Business 302L

Fred Lasenby Auto Parts (FLAP) has annual revenue of $100,000, annual explicit costs of $50,000, and annual implicit costs of $30,000. Which of the following statements is true?
FLAP is making accounting profit of $60,000.
FLAP is making economic profit of $20,000.
FLAP is making accounting profit of $30,000.
FLAP is making economic losses of $10,000.
FLAP is making economic profit of $30,000.

Economic profit is equal to

total revenue minus depreciation.
average revenue minus the average cost of producing the last unit of a good or service.
total revenue minus the opportunity cost of producing goods and services.
total revenue minus the explicit cost of producing goods and services.
total revenue minus the implicit cost of producing goods and services.

Alternative Outputs from One Day of Labor
Wheat (in bushels)Textiles (in yards)
Great Britain 12 3
United States 3 12
According to the table above, the United States

should export wheat to Great Britain.
has an absolute advantage over Great Britain in the production of textiles.
has an absolute advantage over Great Britain in the production of wheat.
none of the other answers are correct.
has a comparative advantage in the production of wheat.

Comparative advantage is based on
capital costs
opportunity costs
dollar price
labor costs
both labor and capital costs

Americans love to eat peanut butter & jelly sandwiches. If the price of jelly increases (while other things remain constant), what effect will this have on the market for peanut butter?

both price and quantity fall
both price and quantity rise
price rises and quantity remains the same
price falls, quantity rises
price rises, quantity falls

A fall in the demand for a resource to produce some product (X) will

reduce the value of that resource.
reduce the use of that resource in alternative lower valued products.
none of these answers are correct.
all of these answers are correct.
raise the cost of using the resource for an alternative product (Y).

As more buyers enter a market, demand increases and

the price of the good will tend to rise.
the producers are able to use resources with a higher opportunity cost.
all of the other answers are correct.
the quantity supplied tends to increase.
existing buyers will conserve the use of the good to higher valued uses.

A steeper demand curve

tends to be more inelastic than a flatter demand curve.
indicates that there will be a surplus.
tends to be more elastic than a flatter demand curve.
indicates there will be a shortage.
indicates equilibrium will be hard to achieve without government oversight.

According to the research of a Harvard economist, the demand for cocaine is unit elastic. This means if the price of cocaine were to rise by 10 percent, (i) quantity consumed would fall 10 percent and (ii) dealer income from the sale of cocaine would fall 10 percent. Which of these statements is true?

It cannot be determined from the information given.
i but not ii
both i and ii
ii but not i
neither i nor ii

A factory produces 100 MP3 players per week. AVC = $10 and FC = $10,000. The factory's TC equals

$15,000
$11,000
$10,010
$50,000
$20

Acme, Inc. is currently producing 12,000 gadgets per year. Acme's average total cost (ATC) is $18 per year. What is Acme's total cost (TC) per year?

A monopoly maximizes its profits using what rule?

In the diagram above, at the market equilibrium price, what is the consumer surplus?

Air pollution creates a negative production externality. Therefore,

social welfare is greatest when all air pollution is eliminated.
governments should encourage all private firms to consider only private costs.
social welfare will be enhanced if some, but not all, air pollution is eliminated.
the free market result maximizes social welfare.
the free market does not produce enough air pollution.

Everything else the same, in the foreign exchange market which of the following will increase the supply of U.S. dollars?

Japanese interest rates fall.
U.S. interest rates fall.
U.S. income falls.
all of the other answers are correct.
The price level in the U.S. falls relative to the price level in Japan.

Which of the following statements about internalizing a negative production externality is most correct?

Internalizing a negative production externality will cause an industry to increase the quantity it supplies to the market and increase the price of the good produced.

Internalizing a negative production externality will cause an industry to decrease the quantity it supplies to the market and increase the price of the good produced.

Internalizing a negative production externality will cause an industry to increase the quantity it supplies to the market and decrease the price of the good produced.

Internalizing a negative production externality will cause an industry to decrease the quantity it supplies to the market and decrease the price of the good produced.

Internalizing a negative production externality will have no net effect on quantity supplied or the price of the good.