Test Your Knowledge!

Average Fixed Cost (AFC) equals:

Let’s assume that a firm produces 90 products. Its total weekly cost (TC) at this output is $2,100. This includes TVC and TFC. We also know that the firm employs 3 part-time workers at a wage cost of $400 per worker per week. This is the firm’s only variable cost (TVC). What is the firm’s average fixed cost (AFC) at this output?

A firm’s total revenue equals $1600. The sum of all of its explicit costs equal $1,000. If the firm’s economist reports that its economic profits equals $200, how much must the firm’s implicit costs be?

An example of an implicit cost of attending college is:

Let’s assume that a firm’s total weekly costs are as follows: 1. Salaries = $12,400. 2. Supplies = $1,000. 3. Rent = $1,800. In addition, the owners could have earned interest of $200 per week if they had chosen to put $80,000 of their own money into a bank instead of investing it into their business. This firm’s weekly explicit costs are:

For a typical firm, marginal cost (MC):

Let’s assume that a firm’s total weekly costs are as follows:
1. Salaries of hired workers = $5,000.
2. Supplies = $1,000.
3. Rent = $400.
4. The owners have invested a certain amount of their own money into the business. This could have earned them interest of $300 per week if they had chosen to put it into a bank instead of investing it into their business.
5. The value of the owner’s time is estimated to be $800 per week. What are the firm’s total economic costs?

The respective cost values when the firm’s output is 4, are:

Reasons for diseconomies of scale include:

Large auto makers, such as General Motors, Toyota, Nissan, Honda, Volkswagen, Hyundai, Ford, and Chrysler benefit from: