Economics-Chapter 6 Practice Quiz

question

The production function for bookshelves includes:
wool fabric, buttons, a zipper, a sewing machine, and a tailor.
foam cushions, fabric, wood, nails, and furniture makers.
electric guitars, drums, microphones, musicians, and a stage.
yeast, flour, pans, ovens, and bakers.
wood, nails, carpenters, saws, and hammers.

answer

wood, nails, carpenters, saws, and hammers.

question

Lauren owns a bakery that produces, among other things, wedding cakes. She currently has 7 employees; with 7 employees, her bakery can produce 12 wedding cakes per day. If she hired an eighth employee, her bakery would be able to produce 16 wedding cakes per day. Therefore, the marginal product of the eighth employee is ________ wedding cake(s).
8
1
4
16
2

answer

question

Implicit costs can be difficult to measure because:
they are not measured in dollars.
business owners cannot always observe them directly.
they are always very expensive.
they are always greater than explicit costs.
they include expenses like taxes.

answer

business owners cannot always observe them directly.

question

Refer to the accompanying graph to answer the three questions that follow.

If the firm is maximizing profits, profit is represented by the area:
A ´ C.
(A - B) ´ C.
A ´ B.
B ´ C.
(A + B ) ´ C.

answer

(A - B) ´ C.

question

If there are gains from specialization in a workplace, hiring another employee means that the marginal product of labor will:
increase.
remain the same.
be 0 (zero).
decrease.
be negative.

answer

increase

question

If a firm hires another worker and his or her marginal product of labor is 0 (zero), we know that the firm's total output is:
equal to the marginal product of that worker.
increasing.
unchanged.
decreasing.
0 (zero).

answer

unchanged

question

If all workers are able to specialize and become more productive as more labor is hired, the amount of total output produced ________ at a(n) ________ rate.
decreases; increasing
increases; increasing
increases; decreasing
decreases; constant

answer

increases; increasing

question

Marginal revenue is the change in total:
cost divided by the change in total revenue.
revenue divided by the change in total cost.
revenue when the firm spends more money.
cost when the firm produces additional units.
revenue when the firm produces additional units.

answer

revenue when the firm produces additional units.

question

If a firm hires another worker and his or her marginal product of labor is negative, we know that the firm's total output is:
0 (zero).
unchanged.
decreasing.
equal to the marginal product of that worker.
increasing.

answer

decreasing

question

Based on the graph, at output Q5 is this firm earning positive, negative, or zero economic profits?
It is earning zero economic profit.
It is earning positive economic profit.
We cannot determine the firm's level of profit because we do not know about its revenues.
It is earning negative economic profit.
Because this is the short run, all firms earn positive economic profit.

answer

We cannot determine the firm's level of profit because we do not know about its revenues.

question

Firms will break even if the price they charge is:
less than their minimum average cost of fixed inputs.
equal to their minimum average of all costs (AC).
greater than their minimum average cost of variable inputs.
less than their minimum average of all costs (AC).
greater than their minimum average of all costs (AC).

answer

equal to their minimum average of all costs (AC).

question

Lauren is the owner of a bakery. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. If she could earn $53,000 working for another bakery nearby, we know that her economic profit was:
$145,000.
$0.00.
$12,000.
$15,000.
$53,000.

answer

$0.00

question

Firms will always make a positive economic profit if the price they charge is:
less than their minimum average cost of fixed inputs.
greater than their minimum average cost of variable inputs.
equal to their minimum average of all costs (AC).
greater than their minimum average of all costs (AC).
less than their minimum average of all costs (AC).

answer

greater than their minimum average of all costs (AC).

question

The market for candles is perfectly competitive and is currently in equilibrium. What will happen if candles are later linked to more houses catching on fire?
In the short run, firms will experience economic profits, but in the long run, firms will leave the market, lowering economic profits.
In the short run, firms will experience economic profits, but in the long run, firms will enter the market, lowering economic profits.
In both the short run and the long run, firms will experience zero economic profits.
In the short run, firms will incur economic losses, but in the long run, firms will leave the market, raising economic profits.
In the short run, firms will incur economic losses, but in the long run, firms will enter the market, raising economic profits.

answer

In the short run, firms will incur economic losses, but in the long run, firms will leave the market, raising economic profits.

question

Lauren owns a bakery that produces, among other things, wedding cakes. She currently has 5 employees; with 5 employees, her bakery can produce 7 wedding cakes per day. If she hired a sixth employee, her bakery would be able to produce 9 wedding cakes per day. Therefore, the marginal product of the sixth employee is ________ wedding cakes.
5
1.5
7
2
9

answer

question

Another term for factors of production is:
inputs.
costs.
revenues.
outputs.
profits.

answer

inputs

question

If the marginal product is increasing, the marginal cost of output must be:
increasing.
constant
decreasing.
equal to average cost.
unchanged.

answer

decreasing

question

Refer to the following table. What is the average cost of producing three (3) units of the good?
$206.67
$6.67
$200.00
$406.67
$213.33

answer

$206.67

question

Lauren owns a bakery that produces, among other things, wedding cakes. She currently has 6 employees; with 6 employees, her bakery can produce 9 wedding cakes per day. If she hired a seventh employee, her bakery would be able to produce 12 wedding cakes per day. Therefore, the marginal product of the seventh employee is ________ wedding cakes.
3
9
5
7
1.71

answer

question

Which of the following conditions will result in the firm making zero economic profit?
AC > P > MC
P = MC
P = AC
P > AC
P < AC

answer

P=AC

question

When marginal revenue equals marginal cost:
firms should increase production.
firms should stop production.
profits are always equal to zero.
firms should decrease production.
firms are maximizing profits, so they should continue at that production level.

answer

firms are maximizing profits, so they should continue at that

question

If a firm experiences productivity gains from employee specialization, its marginal cost ________ at a(n) ________ rate.
increases; increasing
decreases; increasing
decreases; decreasing
decreases; constant
increases; decreasing

answer

decreases; decreasing

question

Which of the following is a question that a firm must answer in the long run but NOT in the short run?
How much should it pay its workers?
What prices should it charge for its products?
How many workers should it hire?
What is the profit-maximizing level of output?
What should be the quantity and capacity of database servers?

answer

What should be the quantity and capacity of database servers?

question

The three primary tangible inputs are:
capital, interest, and savings.
labor, wages, and training.
land, labor, and capital.
revenue, profits, and costs.
price, quantity, and profits.

answer

land, labor, and capital.

question

As a firm hires more workers, its marginal product of labor increases only if:
each worker does the same tasks as all others.
the firm produces commodities.
all workers are paid different wages.
all workers are paid the same wage.
employees are assigned specialized tasks.

answer

employees are assigned specialized tasks.

question

A firm's inputs are also known as its:
revenues.
costs.
factors of production.
outputs.
profits.

answer

factors of production.

question

If Tommy's Tank Tops is in a competitive industry and is currently making positive economic profits of $1,000:
individuals will demand fewer tank tops.
the market supply curve will shift to the left.
individuals will demand more tank tops.
firms will want to exit the market.
firms will want to enter the market.

answer

firms will want to enter the market.

question

When firms exit a market, individual firms' profits:
remain unchanged.
decrease, then increase.
decrease.
increase.
increase, then decrease.

answer

increase

question

Ralph owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total explicit costs for the year were:
$24,000.
$6,000.
$72,000.
$66,000.
$60,000.

answer

$66,000

question

Steve owns a bike store. His total costs are $1.2 million per year. Last year, Steve sold 1,200 bikes. If Steve sells 1,250 bikes this year (50 more than last year) and his total cost increases to $1.28 million, we know that the:
average return of selling bikes has decreased.
marginal cost of those 50 bikes is $80,000.
average cost of selling bikes is unchanged.
marginal revenue of selling 1,250 bikes is now $1,000.
marginal cost of those 50 bikes is $1.28 million.

answer

marginal cost of those 50 bikes is $80,000.

question

Lauren is the owner of a bakery. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her accountant, who does not consider implicit costs, would tell her that profit was:
$65,000.
$53,000.
$27,000.
$145,000.
$15,000.

answer

$53,000.

question

Refer to the accompanying figure.
If the price is $8, the firm is making:
a profit on any quantity greater than at the intersection of MC and AC
a profit on any quantity less than at P = $8.
a loss on any quantity less than at the intersection of MC and AC.
a loss on any quantity greater than at the intersection of MC and AC.
zero profit.

answer

a profit on any quantity less than at P = $8.

question

Ralph owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total economic profit for the year was:
$20,000.
-$1,000.
$65,000.
-$35,000.
$34,000.

answer

-$1,000

question

The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a competitive market. Refer to this table to answer the four questions that follow.
When profits are maximized, profits are equal to:
$5.
$2.
$9.
$3.
$10.

answer

question

Refer to the accompanying graph to answer the three questions that follow.
If the firm is maximizing profits, total cost is represented by the area:
B x C.
A x B.
(A + B) x C.
(A - B) x C.
A x C.

answer

B x C

question

If Dirk's Doughnuts is in a competitive industry and is currently incurring economic losses of $500:
individuals will demand fewer doughnuts.
firms will want to enter the market.
the market supply curve will shift to the right.
firms will want to exit the market.
individuals will demand more doughnuts.

answer

firms will want to exit the market.

question

An explicit cost for a business that manufactures bicycles would be the:
wages paid to employees.
goods and services provided by the government with the taxes the firm pays.
salary that the owner of the business could earn elsewhere.
various products that could be made with the steel used to make bicycles.
value of the products that the firm's employees could produce at another company.

answer

wages paid to employees.

question

The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a competitive market. Refer to this table to answer the four questions that follow.
Profits are maximized when producing ________ unit(s).
0 (zero)
2
4
3
1

answer

question

If the market price is $15 and marginal cost is represented by the equation 2 x Q, where Q is in thousands of units, what is the profit-maximizing quantity?
7,000
8,000
7,500
30,000
15,000

answer

7,500

question

In economics, we assume that firms make decisions in order to:
protect the environment.
lobby officials.
maximize profit.
minimize revenues.
evade taxes.

answer

maximize profit.

question

Which of the following is an example of a long-run cost for a manufacturing firm?
the purchase of additional raw materials
paying higher tax rates
hiring more employees
increasing the size of its management team
an increase in the size of its factory

answer

an increase in the size of its factory

question

Refer to the accompanying graph to answer the three questions that follow.
If this firm is maximizing profits, total revenue is represented by the area:
A x B.
A x C.
B + C.
(A + B) x C.
B x C.

answer

A x C

question

Which of the following is true about explicit costs?
They are not measured in terms of dollars.
They are the opportunity costs of production.
They are not included when measuring accounting profit.
They are out-of-pocket expenses.
They are not included when measuring economic profit.

answer

They are out-of-pocket expenses.

question

Chief executive officers (CEOs) of major corporations are often paid mostly with stock options (which allow the holder to buy stock at a given price), as opposed to salaries and cash payments. These stock options often cannot be converted into stock and sold until years after they were issued. All this is ultimately intended to create incentives for the CEO to:
increase the value of the stock by maximizing company profit.
lobby Congress for subsidies and tax breaks.
outsource all production to other countries.
leave the company after a year or so.
lay off as many employees as possible.

answer

increase the value of the stock by maximizing company profit.

question

Ralph owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total implicit costs for the year were:
$60,000.
$66,000.
$100,000.
$72,000.
$35,000.

answer

$35,000.

question

If a firm generates $240,000 in revenue, earns $120,000 in economic profit, and its explicit costs are $80,000, how much are its implicit costs?
$60,000
$80,000
$160,000
$120,000
$40,000

answer

$40,000

question

Accountants consider only explicit costs when measuring profit, whereas economics consider both implicit and explicit costs. The reason that they ignore implicit costs is that:
implicit costs are tax deductible.
implicit costs cannot be measured in terms of dollars.
implicit costs are not out-of-pocket expenses.
implicit costs are typically very small.
explicit costs are always greater than implicit costs.

answer

implicit costs are not out-of-pocket expenses.

question

Lauren is the owner of a bakery that earns 0 (zero) economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total explicit costs were:
$53,000.
$15,000.
$80,000.
$77,000.
$92,000.

answer

$92,000.

question

If workers are unable to specialize and become more productive as more labor is hired, the amount of total output produced ________ at a(n) ________ rate.
increases; increasing
decreases; constant
decreases; increasing
increases; decreasing
increases; constant

answer

increases; decreasing

question

The out-of-pocket expenses incurred in producing a good are also known as:
explicit costs.
capital costs.
fiduciary costs.
implicit costs.
wages and prices.

answer

explicit costs.

question

An example of an implicit cost is:
wages paid to employees.
a payment on an electricity bill.
forgone wages.
gasoline costs.
a payment on the loan for a piece of equipment not in use.

answer

forgone wages.

question

The production function of a restaurant includes items such as labor (i.e., cooks, waiters, a manager), capital (i.e., ovens, counters, tables, chairs, and a building), and land. In the short run, the owner of the restaurant will optimize production by employing a variable amount of ________ given a fixed amount of ________.
labor; capital and raw materials
labor; capital and land
land; capital and labor
land; labor and raw materials
capital; labor and land

answer

labor; capital and land

question

If a firm experiences diminishing marginal product, its marginal cost ________ at a(n) ________ rate.
decreases; constant
increases; increasing
increases; constant
decreases; decreasing
increases; decreasing

answer

increases; increasing

question

Darrell is the owner of a furniture store. Last year, his total revenue was $525,000 and his total labor costs were $200,000. His overhead expenses, including insurance and legal fees, were $175,000. The rent on his building was $45,000. Darrell could earn $105,000 per year working at a nearby furniture distributor. If his total revenue increases to $600,000 this year and all of his other expenses are held constant, we know that his economic profit is now:
$200,000.
$600,000.
$105,000.
$75,000.
$0.00.

answer

$75,000.

question

Marginal revenue is the change in total:
revenue divided by the change in total cost.
revenue when the firm produces additional units.
cost divided by the change in total revenue.
revenue when the firm spends more money.
cost when the firm produces additional units.

answer

revenue when the firm produces additional units.

question

In the accompanying table, diminishing marginal product begins after the ________ unit of output.
fourth
third
first
fifth
second

answer

second

question

Profit maximization occurs when:
the price in the market is equal to the firm's marginal revenue.
a firm expands output until marginal revenue is exceeded by marginal cost.
a firm sets the price at a point above average cost.
a firm expands output until marginal revenue is equal to marginal cost.
total costs equal total revenue.

answer

a firm expands output until marginal revenue is equal to marginal cost.

question

A firm's decisions are ultimately oriented toward:
increasing total revenue.
maximizing profit.
maximizing production.
negotiating better deals with suppliers.
minimizing the number of employees it hires.

answer

maximizing profit.

question

When a firm hires another employee and, as a result, total output increases, this change in total output is also known as:
marginal benefit.
total output.
marginal product.
marginal employment.
labor contribution.

answer

marginal product.

question

If a firm hires another worker and his or her marginal product of labor is positive, we know that the firm's total output is:
unchanged.
increasing.
equal to the marginal product of that worker.
decreasing.
0 (zero).

answer

increasing.

question

The production function for automobiles includes:
a mall, racks and shelves, mannequins, and sales clerks.
a factory, an assembly line, workers, and robots.
an aircraft carrier, planes, helicopters, sailors, and pilots.
lumber, shingles, windows, doors, and carpenters.
farmland, seeds, rain, and tractors.

answer

a factory, an assembly line, workers, and robots.

question

A firm's inputs are also known as its:
costs.
profits.
outputs.
factors of production.
revenues.

answer

factors of production.

question

Should a firm always produce the level of output where marginal cost is lowest?
Yes, any other level of output will have higher marginal cost.
Yes, that is the level of output where costs are lowest.
No, firms should produce where marginal cost equals average cost.
No, that might be the best choice, but it depends on the firm's profits.
No, that is the level of output where employees are most efficient.

answer

No, that might be the best choice, but it depends on the firm's profits.

question

Every year the U.S. sugar industry, which is dominated by only a few firms, spends millions of dollars lobbying members of Congress and contributing to their re-election campaigns. It does so for both Democrats and Republicans. One goal of these contributions is the preservation of the U.S. sugar quota, which limits the importation of less expensive sugar from other countries. Ultimately, all of these activities are motivated by a desire among U.S. sugar producers to:
keep their profits as high as possible.
hire as many employees as they can.
make the market for sugar as competitive as possible.
support one political party but not another.
keep their prices as low as possible.

answer

keep their profits as high as possible.

question

Economists consider both explicit and implicit costs when measuring economic profit. The reason they consider implicit costs is that:
most businesses forget to pay their implicit costs.
they are more conservative than accountants, who consider only costs that are out-of-pocket.
implicit costs are typically far larger than explicit costs.
a business must cover its opportunity costs as well as its out-of-pocket expenses to be truly profitable.
implicit costs include expenses like taxes and fees to the government.

answer

a business must cover its opportunity costs as well as its out-of-pocket expenses to be truly profitable.

question

As a firm hires more labor and each worker is able to specialize, what happens to each additional worker's marginal productivity?
It increases continuously.
It remains constant, no matter how much labor is hired.
It decreases at first, then increases.
It decreases continuously.
It increases at first, then decreases.

answer

It increases at first, then decreases.

question

When firms exit a market, individual firms' profits:
decrease, then increase.
decrease.
increase.
increase, then decrease.
remain unchanged.

answer

increase.

question

answer

$53,000.

question

Based on the graph, at output Q5 is this firm earning positive, negative, or zero economic profits?
It is earning positive economic profit.
It is earning zero economic profit.
It is earning negative economic profit.
Because this is the short run, all firms earn positive economic profit.
We cannot determine the firm's level of profit because we do not know about its revenues.

answer

We cannot determine the firm's level of profit because we do not know about its revenues.

question

Which of the following is a question that a firm must answer in the long run but NOT in the short run?
What should be the quantity and capacity of database servers?
What prices should it charge for its products?
How many workers should it hire?
What is the profit-maximizing level of output?
How much should it pay its workers?

answer

What should be the quantity and capacity of database servers?

question

Lauren is the owner of a bakery that earns 0 (zero) economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total implicit costs were:
$15,000.
$65.000.
$53,000.
$92,000.
$145,000.

answer

$53,000.

question

answer

$2.

question

If the marginal product of labor for a firm decreases as more workers are hired, we know that:
there are still gains from specialization left to be exploited.
the marginal cost of producing output is decreasing.
the marginal cost of producing output is constant.
the gains from specialization are exhausted.
all workers are paid the same wage.

answer

the gains from specialization are exhausted.

question

An example of an explicit cost is:
the amount of money one could receive for renting a company truck to another business.
the opportunity cost of a $50,000 investment into a building.
the savings interest lost by investing $10,000 in capital instead of saving the money.
forgone wages.
a payment on a loan for a computer.

answer

a payment on a loan for a computer.

question

If Tommy's Tank Tops is in a competitive industry and is currently making positive economic profits of $1,000:
the market supply curve will shift to the left.
individuals will demand fewer tank tops.
firms will want to exit the market.
firms will want to enter the market.
individuals will demand more tank tops.

answer

firms will want to enter the market.

question

Ralph owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His accountant, who does not consider implicit costs, would tell him that profit for the year was:
$72,000.
$35,000.
$100,000.
-$1,000.
$34,000.

answer

$34,000.

1 of 76

question

answer

wood, nails, carpenters, saws, and hammers.

question

answer

question

answer

business owners cannot always observe them directly.

question

Refer to the accompanying graph to answer the three questions that follow.

If the firm is maximizing profits, profit is represented by the area:
A ´ C.
(A - B) ´ C.
A ´ B.
B ´ C.
(A + B ) ´ C.

answer

(A - B) ´ C.

question

If there are gains from specialization in a workplace, hiring another employee means that the marginal product of labor will:
increase.
remain the same.
be 0 (zero).
decrease.
be negative.

answer

increase

question

answer

unchanged

question

answer

increases; increasing

question

answer

revenue when the firm produces additional units.

question

answer

decreasing

question

answer

We cannot determine the firm's level of profit because we do not know about its revenues.

question

answer

equal to their minimum average of all costs (AC).

question

answer

$0.00

question

answer

greater than their minimum average of all costs (AC).

question

answer

In the short run, firms will incur economic losses, but in the long run, firms will leave the market, raising economic profits.

question

answer

question

Another term for factors of production is:
inputs.
costs.
revenues.
outputs.
profits.

answer

inputs

question

If the marginal product is increasing, the marginal cost of output must be:
increasing.
constant
decreasing.
equal to average cost.
unchanged.

answer

decreasing

question

Refer to the following table. What is the average cost of producing three (3) units of the good?
$206.67
$6.67
$200.00
$406.67
$213.33

answer

$206.67

question

answer

question

Which of the following conditions will result in the firm making zero economic profit?
AC > P > MC
P = MC
P = AC
P > AC
P < AC

answer

P=AC

question

answer

firms are maximizing profits, so they should continue at that

question

answer

decreases; decreasing

question

answer

What should be the quantity and capacity of database servers?

question

The three primary tangible inputs are:
capital, interest, and savings.
labor, wages, and training.
land, labor, and capital.
revenue, profits, and costs.
price, quantity, and profits.

answer

land, labor, and capital.

question

answer

employees are assigned specialized tasks.

question

A firm's inputs are also known as its:
revenues.
costs.
factors of production.
outputs.
profits.

answer

factors of production.

question

answer

firms will want to enter the market.

question

When firms exit a market, individual firms' profits:
remain unchanged.
decrease, then increase.
decrease.
increase.
increase, then decrease.

answer

increase

question

answer

$66,000

question

answer

marginal cost of those 50 bikes is $80,000.

question

answer

$53,000.

question

answer

a profit on any quantity less than at P = $8.

question

Ralph owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total economic profit for the year was:
$20,000.
-$1,000.
$65,000.
-$35,000.
$34,000.

answer

-$1,000

question

answer

question

Refer to the accompanying graph to answer the three questions that follow.
If the firm is maximizing profits, total cost is represented by the area:
B x C.
A x B.
(A + B) x C.
(A - B) x C.
A x C.

answer

B x C

question

answer

firms will want to exit the market.

question

answer

wages paid to employees.

question

The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a competitive market. Refer to this table to answer the four questions that follow.
Profits are maximized when producing ________ unit(s).
0 (zero)
2
4
3
1

answer

question

If the market price is $15 and marginal cost is represented by the equation 2 x Q, where Q is in thousands of units, what is the profit-maximizing quantity?
7,000
8,000
7,500
30,000
15,000

answer

7,500

question

In economics, we assume that firms make decisions in order to:
protect the environment.
lobby officials.
maximize profit.
minimize revenues.
evade taxes.

answer

maximize profit.

question

answer

an increase in the size of its factory

question

Refer to the accompanying graph to answer the three questions that follow.
If this firm is maximizing profits, total revenue is represented by the area:
A x B.
A x C.
B + C.
(A + B) x C.
B x C.

answer

A x C

question

answer

They are out-of-pocket expenses.

question

answer

increase the value of the stock by maximizing company profit.

question

Ralph owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total implicit costs for the year were:
$60,000.
$66,000.
$100,000.
$72,000.
$35,000.

answer

$35,000.

question

If a firm generates $240,000 in revenue, earns $120,000 in economic profit, and its explicit costs are $80,000, how much are its implicit costs?
$60,000
$80,000
$160,000
$120,000
$40,000

answer

$40,000

question

answer

implicit costs are not out-of-pocket expenses.

question

answer

$92,000.

question

answer

increases; decreasing

question

The out-of-pocket expenses incurred in producing a good are also known as:
explicit costs.
capital costs.
fiduciary costs.
implicit costs.
wages and prices.

answer

explicit costs.

question

An example of an implicit cost is:
wages paid to employees.
a payment on an electricity bill.
forgone wages.
gasoline costs.
a payment on the loan for a piece of equipment not in use.

answer

forgone wages.

question

answer

labor; capital and land

question

answer

increases; increasing

question

answer

$75,000.

question

answer

revenue when the firm produces additional units.

question

In the accompanying table, diminishing marginal product begins after the ________ unit of output.
fourth
third
first
fifth
second

answer

second

question

answer

a firm expands output until marginal revenue is equal to marginal cost.

question

answer

maximizing profit.

question

answer

marginal product.

question

answer

increasing.

question

answer

a factory, an assembly line, workers, and robots.

question

A firm's inputs are also known as its:
costs.
profits.
outputs.
factors of production.
revenues.

answer

factors of production.

question

answer

No, that might be the best choice, but it depends on the firm's profits.

question

answer

keep their profits as high as possible.

question

answer

a business must cover its opportunity costs as well as its out-of-pocket expenses to be truly profitable.

question

answer

It increases at first, then decreases.

question

When firms exit a market, individual firms' profits:
decrease, then increase.
decrease.
increase.
increase, then decrease.
remain unchanged.

answer

increase.

question

answer

$53,000.

question

answer

We cannot determine the firm's level of profit because we do not know about its revenues.

question

answer

What should be the quantity and capacity of database servers?

question

Lauren is the owner of a bakery that earns 0 (zero) economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total implicit costs were:
$15,000.
$65.000.
$53,000.
$92,000.
$145,000.

answer

$53,000.

question

answer

$2.

question

answer

the gains from specialization are exhausted.

question

answer

a payment on a loan for a computer.

question

answer

firms will want to enter the market.

question

Ralph owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His accountant, who does not consider implicit costs, would tell him that profit for the year was:
$72,000.
$35,000.
$100,000.
-$1,000.
$34,000.

answer

$34,000.

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