question
A cost that is incurred when an actual monetary payment is made is a(n) __________ cost.
positive
explicit
expressed
implicit
positive
explicit
expressed
implicit
answer
Explicit
question
Five months ago Wilson opened up a health club. Which of the following is an implicit cost related to the health club?
Wilson usually eats four hamburgers a day, priced at $3 each.
Wilson previously worked as an accountant, earning $3,000 a month.
Wilson paid $120 for an outside laundry service to clean the towels used at the club.
Wilson paid $100 for the pest control exterminator to spray the health club.
Wilson usually eats four hamburgers a day, priced at $3 each.
Wilson previously worked as an accountant, earning $3,000 a month.
Wilson paid $120 for an outside laundry service to clean the towels used at the club.
Wilson paid $100 for the pest control exterminator to spray the health club.
answer
Wilson previously worked as an accountant, earning $3,000 a month.
question
Economic profit is the difference between total revenue and
the sum of explicit and implicit costs.
implicit costs.
explicit costs.
sunk costs.
the sum of explicit and implicit costs.
implicit costs.
explicit costs.
sunk costs.
answer
the sum of explicit and implicit costs.
question
Consider the following information about a business Diane opened last year: price = $20, quantity sold = 25,000; implicit cost = $255,000; explicit cost = $360,000. Assuming that all relevant costs and revenue are noted, what was Diane's economic profit?
$140,000
$220,000
-$115,000
-$140,000
$140,000
$220,000
-$115,000
-$140,000
answer
$115,000
question
If a firm earns normal profit, then it has generated revenues
sufficient to cover explicit costs, but not implicit costs.
sufficient to cover implicit costs, but not explicit costs.
equal to the sum of implicit and explicit costs.
greater than total opportunity costs.
sufficient to cover explicit costs, but not implicit costs.
sufficient to cover implicit costs, but not explicit costs.
equal to the sum of implicit and explicit costs.
greater than total opportunity costs.
answer
equal to the sum of implicit and explicit costs.
question
An unrecoverable cost that should be disregarded in any current or future decision is also called a(n) __________ cost.
variable
implicit
explicit
sunk
variable
implicit
explicit
sunk
answer
Sunk
question
Cy recently went into the business of producing and selling cardboard boxes. For this business, which of the following is most likely to be a fixed cost?
fire insurance
labor costs
paper costs
adhesive costs
fire insurance
labor costs
paper costs
adhesive costs
answer
Fire insurance
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
law of diminishing marginal utility.
average-marginal rule.
law of supply.
law of diminishing marginal returns.
law of diminishing marginal utility.
average-marginal rule.
law of supply.
law of diminishing marginal returns.
answer
law of diminishing marginal returns.
question
A rising marginal cost curve is a reflection of a
rising marginal physical product curve.
falling average fixed cost curve.
rising average variable cost curve.
falling marginal physical product curve.
rising marginal physical product curve.
falling average fixed cost curve.
rising average variable cost curve.
falling marginal physical product curve.
answer
falling marginal physical product curve.
question
Which of the following cost curves is never U-shaped?
the marginal cost curve
the average total cost curve
the average variable cost curve
the average fixed cost curve
the marginal cost curve
the average total cost curve
the average variable cost curve
the average fixed cost curve
answer
the average fixed cost curve
question
Economies of scale are said to exist when inputs are increased by some percentage and output increases by a(n) __________ percentage, causing unit costs to __________.
greater; rise
smaller; rise
smaller; fall
greater; fall
greater; rise
smaller; rise
smaller; fall
greater; fall
answer
greater; fall
question
In the long run, if inputs are increased by 10 percent and output increases by 20 percent, then __________ are said to exist.
diminishing marginal returns
diseconomies of scale
economies of scale
constant returns to scale
diminishing marginal returns
diseconomies of scale
economies of scale
constant returns to scale
answer
Economies of scale
question
The main difference between the short run and the long run is that
the long run always refers to a time period of one year or longer.
firms earn losses in the long run, but not in the short run.
in the long run, only one input can be fixed.
in the short run, one or more inputs are fixed.
the long run always refers to a time period of one year or longer.
firms earn losses in the long run, but not in the short run.
in the long run, only one input can be fixed.
in the short run, one or more inputs are fixed.
answer
in the short run, one or more inputs are fixed.
question
Which of the following is an implicit cost?
Brown pays the bill he received in the mail.
Smith, who could work for someone else, works for himself.
Jones buys $100 worth of supplies from Smith.
Williamson pays his income taxes on April 15.
Brown pays the bill he received in the mail.
Smith, who could work for someone else, works for himself.
Jones buys $100 worth of supplies from Smith.
Williamson pays his income taxes on April 15.
answer
Smith, who could work for someone else, works for himself.
question
If AFC is $8 at a quantity of output of 1,000 units, and TC is $12,000 at the same level of output, it follows that
total cost is $4,000.
AVC is $4.
marginal cost is $10.
marginal cost is $1,000.
total cost is $4,000.
AVC is $4.
marginal cost is $10.
marginal cost is $1,000.
answer
AVC is $4
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