question
Which of the following statements is true?
Select one:
a. Costs are always explicit, never implicit.
b. Costs are always implicit, never explicit.
c. George runs a stationery shop; he paid Frank $5,000 for the carpet he installed in the shop. The $5,000 for carpet is an implicit cost.
d. An implicit cost is a cost that represents the value of resources used in production for which no actual monetary payment is made.
e. none of the above
Select one:
a. Costs are always explicit, never implicit.
b. Costs are always implicit, never explicit.
c. George runs a stationery shop; he paid Frank $5,000 for the carpet he installed in the shop. The $5,000 for carpet is an implicit cost.
d. An implicit cost is a cost that represents the value of resources used in production for which no actual monetary payment is made.
e. none of the above
answer
D
question
Five months ago Wilson opened up a health club. Which of the following is an implicit cost related to the health club?
Select one:
a. Wilson paid $120 for an outside laundry service to clean the towels used at the club.
b. Wilson paid $100 for the pest control exterminator to spray the health club.
c. Wilson previously worked as an accountant, earning $3,000 a month.
d. Wilson usually eats four hamburgers a day, priced at $3 each.
Select one:
a. Wilson paid $120 for an outside laundry service to clean the towels used at the club.
b. Wilson paid $100 for the pest control exterminator to spray the health club.
c. Wilson previously worked as an accountant, earning $3,000 a month.
d. Wilson usually eats four hamburgers a day, priced at $3 each.
answer
C
question
Economic profit is the difference between total revenue and
Select one:
a. explicit costs.
b. implicit costs.
c. sunk costs.
d. the sum of explicit and implicit costs.
Select one:
a. explicit costs.
b. implicit costs.
c. sunk costs.
d. the sum of explicit and implicit costs.
answer
D
question
Consider the following information about a business Diane opened last year: price = $10, quantity sold = 25,000; implicit cost = $55,000; explicit cost = $160,000. What was Diane's economic profit?
Select one:
a. $35,000
b. $195,000
c. -$35,000
d. $90,000
e. There is not enough information provided to answer this question.
Select one:
a. $35,000
b. $195,000
c. -$35,000
d. $90,000
e. There is not enough information provided to answer this question.
answer
A
question
Consider the following information about a business Diane opened last year: price = $10, quantity sold = 25,000; implicit cost = $55,000; explicit cost = $160,000. What was Diane's accounting profit?
Select one:
a. $35,000
b. $195,000
c. -$35,000
d. $90,000
e. There is not enough information provided to answer this question.
Select one:
a. $35,000
b. $195,000
c. -$35,000
d. $90,000
e. There is not enough information provided to answer this question.
answer
D
question
If a firm earns normal profit, then it has generated revenues
Select one:
a. equal to the sum of implicit and explicit costs.
b. greater than total opportunity costs.
c. sufficient to cover explicit costs, but not implicit costs.
d. sufficient to cover implicit costs, but not explicit costs.
Select one:
a. equal to the sum of implicit and explicit costs.
b. greater than total opportunity costs.
c. sufficient to cover explicit costs, but not implicit costs.
d. sufficient to cover implicit costs, but not explicit costs.
answer
A
question
A fixed input is an input whose quantity
Select one:
a. can be changed as output changes in the short run.
b. cannot be changed as output changes in the short run.
c. cannot be changed as output changes in the long run.
d. a and c
e. b and c
Select one:
a. can be changed as output changes in the short run.
b. cannot be changed as output changes in the short run.
c. cannot be changed as output changes in the long run.
d. a and c
e. b and c
answer
B
question
Which of the following statements is true?
Select one:
a. The short run is always somewhere between six and twelve months.
b. In the short run, changes in output can only be brought about by a change in the quantity of variable inputs.
c. The long run is any period of time over one year.
d. In the short run, there are variable costs but no fixed costs.
e. b and d
Select one:
a. The short run is always somewhere between six and twelve months.
b. In the short run, changes in output can only be brought about by a change in the quantity of variable inputs.
c. The long run is any period of time over one year.
d. In the short run, there are variable costs but no fixed costs.
e. b and d
answer
B.
question
Average fixed cost
Select one:
a. is greater at lower levels of output than at higher levels.
b. does not change as output changes.
c. exists only in the short run.
d. is usually greater at higher levels of output than at lower levels of output.
e. a and c
Select one:
a. is greater at lower levels of output than at higher levels.
b. does not change as output changes.
c. exists only in the short run.
d. is usually greater at higher levels of output than at lower levels of output.
e. a and c
answer
E
question
Costs that do not change with output are called __________ costs.
Select one:
a. marginal
b. average
c. fixed
d. variable
Select one:
a. marginal
b. average
c. fixed
d. variable
answer
C
question
At 100 units of output, total cost is $22,000 and total variable cost is $14,000. At 100 units of output, what is the value of average total cost, average variable cost, and average fixed cost, respectively?
Select one:
a. $22; $14; $8
b. $220; $140; $80
c. $740; $340; $400
d. $340; $740; $60
e. $400; $340: There is not enough information provided to determine the average fixed cost.
Select one:
a. $22; $14; $8
b. $220; $140; $80
c. $740; $340; $400
d. $340; $740; $60
e. $400; $340: There is not enough information provided to determine the average fixed cost.
answer
B
question
Which of these statements is false?
Select one:
a. There are no fixed costs in the long run.
b. Total costs are equal to total fixed costs plus total variable costs.
c. In the short run, all inputs are fixed inputs.
d. A fixed cost is a cost that does not change as output changes.
Select one:
a. There are no fixed costs in the long run.
b. Total costs are equal to total fixed costs plus total variable costs.
c. In the short run, all inputs are fixed inputs.
d. A fixed cost is a cost that does not change as output changes.
answer
C
question
The change in total cost that results from a change in output is __________ cost.
Select one:
a. average fixed
b. average variable
c. average total
d. marginal
Select one:
a. average fixed
b. average variable
c. average total
d. marginal
answer
D
question
"As additional units of a variable input are added to a fixed input, eventually the marginal physical product of the variable input will decline." This is a statement of the
Select one:
a. law of supply.
b. average-marginal rule.
c. law of diminishing marginal utility.
d. law of diminishing marginal returns.
Select one:
a. law of supply.
b. average-marginal rule.
c. law of diminishing marginal utility.
d. law of diminishing marginal returns.
answer
D
question
A rising marginal cost curve is a reflection of a
Select one:
a. rising marginal physical product curve.
b. falling marginal physical product curve.
c. falling average fixed cost curve.
d. rising average variable cost curve.
Select one:
a. rising marginal physical product curve.
b. falling marginal physical product curve.
c. falling average fixed cost curve.
d. rising average variable cost curve.
answer
B
question
As the marginal physical product curve rises,
Select one:
a. the marginal cost curve rises.
b. the marginal cost curve falls.
c. the total cost curve rises.
d. the total cost curve falls.
Select one:
a. the marginal cost curve rises.
b. the marginal cost curve falls.
c. the total cost curve rises.
d. the total cost curve falls.
answer
B
question
The change in output that results from changing a variable input by one unit, holding all other inputs fixed, is called the marginal __________ product of the variable input.
Select one:
a. physical
b. value
c. average
d. explicit
Select one:
a. physical
b. value
c. average
d. explicit
answer
A
question
Refer to Exhibit 21-l. The numbers that go in blanks (C) and (D) are, respectively,
Select one:
a. 25 and 20.
b. 20 and 22.
c. 25 and 24.
d. 22 and 20.
e. none of the above
Select one:
a. 25 and 20.
b. 20 and 22.
c. 25 and 24.
d. 22 and 20.
e. none of the above
answer
A
question
If labor is the variable input, then marginal cost equals
Select one:
a. MPP divided by the wage rate.
b. average variable (labor) costs divided by MPP.
c. average variable (labor) costs multiplied by MPP.
d. the wage rate divided by MPP.
e. the wage rate multiplied by MPP.
Select one:
a. MPP divided by the wage rate.
b. average variable (labor) costs divided by MPP.
c. average variable (labor) costs multiplied by MPP.
d. the wage rate divided by MPP.
e. the wage rate multiplied by MPP.
answer
D
question
The average-marginal rule states that if the marginal magnitude is
Select one:
a. less than the average magnitude, the average magnitude falls.
b. greater than the average magnitude, the average magnitude falls.
c. rising, the average magnitude is necessarily above it.
d. falling, the average magnitude is necessarily below it.
e. c and d
Select one:
a. less than the average magnitude, the average magnitude falls.
b. greater than the average magnitude, the average magnitude falls.
c. rising, the average magnitude is necessarily above it.
d. falling, the average magnitude is necessarily below it.
e. c and d
answer
A
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