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price elasticity of demand of accounting profits

1). Use the attached diagram to answer the next question. Between the prices of $10 and $8, the price elasticity of demand is:
A) 0.5
B) 0.9
C) 1.11
D) 2.0

2). Suppose that a business incurred implicit costs of $300,000 and explicit costs of $1,300,000 over the past year. If the firm earned $1,400,000 in revenue, its:
A) accounting profits were $400,000 and its economic profits were $100,000
B) accounting losses were $200,000 and its economic profits were $100,000
C) accounting profits were $100,000 and its economic profits were zero
D) accounting profits were $100,000 and its economic losses were $200,000

3). The WXY Corporation has fixed costs of $50. Its total variable costs (TVC) vary with output as shown in the attached table.

Refer to the table. The average total cost of 4 units of output is:
A) $27.50
B) $40.00
C) $52.50
D) $210.00

4). The attached diagram shows the short-run average total cost curves for five different plant sizes for a firm. The firm experiences economies of scale over the range of plant sizes:
A) 1 through 2 only
B) 1 through 3 only
C) 1 through 5
D) 3 through 5 only

5). Refer to the table attached. Suppose the firm's goal is maximum profits (or minimum losses.) If this firm's minimum average variable cost is $23, the firm will produce:

A) 0 units
B) 2 units
C) 3 units
D) 4 units

6). Use the attached diagram to answer the next question.
Refer to the diagrams, which pertain to a purely competitive firm and the industry in which it operates. The firm will produce q units and incur an economic loss.

A) True
B) False

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Dear Student,

Thank you for using BM.
Below are my answers.

ANSWERS

1. B
[(22-18)/18]/[(8-10)/10] = -0.89
Absolute value ...

Solution Summary

The price elasticity of demand is featured.

$2.19