Microeconomics Unit 3

What is the Profit Maximizing Formula?

• Revenue > Expenses

• MR > ATC

• MR = MC

• AFC + AVC = ATC

What is the difference between Accounting (Normal) Profit and Economic Profit?

• Merchandise Costs

• Opportunity Cost

• Labor Cost

• Expenses

Bob currently earns $50,000 per year as a financial planner. If he quit his job and opened an ice cream stand on the beach, earning $25,000 per year in accounting profit, what is his Economic Profit?

• $25,000

• $50,000

• $75,000

• -$25,000

According to the Profit Maximizing Formula, how many units should this firm produce?

• 2

• 3

• 4

• 5

Which of the following is the best definition for Marginal Cost?

• The cost of producing more units

• The cost of producing one additional unit

• Fixed costs

• Variable Costs

Which costs change based on the number of units produced?

• Fixed

• Variable

Which costs do not change based on the number of units produced?

• Fixed Costs

• Variable Costs

Rent and machinery are an example of which of these?

• Fixed Costs

• Variable Costs

Labor, utilities, and raw materials are an example of which of these?

• Fixed Costs

• Variable Costs

A change in Fixed Costs affect which of the following? (check all that apply)

• AFC

• AVC

• ATC

• MC