. \$5.00 d. \$ Refer to Table What is average variable cost when output is 50 units? a. \$3.60 b. \$4.00 c. \$4.40 d. \$4.80 6

7 Name: 27. Refer to Table What is variable cost when output equals 30 units? a. \$4.00 b. \$4.33 c. \$40.00 d. \$90.00 Table Consider the following table of long-run total cost for four different firms Quantity Firm 1 \$210 \$340 \$490 \$660 \$850 \$1,060 \$1,290 Firm 2 \$180 \$350 \$510 \$660 \$800 \$930 \$1,050 Firm 3 \$120 \$250 \$390 \$540 \$700 \$870 \$1,050 Firm 4 \$150 \$300 \$450 \$600 \$750 \$900 \$1, Refer to Table Which firm has constant returns to scale over the entire range of output? a. Firm 1 b. Firm 2 c. Firm 3 d. Firm 4 7

8 Review 3 Answer Section MULTIPLE CHOICE 1. ANS: D DIF: 2 REF: 14-1 TOP: Total revenue 2. ANS: D DIF: 2 REF: 14-1 TOP: Total revenue 3. ANS: C DIF: 2 REF: 14-1 TOP: Marginal revenue 4. ANS: B DIF: 2 REF: 14-1 TOP: Average revenue 5. ANS: A DIF: 2 REF: 14-2 TOP: Marginal cost 6. ANS: C DIF: 2 REF: 14-2 TOP: Marginal cost 7. ANS: C DIF: 2 REF: 14-2 TOP: Economic profit 8. ANS: B DIF: 2 REF: 10-1 TOP: Externalities 9. ANS: C DIF: 2 REF: 10-1 TOP: Externalities 10. ANS: B DIF: 2 REF: 10-1 TOP: Externalities 11. ANS: A DIF: 2 REF: 12-2 TOP: Marginal tax rates 12. ANS: D DIF: 2 REF: 12-2 TOP: Marginal tax rates 13. ANS: B DIF: 3 REF: 12-2 TOP: Average tax rates 14. ANS: A DIF: 2 REF: 13-1 TOP: Profit 15. ANS: D DIF: 2 REF: 13-1 TOP: Opportunity cost 16. ANS: B DIF: 1 REF: 13-2 TOP: Marginal product of labor 17. ANS: D DIF: 2 REF: 13-2 TOP: Marginal product 18. ANS: D DIF: 1 REF: 13-2 TOP: Marginal product 19. ANS: D DIF: 2 REF: 13-2 TOP: Variable costs 20. ANS: D DIF: 2 REF: 13-3 TOP: Marginal product of labor 1

9 21. ANS: A DIF: 2 REF: 13-3 TOP: Total cost 22. ANS: B DIF: 2 REF: 13-3 TOP: Fixed costs 23. ANS: C DIF: 2 REF: 13-3 TOP: Accounting profit 24. ANS: C DIF: 2 REF: 13-4 TOP: Fixed costs 25. ANS: A DIF: 3 REF: 13-4 TOP: Average fixed cost 26. ANS: B DIF: 3 REF: 13-4 TOP: Average variable cost 27. ANS: D DIF: 2 REF: 13-4 TOP: Variable costs 28. ANS: D DIF: 2 REF: 13-4 TOP: Constant returns to scale 2

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