You run a small business producing picture frames. This month your total cost is $10,000, your variable cost is $5,000, and your output is 5,000 picture frames. Given this information, your:
A. average variable cost is $2.
B. average total cost is $1.
C. average total cost is $3.
D. average fixed cost is $1.
Answer: D
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Graphically, producer surplus is measured as the area
A. under the demand curve and below the actual price. B. above the supply curve and above the actual price. C. under the demand curve and above the actual price. D. above the supply curve and below the actual price.
When the cost of producing a product is paid, at least in part, by someone other than the producer, the cost is referred to as
A) an external cost. B) an external profit. C) an external benefit. D) an external/internal cost. E) a public cost.
If the price elasticity is between 0 and 1, demand is
A) elastic. B) inelastic. C) unit elastic. D) perfectly elastic.
Corrective taxes are unlike most other taxes because they
a. distort incentives. b. move the allocation of resources away from the social optimum. c. raise revenue for the government. d. move the allocation of resources closer to the social optimum.