ECS1501
ECS1501 ASSIGNMENT 4 SOLUTIONS
SEMESTER 2 2020
ECS1501
ASSIGNMENT 4
SOLUTIONS
SEMESTER 2 2020
, ECS1501 ASSIGNMENT 4 SOLUTIONS SEMESTER 2 2020
4.1 Economists normally assume that the goal of a business firm is to
[1] maximise revenue.
[2] minimize cost.
[3] maximise profit.
[4] maximise exposure.
Explanation: Firm: - Firm is a business organization that buys or hires factors of production in order
to produce goods and services that can be sold at a profit. Objective of firm:-The standard
economic assumption underlying the analysis of firms is profit maximization.
4.2 The long run refers to the period of time for which
[1] a fixed input exists.
[2] all inputs are variable.
[3] marginal costs are decreasing.
[4] fixed costs are positive.
Explanation: The long-run is a period of time in which all factors of production and costs are
variable. In the long run, firms are able to adjust all costs, whereas, in the short run, firms are only
able to influence prices through adjustments made to production levels.
4.3 Suppose that for the year 2017, the firm Maartin's Marbles generated revenue of R1 850 million
and incurred explicit costs of R1 250 million and implicit costs of R450 million. For the year 2017,
Maartin’s Marbles had accounting profit of __________ and economic profit of __________.
[1] R600 million; R1 400 million
[2] R150 million; R600 million
[3] R600 million; R150 million
2
ECS1501 ASSIGNMENT 4 SOLUTIONS
SEMESTER 2 2020
ECS1501
ASSIGNMENT 4
SOLUTIONS
SEMESTER 2 2020
, ECS1501 ASSIGNMENT 4 SOLUTIONS SEMESTER 2 2020
4.1 Economists normally assume that the goal of a business firm is to
[1] maximise revenue.
[2] minimize cost.
[3] maximise profit.
[4] maximise exposure.
Explanation: Firm: - Firm is a business organization that buys or hires factors of production in order
to produce goods and services that can be sold at a profit. Objective of firm:-The standard
economic assumption underlying the analysis of firms is profit maximization.
4.2 The long run refers to the period of time for which
[1] a fixed input exists.
[2] all inputs are variable.
[3] marginal costs are decreasing.
[4] fixed costs are positive.
Explanation: The long-run is a period of time in which all factors of production and costs are
variable. In the long run, firms are able to adjust all costs, whereas, in the short run, firms are only
able to influence prices through adjustments made to production levels.
4.3 Suppose that for the year 2017, the firm Maartin's Marbles generated revenue of R1 850 million
and incurred explicit costs of R1 250 million and implicit costs of R450 million. For the year 2017,
Maartin’s Marbles had accounting profit of __________ and economic profit of __________.
[1] R600 million; R1 400 million
[2] R150 million; R600 million
[3] R600 million; R150 million
2
