Podcast
Questions and Answers
Which of the following is the BEST example of an explicit cost?
Which of the following is the BEST example of an explicit cost?
- The salary a business owner could be earning in another job.
- The depreciation of equipment.
- The forgone rent from using owned property for business operations.
- The cost of raw materials used in production. (correct)
What primarily distinguishes a sunk cost from a non-sunk cost?
What primarily distinguishes a sunk cost from a non-sunk cost?
- Sunk costs cannot be avoided, regardless of the decision made, while non-sunk costs can be avoided if the firm shuts down. (correct)
- Sunk costs are relevant to making future decisions, while non-sunk costs are not.
- Sunk costs can be recovered if the firm ceases operations.
- Non-sunk costs cannot be avoided if a firm shuts down.
In the context of cost minimization, what does the term 'long run' signify?
In the context of cost minimization, what does the term 'long run' signify?
- A period sufficiently long that all inputs are variable. (correct)
- A period less than one calendar year.
- A period when all inputs are fixed.
- A period when at least one input is fixed.
What is the primary objective of a cost-minimizing firm?
What is the primary objective of a cost-minimizing firm?
If a firm's isocost line shifts due to a change in total cost, what remains unchanged?
If a firm's isocost line shifts due to a change in total cost, what remains unchanged?
What does the slope of an isocost line represent?
What does the slope of an isocost line represent?
At the cost-minimizing input combination, what is true of the relationship between the marginal rate of technical substitution (MRTS) and the input price ratio?
At the cost-minimizing input combination, what is true of the relationship between the marginal rate of technical substitution (MRTS) and the input price ratio?
What condition defines a 'corner solution' in cost minimization?
What condition defines a 'corner solution' in cost minimization?
If the price of labor (w) increases, what is the expected impact on the cost-minimizing quantity of capital, all else being equal?
If the price of labor (w) increases, what is the expected impact on the cost-minimizing quantity of capital, all else being equal?
What is an 'expansion path'?
What is an 'expansion path'?
What defines an 'inferior input' in production?
What defines an 'inferior input' in production?
A firm's production function is given by $Q = 50K^{0.5}L^{0.5}$, where Q is output, K is capital, and L is labor. If the wage rate (w) is $5 and the rental rate of capital (r) is $20, what is the cost-minimizing ratio of capital to labor (K/L)?
A firm's production function is given by $Q = 50K^{0.5}L^{0.5}$, where Q is output, K is capital, and L is labor. If the wage rate (w) is $5 and the rental rate of capital (r) is $20, what is the cost-minimizing ratio of capital to labor (K/L)?
What is the key difference between the short-run and long-run labor demand curves?
What is the key difference between the short-run and long-run labor demand curves?
The production function is $Q=50K^{0.5}L^{0.5}$. If Q=100 and K=1, what is the L?
The production function is $Q=50K^{0.5}L^{0.5}$. If Q=100 and K=1, what is the L?
A firm's total cost function is $TC = 10 + 2Q$, where Q is the quantity of output. What is the nature of costs in this scenario?
A firm's total cost function is $TC = 10 + 2Q$, where Q is the quantity of output. What is the nature of costs in this scenario?
Flashcards
What are explicit costs?
What are explicit costs?
Costs involving a direct monetary outlay
What are implicit costs?
What are implicit costs?
Costs that do not involve outlays of cash.
What is opportunity cost?
What is opportunity cost?
The value of a resource in its best alternative use.
What are economic costs?
What are economic costs?
Signup and view all the flashcards
What are accounting costs?
What are accounting costs?
Signup and view all the flashcards
What are sunk costs?
What are sunk costs?
Signup and view all the flashcards
What are Non-sunk costs?
What are Non-sunk costs?
Signup and view all the flashcards
What is a cost minimization firm?
What is a cost minimization firm?
Signup and view all the flashcards
What is the long run?
What is the long run?
Signup and view all the flashcards
What is the short run?
What is the short run?
Signup and view all the flashcards
What is isocost line?
What is isocost line?
Signup and view all the flashcards
What are normal inputs?
What are normal inputs?
Signup and view all the flashcards
What is capital demand curve?
What is capital demand curve?
Signup and view all the flashcards
What are total variable costs?
What are total variable costs?
Signup and view all the flashcards
What are total fixed costs?
What are total fixed costs?
Signup and view all the flashcards
