Sally owns a small business that she operates in a small building she owns. Give

Question

Sally owns a small business that she operates in a small building she owns. Given the information in Exhibit 7-1, Sally's economic profit is a. $80,000 b. $50,000 c. $65,000 d. $35,000 $24,000 5. Inputs that can be increased or decreased in the short run are called a. fixed inputs b. variable inputs c. economic inputs d. accounting inputs e. normal inputs 6. 7. The law of diminishing returns explains why a. monopolies have a guaranteed profit margin b. short-run MC and AVC curves are U-shaped c- the production possibilities curve is bowed out d. long run supply curves are downward sloping e. total product is a straight line 8. In the range of increasing marginal returns, total product is a. increasing at a constant rate b. increasing at an increasing rate c. increasing at a decreasing rate d. decreasing at an increasing rate e. decreasing at a decreasing rate 9. If fixed cost at Q- 100 is $130, then a. fixed cost at Q 0 is $O b. fixed cost at Q-0 is less than $130 c. fixed cost at Q- 200 is $260 fixed cost at Q-200 is S130 e. it is impossible to calculate fixed costs at any other quantity

Explanation / Answer

6.

Inputs that can be increased or decreased in the short run are called:

b. variable inputs.

This is because a firm can increase or decrease its variable factors of production.

7.

The law of diminishing marginal returns explains why:

b. short-run MC and AVC curves are U-shaped.

8.

In the range of increasing marginal returns, total product is:

b. increasing at an increasing rate.

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