question
Refer to Exhibit 21-14. What is the MPP of the first unit of labor [blank (C)]?
a.
700 units
b.
600 units
c.
100 units
d.
50 units
a.
700 units
b.
600 units
c.
100 units
d.
50 units
answer
c.
100 units
100 units
question
Refer to Exhibit 21-14. What is the level of output with 2 and 3 laborers working [blanks (A) and (B)], respectively?
a.
175 units; 225 units
b.
100 units; 175 units
c.
100 units; 225 units
d.
50 units; 175 units
a.
175 units; 225 units
b.
100 units; 175 units
c.
100 units; 225 units
d.
50 units; 175 units
answer
a.
175 units; 225 units
175 units; 225 units
question
Refer to Exhibit 21-14. What is the MPP of the fourth unit of labor [blank (D)]?
a.
70 units
b.
60 units
c.
100 units
d.
15 units
a.
70 units
b.
60 units
c.
100 units
d.
15 units
answer
d.
15 units
15 units
question
Refer to Exhibit 21-14. What is the marginal cost of producing this good with 1 and 2 laborers working [blanks (E) and (F)], respectively?
a.
$600; $300
b.
$60; $30
c.
$8; $12
d.
$6; $8
a.
$600; $300
b.
$60; $30
c.
$8; $12
d.
$6; $8
answer
d.
$6; $8
$6; $8
question
Refer to Exhibit 21-14. What is the marginal cost of producing this good with 3 and 4 laborers working [blanks (G) and (H)], respectively?
a.
$200; $150
b.
$60; $30
c.
$12; $40
d.
$6; $8
a.
$200; $150
b.
$60; $30
c.
$12; $40
d.
$6; $8
answer
c.
$12; $40
$12; $40
question
Refer to Exhibit 21-12 above. The number that goes in blank (A)
a.
12
b.
25
c.
11
d.
13
e.
none of the above
a.
12
b.
25
c.
11
d.
13
e.
none of the above
answer
a.
12
12
question
Refer to Exhibit 21-12 above. The number that goes in blank (B)
a.
25
b.
51.
c.
10
d.
13
e.
none of the above
a.
25
b.
51.
c.
10
d.
13
e.
none of the above
answer
d.
13
13
question
Refer to Exhibit 21-12 above. The number that goes in blank (C)
a.
14
b.
25
c.
12
d.
39
e.
none of the above
a.
14
b.
25
c.
12
d.
39
e.
none of the above
answer
a.
14
14
question
Refer to Exhibit 21-12 above. The number that goes in blank (D)
a.
39
b.
51.
c.
12
d.
25
e.
none of the above
a.
39
b.
51.
c.
12
d.
25
e.
none of the above
answer
c.
12
12
question
As long as there are __________ costs, __________ profit will be greater than __________ profit.
a.
implicit; accounting; economic
b.
explicit; accounting; economic
c.
implicit; economic; accounting
d.
explicit; economic; accounting
a.
implicit; accounting; economic
b.
explicit; accounting; economic
c.
implicit; economic; accounting
d.
explicit; economic; accounting
answer
a.
implicit; accounting; economic
implicit; accounting; economic
question
A cost of resources used in production for which no actual monetary payment is made is a(n) __________ cost.
a.
tacit
b.
implicit
c.
covert
d.
explicit
a.
tacit
b.
implicit
c.
covert
d.
explicit
answer
b.
implicit
implicit
question
Economic profit is the difference between total revenue and
a.
explicit costs.
b.
implicit costs.
c.
sunk costs.
d.
the sum of explicit and implicit costs.
a.
explicit costs.
b.
implicit costs.
c.
sunk costs.
d.
the sum of explicit and implicit costs.
answer
d.
the sum of explicit and implicit costs.
the sum of explicit and implicit costs.
question
Consider the following information about a business Diane opened last year: price = $15, quantity sold = 25,000; implicit cost = $155,000; explicit cost = $260,000. What was Diane's accounting profit?
a.
$40,000
b.
$115,000
c.
-$40,000
d.
$220,000
a.
$40,000
b.
$115,000
c.
-$40,000
d.
$220,000
answer
b.
$115,000
$115,000
question
Which of the following statements is true?
a.
Explicit costs always equal implicit costs.
b.
Zero economic profit is a smaller dollar figure than normal profit.
c.
Zero economic profit is a larger dollar figure than normal profit.
d.
Saying that a firm earned zero economic profit is the same as saying it earned normal profit.
a.
Explicit costs always equal implicit costs.
b.
Zero economic profit is a smaller dollar figure than normal profit.
c.
Zero economic profit is a larger dollar figure than normal profit.
d.
Saying that a firm earned zero economic profit is the same as saying it earned normal profit.
answer
d.
Saying that a firm earned zero economic profit is the same as saying it earned normal profit.
Saying that a firm earned zero economic profit is the same as saying it earned normal profit.
question
Average variable cost equals
a.
average total cost minus average fixed cost.
b.
total variable cost divided by the change in output.
c.
total variable cost divided by output.
d.
price of the variable input times the quantity of the variable input.
e.
a and c
a.
average total cost minus average fixed cost.
b.
total variable cost divided by the change in output.
c.
total variable cost divided by output.
d.
price of the variable input times the quantity of the variable input.
e.
a and c
answer
e.
a and c
a and c
question
At 500 units of output, total cost is $35,000 and total variable cost is $22,000. What does total fixed cost equal at 500 units?
a.
$57,000
b.
$900
c.
$13,000
d.
$34
a.
$57,000
b.
$900
c.
$13,000
d.
$34
answer
c.
$13,000
$13,000
question
If AFC is $8 at a quantity of output of 1,000 units, and ATC is $12 at the same level of output, it follows that
a.
marginal cost is $10.
b.
AVC is $4,000.
c.
total cost is $4,000.
d.
marginal cost is $1,000.
e.
AVC is $4.4.
a.
marginal cost is $10.
b.
AVC is $4,000.
c.
total cost is $4,000.
d.
marginal cost is $1,000.
e.
AVC is $4.4.
answer
e.
AVC is $4.4.
AVC is $4.4.
question
The law of diminishing marginal returns holds for a situation in which
a.
all inputs are variable.
b.
all inputs are fixed.
c.
some inputs are variable and some inputs are fixed.
d.
all inputs are increased in the same proportion.
a.
all inputs are variable.
b.
all inputs are fixed.
c.
some inputs are variable and some inputs are fixed.
d.
all inputs are increased in the same proportion.
answer
c.
some inputs are variable and some inputs are fixed.
some inputs are variable and some inputs are fixed.
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
a.
law of supply.
b.
average-marginal rule.
c.
law of diminishing marginal utility.
d.
law of diminishing marginal returns.
a.
law of supply.
b.
average-marginal rule.
c.
law of diminishing marginal utility.
d.
law of diminishing marginal returns.
answer
d.
law of diminishing marginal returns.
law of diminishing marginal returns.
question
A rising marginal cost curve is a reflection of a
a.
rising marginal physical product curve.
b.
falling marginal physical product curve.
c.
falling average fixed cost curve.
d.
rising average variable cost curve.
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.
falling marginal physical product curve.
falling marginal physical product curve.
question
As the marginal physical product curve rises,
a.
the marginal cost curve rises.
b.
the marginal cost curve falls.
c.
the total cost curve rises.
d.
the total cost curve falls.
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.
the marginal cost curve falls.
the marginal cost curve falls.
question
The marginal physical product (MPP) of a variable input is
a.
total output divided by the quantity of the input used.
b.
the change in total output that results from changing the variable input by one unit.
c.
the change in total revenue that results from changing the variable input by one unit.
d.
the change in total output that results from changing the fixed input by one unit.
a.
total output divided by the quantity of the input used.
b.
the change in total output that results from changing the variable input by one unit.
c.
the change in total revenue that results from changing the variable input by one unit.
d.
the change in total output that results from changing the fixed input by one unit.
answer
b.
the change in total output that results from changing the variable input by one unit.
the change in total output that results from changing the variable input by one unit.
question
As the marginal physical product of a variable input __________, the marginal cost __________.
a.
increases; increases
b.
increases; decreases
c.
decreases; increases
d.
b and c
a.
increases; increases
b.
increases; decreases
c.
decreases; increases
d.
b and c
answer
d.
b and c
b and c
question
If labor is the variable input, then marginal cost equals
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.
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.
answer
d.
the wage rate divided by MPP.
the wage rate divided by MPP.
question
If the average variable cost curve is falling,
a.
the MC curve must be below it.
b.
marginal cost is greater than average variable cost.
c.
the MC curve is necessarily falling.
d.
the MC curve is necessarily horizontal (neither rising nor falling).
a.
the MC curve must be below it.
b.
marginal cost is greater than average variable cost.
c.
the MC curve is necessarily falling.
d.
the MC curve is necessarily horizontal (neither rising nor falling).
answer
a.
the MC curve must be below it.
the MC curve must be below it.
question
In the long run,
a.
all costs are variable costs.
b.
all costs are fixed costs.
c.
there are no variable costs.
d.
b and c
a.
all costs are variable costs.
b.
all costs are fixed costs.
c.
there are no variable costs.
d.
b and c
answer
a.
all costs are variable costs.
all costs are variable costs.
question
Economic profit is
a.
total revenue minus total cost (including both explicit and implicit costs).
b.
the same as accounting profit.
c.
accounting profit plus implicit costs.
d.
accounting profit minus implicit costs.
e.
a and d
a.
total revenue minus total cost (including both explicit and implicit costs).
b.
the same as accounting profit.
c.
accounting profit plus implicit costs.
d.
accounting profit minus implicit costs.
e.
a and d
answer
e.
a and d
a and d
question
. Refer to Situation 21-4. What are Joe's explicit costs?
a.
$125,000
b.
$175,000
c.
$35,000
d.
$200,000
e.
$50,000
a.
$125,000
b.
$175,000
c.
$35,000
d.
$200,000
e.
$50,000
answer
a.
$125,000
$125,000
question
Refer to Situation 21-4. What are Joe's implicit costs?
a.
$150,000
b.
$175,000
c.
$35,000
d.
$200,000
e.
$50,000
a.
$150,000
b.
$175,000
c.
$35,000
d.
$200,000
e.
$50,000
answer
e.
$50,000
$50,000
question
Refer to Situation 21-4. What are Joe's accounting profits?
a.
$0
b.
-$75,000
c.
-$25,000
d.
$25,000
e.
$75,000
a.
$0
b.
-$75,000
c.
-$25,000
d.
$25,000
e.
$75,000
answer
e.
$75,000
$75,000
question
Refer to Situation 21-4. What are Joe's economic profits?
a.
$0
b.
$25,000
c.
-$25,000
d.
$40,000
e.
$75,000
a.
$0
b.
$25,000
c.
-$25,000
d.
$40,000
e.
$75,000
answer
b.
$25,000
$25,000
question
Refer to Situation 21-4. Is Joe earning a normal profit?
a.
No, he is earning an above-normal profit.
b.
No, but he is earning an accounting profit and that is all that matters.
c.
Yes, but his economic profit is $0 and that is not good.
d.
We cannot be sure, because "normal" profit is a subjective judgment.
e.
No, his economic profit is negative.
a.
No, he is earning an above-normal profit.
b.
No, but he is earning an accounting profit and that is all that matters.
c.
Yes, but his economic profit is $0 and that is not good.
d.
We cannot be sure, because "normal" profit is a subjective judgment.
e.
No, his economic profit is negative.
answer
a.
No, he is earning an above-normal profit.
No, he is earning an above-normal profit.
question
If explicit costs equal $157,000, implicit costs equal $95,000, and accounting profit equals $23,000, it follows that total revenue equals __________ and economic profit equals __________.
a.
$75,000; $17,000
b.
$180,000; -$72,000
c.
$68,000; $25,000
d.
$118,000; -$72,000
a.
$75,000; $17,000
b.
$180,000; -$72,000
c.
$68,000; $25,000
d.
$118,000; -$72,000
answer
b.
$180,000; -$72,000
$180,000; -$72,000
question
Economic profit is the difference between total revenue and implicit costs.
a.
True
b.
False
a.
True
b.
False
answer
b.
False
False
question
If implicit costs equal accounting profit, economic profit must be
a.
negative.
b.
positive.
c.
zero.
d.
higher in the short run than in the long run.
e.
higher in the long run than in the short run.
a.
negative.
b.
positive.
c.
zero.
d.
higher in the short run than in the long run.
e.
higher in the long run than in the short run.
answer
c.
zero.
zero.
question
Refer to Exhibit 21-7. The total variable cost of producing 3 units is
a.
$31.00.
b.
$51.00.
c.
$17.00.
d.
$60.00.
a.
$31.00.
b.
$51.00.
c.
$17.00.
d.
$60.00.
answer
d.
$60.00.
$60.00.
question
Refer to Exhibit 21-7. The average total cost of producing 4 units of output is
a.
$11.25.
b.
$5.00.
c.
$3.50.
d.
$27.50.
a.
$11.25.
b.
$5.00.
c.
$3.50.
d.
$27.50.
answer
d.
$27.50.
$27.50.
question
Refer to Exhibit 21-7. The average fixed cost of producing 5 units of output is
a.
$16.25.
b.
$4.00.
c.
$11.15.
d.
$6.00.
a.
$16.25.
b.
$4.00.
c.
$11.15.
d.
$6.00.
answer
d.
$6.00.
$6.00.
question
Refer to Exhibit 21-7. The marginal cost of producing the seventh unit of output is
a.
$85.00.
b.
$12.14.
c.
$21.00.
d.
$5.00.
a.
$85.00.
b.
$12.14.
c.
$21.00.
d.
$5.00.
answer
d.
$5.00.
$5.00.
question
John purchases a baseball card for $10 that turns out to be so rare that a collector offers to buy it from him for $2,000. Instead, John decides to give the card to his sister (an avid baseball-card collector) as a birthday present. The opportunity cost of John's generosity is
a.
$10, the purchase price.
b.
$0, because at the time the decision is made, $10 are sunk cost, i.e., at that point there is no cost to John of giving the card away.
c.
$2,000, the amount offered by the collector.
d.
$1,005, the average of $10 and $2,000.
a.
$10, the purchase price.
b.
$0, because at the time the decision is made, $10 are sunk cost, i.e., at that point there is no cost to John of giving the card away.
c.
$2,000, the amount offered by the collector.
d.
$1,005, the average of $10 and $2,000.
answer
c.
$2,000, the amount offered by the collector.
$2,000, the amount offered by the collector.
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