question
Accounting profit is equal to total revenue minus
A. Implicit costs
B. Explicit costs
C. The sum of implicit and explicit costs
D. Marginal costs
E. Variable costs
A. Implicit costs
B. Explicit costs
C. The sum of implicit and explicit costs
D. Marginal costs
E. Variable costs
answer
B. Explicit costs
question
Economic profit is equal to total revenue minus
A. Implicit costs
B. Explicit costs
C. The sum of implicit and explicit costs
D. Marginal costs
E. Variable costs
A. Implicit costs
B. Explicit costs
C. The sum of implicit and explicit costs
D. Marginal costs
E. Variable costs
answer
C. The sum of implicit and explicit costs
question
*Use the following information to answer the following question. Madelyn owns a small pottery factory. She can make 1,000 pieces of pottery per year and sell them for $100 each. It costs Madelyn $20,000 for the raw materials to produce the 1,000 pieces of pottery. She has invested $100,000 in her factory and equipment: $50,000 from her savings and $50,000 borrowed at 10 percent (assume that she could have loaned her money out at 10 percent, too). Madelyn can work at a competing pottery factory factory for $40,000 per year.
The accounting profit at Madelyn's pottery factory is
A. $30,000
B. $35,000
C. $70,000
D. $75,000
E. $80,000
The accounting profit at Madelyn's pottery factory is
A. $30,000
B. $35,000
C. $70,000
D. $75,000
E. $80,000
answer
D. $75,000
question
*Use the following information to answer the following question. Madelyn owns a small pottery factory. She can make 1,000 pieces of pottery per year and sell them for $100 each. It costs Madelyn $20,000 for the raw materials to produce the 1,000 pieces of pottery. She has invested $100,000 in her factory and equipment: $50,000 from her savings and $50,000 borrowed at 10 percent (assume that she could have loaned her money out at 10 percent, too). Madelyn can work at a competing pottery factory factory for $40,000 per year.
The economic profit at Madelyn's pottery factory is
A. $30,000
B. $35,000
C. $70,000
D. $75,000
E. $80,000
The economic profit at Madelyn's pottery factory is
A. $30,000
B. $35,000
C. $70,000
D. $75,000
E. $80,000
answer
A. $30,000
question
If there are implicit costs of production,
A. economic profit will exceed accounting profit
B. Accounting profit will exceed economic profit
C. Economic profit and accounting profit will be equal
D. Economic profit will always be zero
E. Accounting profit will always be zero
A. economic profit will exceed accounting profit
B. Accounting profit will exceed economic profit
C. Economic profit and accounting profit will be equal
D. Economic profit will always be zero
E. Accounting profit will always be zero
answer
B. Accounting profit will exceed economic profit
question
If a production function exhibits diminishing marginal product, its slope
A. Becomes flatter as the quantity of the input increases
B. Becomes steeper as the quantity of the input increases
C. Is linear (a straight line)
D. Could be any of the above
A. Becomes flatter as the quantity of the input increases
B. Becomes steeper as the quantity of the input increases
C. Is linear (a straight line)
D. Could be any of the above
answer
A. Becomes flatter as the quantity of the input increases
question
If a production function exhibits diminishing marginal product, the slope of the corresponding total-cost curve
A. Becomes flatter as the quantity of the input increases
B. Becomes steeper as the quantity of the input increases
C. Is linear (a straight line)
D. Could be any of the above
A. Becomes flatter as the quantity of the input increases
B. Becomes steeper as the quantity of the input increases
C. Is linear (a straight line)
D. Could be any of the above
answer
B. Becomes steeper as the quantity of the input increases
question
*Use the following information to answer the following questions
Number of Workers ----Output
0 0
1 23
2 40
3 50
The marginal product of labor as production moves from employing one worker to employing two workers is
A. 0
B. 10
C. 17
D. 23
E. 40
Number of Workers ----Output
0 0
1 23
2 40
3 50
The marginal product of labor as production moves from employing one worker to employing two workers is
A. 0
B. 10
C. 17
D. 23
E. 40
answer
C. 17
question
*Use the following information to answer the following questions
Number of Workers ----Output
0 0
1 23
2 40
3 50
The production process described above exhibits
A. Constant marginal product of labor
B. Increasing marginal product of labor
C. Diminishing marginal product of labor
D. Increasing returns
Number of Workers ----Output
0 0
1 23
2 40
3 50
The production process described above exhibits
A. Constant marginal product of labor
B. Increasing marginal product of labor
C. Diminishing marginal product of labor
D. Increasing returns
answer
C. Diminishing marginal product of labor
question
Which of the following is a variable cost in the short run?
A. Wages paid to factory
B. Payment on the lease for factory equipment
C. Rent on the factory
D. Interest payments on borrowed financial capital
E. Salaries paid to upper management
A. Wages paid to factory
B. Payment on the lease for factory equipment
C. Rent on the factory
D. Interest payments on borrowed financial capital
E. Salaries paid to upper management
answer
A. Wages paid to factory
question
When marginal costs are below average total costs,
A. Average fixed costs are rising
B. Average total costs are falling
C. Average total costs are rising
D. Average total costs are minimized
A. Average fixed costs are rising
B. Average total costs are falling
C. Average total costs are rising
D. Average total costs are minimized
answer
B. Average total costs are falling
question
If marginal costs equal equal average total costs,
A. Average total costs are rising
B. Average total costs are falling
C. Average total costs are rising
D. Average total costs are minimized
A. Average total costs are rising
B. Average total costs are falling
C. Average total costs are rising
D. Average total costs are minimized
answer
C. Average total costs are rising
question
If, as the quantity produced increases, a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal-cost curve will
A. Slope upward
B. Be U-shaped
C. Slope downward
D. Be flat (horizontal)
A. Slope upward
B. Be U-shaped
C. Slope downward
D. Be flat (horizontal)
answer
B. Be U-shaped
question
In the long run, if a small factory were to expand its scale of operations, it is likely that it would initially experience
A. Economies of scale
B. Constant returns to scale
C. Diseconomies of scale
D. An increase in average total costs
A. Economies of scale
B. Constant returns to scale
C. Diseconomies of scale
D. An increase in average total costs
answer
A. Economies of scale
question
The efficient scale of production is the quantity of output that minimizes
A. Average total cost
B. Marginal cost
C. Average fixed cost
D. Average variable cost
A. Average total cost
B. Marginal cost
C. Average fixed cost
D. Average variable cost
answer
A. Average total cost
question
Which of the following statements is true?
A. All costs are fixed in the long run
B. Al costs are variable in the long run
C. All costs are fixed in the short run
D. All costs are variable in the short run
A. All costs are fixed in the long run
B. Al costs are variable in the long run
C. All costs are fixed in the short run
D. All costs are variable in the short run
answer
B. All costs are variable in the long run
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