Which of the following falls under the purview of microeconomics? Inflation Prof
ID: 1218649 • Letter: W
Question
Which of the following falls under the purview of microeconomics?
Inflation
Profit
Interest rate
Exchange rate
Macroeconomics encompasses the study of:
Cost of machineries
$8,000
Labor wages (monthly)
$4,000
Electricity charges (monthly)
$2,000
Rent of land (monthly)
$1,500
Rent paid for capital (monthly)
$3,000
Opportunity cost of the owners' work (monthly)
$7,000
What is the sunk cost?
$4,500
$3,500
$8,000
$12,500
Derek loans an amount from the bank to start a business. The annual interest is 11 percent on the loan amount. He has to pay the interest amount in equal monthly installments. From his business’s perspective, the interest that he has to pay is a type of:
Cost of machineries
$8,000
Labor wages (monthly)
$4,000
Electricity charges (monthly)
$2,000
Rent of land (monthly)
$1,500
Rent paid for capital (monthly)
$3,000
Opportunity cost of the owners' work (monthly)
$7,000
What is the annual economic profit (or loss)?
Price/unit (P) = $2
Quantity produced (Q) = 12,000
Variable cost/unit (V) = $0.50
Fixed cost (F) = $14,000
What is approximately the average cost of production?
$1.90
$1.20
$1.70
$0.50
-$62,000
$84,000
-$22,000
$92,000
The details of the production process of a certain commodity and its market price is given below:
marginal cost.
opportunity cost.
accounting cost.
sunk cost.
The table below shows a business firm’s list of expenditures. The machineries are bought in the current year. The owners also participate in the production process. The firm expects to earn revenue of $196,000 after one year.
national production.
average cost of production.
a household’s consumption decisions.
a firm’s production function.
When all fixed costs are regarded as sunk for the next production period, a firm should continue to operate only as long as the selling price per unit is at least as large as the average variable cost per unit.
True
False
The table below shows a business firm’s list of expenditures. The machineries are bought in the current year. The owners also participate in the production process. The revenue earning after one year is $196,000.
Cost of machineries
$8,000
Labor wages (monthly)
$4,000
Electricity charges (monthly)
$2,000
Rent of land (monthly)
$1,500
Rent paid for capital (monthly)
$3,000
Opportunity cost of the owners' work (monthly)
$7,000
Explanation / Answer
(1) Macroeconomics considers the following:
- Inflation
- Interest rate
- Exchange rate
(2) $8,000
Sunk cost is the cost of machine, which cannot be recovered by any current or future decision.
(3) Interest paid by Derek is a type of Explicit cost.
(4) Total economic cost = Monthly explicit costs + Opportunity costs
= $(4,000 + 2,000 + 1,500 + 3,000 + 7,000) = $17,500
Economic profit (loss) = Revenue - Economic sost = Revenue - $17,500
Profit cannot be precisely computed without revenue data.
(5) Total cost of production = Total variable cost + Fixed cost
= 12,000 x $0.5 + $14,000 = $(6,000 + 14,000) = $20,000
Average cost of production = $20,000 / 12,000 = $1.67 ~ $1.70
Note: First 5 questions are answered.
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