Economics, 11e, Global Edition (Parkin)
Part 4 Review
1 Firms and Markets
1) Ms. Lollipop opened a candy store in December 2013. She rented a building for $25,000 a year and used $30,000 from her savings account, which earned an annual interest rate of 5 percent, to buy capital equipment. In December 2014, the market value of her capital equipment was $26,000. What is the economic depreciation of Lollipop's capital?
A) $3,000
B) $4,000
C) $1,000
D) $25,000
Answer: B
Topic: Economic Depreciation
Skill: Conceptual
Status: Previous edition, Part Review 4
AACSB: Analytical Skills
2) Ms. Lollipop opened a candy store in December 2013. She rented a building for $25,000 a year and used $30,000 from her savings account, which earned an annual interest rate of 5 percent, to buy capital equipment. During the first year of operation, Lollipop paid $28,000 to her employees, $10,000 for utilities, and $16,000 for goods she bought from other firms. In December 2014, the market value of Lollipop's capital equipment was $26,000. Lollipop's best alternative to running her candy store is to work as a sales clerk at Winn-Dixie for $15,000 a year. What is Lollipop's total opportunity cost?
A) $99,500
B) $94,000
C) $79,000
D) $20,500
Answer: A
Topic: Opportunity Costs
Skill: Conceptual
Status: Previous edition, Part Review 4
AACSB: Analytical Skills
3) Ms. Lollipop ope ned a candy store in December 2013. She ren ted a build ing for $25,000 a year and used $30,000 from her sav ings accou nt, which ear ned an ann ual in terest rate of 5 perce nt, to buy capital equipment. During the first year of operation, Lollipop paid $28,000 to her employees, $10,000 for utilities, and $16,000 for goods she bought from other firms. In December 2014, the market value of Lollipop's capital equipme nt was $26,000. Lollipop's best alter native to running her candy store is to work as a sales clerk at Winn-Dixie for $15,000 a year. What is Lollipop's econ omic profit?
A) $21,000
B) $500
C) $5,000
D) -$9,000
An swer: B
Topic: Economic Profit
Skill: Conceptual
Status: Previous edition, Part Review 4
AACSB: Analytical Skills
4) In the table above, what is the marg inal product of the 5th worker?
A) 190 units per week
B) 4 un its per week
C) 20 un its per week
D) 38 un its per week
An swer: C
Topic: Marginal Product of Labor
Skill: Analytical
Status: Previous edition, Part Review 4
AACSB: Analytical Skills
5) Give n the in formati on in the table above, suppose labor is the only variable in put. The price of labor is $400 per week and total fixed costs are $1,000 per week. What is the total cost of produci ng 100 un its?
A) $1,700
B) $1,800
C) $1,900
D) $2,000
An swer: B
Topic: Total Cost
Skill: Analytical
Status: Previous edition, Part Review 4
AACSB: Analytical Skills
6) Given the information in the table above, suppose labor is the only variable input. The price of labor is $400 per week and total fixed costs are $1,000 per week. If 170 units are produced, the average total cost is
