ECON FINAL
c
A difference between explicit and implicit costs is that a. explicit costs must be greater than implicit costs. b. explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do. c. implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do. d. mplicit costs must be greater than explicit costs
c
A local park filled with picnickers is a. excludable and rival in consumption b. excludable and not rival in consumption c. not excludable and rival in consumption d. not excludable and not rival in consumption
a
A production function is a relationship between inputs and a. quantity of output b. revenue. c. costs d. profit.
d
A traffic light at an intersection is a. rival and excludable in consumption b. not rival but excludable in consumption. c. rival but not excludable in consumption d. not rival and not excludable in consumption
c
A view of a spectacular sunset along a private beach is an example of a a. private good b. public good c. nonrival but excludable good. d. rival but excludable good.
c
Anya has decided to start her own hair-styling salon. To purchase the necessary equipment, Anya withdrew $10,000 from her savings account, which was earning 3% interest, and borrowed an additional $5,000 from the bank at an interest rate of 8%. What is Anya's annual opportunity cost of the financial capital that has been invested in the business? a. $300 b. $400 c.. $700 d. $1,650
d
At the local park there is a playground that anyone may use. There is rarely anyone using the playground, so children who use the playground receive full enjoyment from its use. The playground is a. rival in consumption and is excludable. b. not rival in consumption, but is excludable c. rival in consumption, but is not excludable. d. not rival in consumption nor is it excludable
c
Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's a. total revenue b. explicit costs c. implicit costs d. marginal costs
fixed costs
Costs that do not vary with the quantity of output produced
c
Economists normally assume that the goal of a firm is to (i) sell as much of its product as possible. (ii) set the price of the product as high as possible. (iii) maximize profit. a. (i) and (ii) only b. (ii) and (iii) only c. (iii) only d. (i), (ii), and (iii)
Total costs
FC + VC
false
Fixed costs are those costs that remain fixed no matter how long the time horizon is. true false
d
For a construction company that builds houses, which of the following costs would be a fixed cost? a .the $50,000 per year salary paid to a construction foreman b. the $30,000 per year salary paid to the company's bookkeeper c. the $10,000 per year premium paid to an insurance company d. All of the above are correct
b
For a firm, the relationship between the quantity of inputs and quantity of output is called the a. profit function b. production function c. total-cost function d. quantity function
public goods
Goods that are neither excludable nor rival in consumption
a
If a firm uses labor to produce output, the firm's production function depicts the relationship between a. the number of workers and the quantity of output marginal product and marginal cost b. the maximum quantity that the firm can produce as it c. adds more capital to a fixed quantity of labor d. fixed inputs and variable inputs in the short run
d
If marginal cost is greater than average total cost, then a. profits are increasing b. economies of scale are becoming greater. c. average total cost remains constant d. average total cost is increasing
a
In the long run a company that produces and sells laundry detergent incurs total costs of $2,500 when output is 1,250 units and $2,750 when output is 1,500 units. For this range of output, the laundry detergent company exhibits a. economies of scale b. constant returns to scale c. diseconomies of scale d. efficient scale
b
In the long run the local coffee shop incurs total costs of $625 when output is 1,250 cups of coffee and $750 when output is 1,500 cups of coffee. For this range of output, the coffee shop exhibits a. economies of scale b. constant returns to scale c. diseconomies of scale d. efficient scale
c
It is commonly argued that national defense is a public good. Nevertheless, the weapons used by the U.S. military are produced by private firms. We can conclude that a. resources would be used more efficiently if the government produced the weapons b. resources would be used more efficiently if private firms provided national defense c. weapons are rival in consumption and excludable, but national defense is not rival in consumption and not excludable. d. national defense is rival in consumption and excludable, but weapons are not rival in consumption and not excludable
c
Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each. An economist would calculate the total cost for one photo frame to be a. $5 b. $10 c. $15 d. $25
d
Knowledge that is patented is a a. public good, whereas knowledge that is not patented is a common resource. b. private good, whereas knowledge that is not patented is a club good. c. common resource, whereas knowledge that is not patented is a private good d. club good, whereas knowledge that is not patented is a public good.
a
Larry's Lunchcart is a small street vendor business. If Larry makes 15 pretzels in his first hour of business and incurs a total cost of $16.50, his average total cost per pretzel is a. $1.10 b. $6.50 c. $15.00 d. $16.50
Excludable
Neither public goods nor common resources are
c
People cannot be prevented from using a good if the good is a. a private good or a public good b. a private good or a common resource. c. a public good or a common resource d. a public good or a club good
b
Private companies will invest in medical research if a. they will produce general knowledge. b. they will produce a specific product for which they may receive a patent. c. there is no government intervention in the market for medical products. d. others will benefit from their discoveries
d
Residents of Hong Kong are able to find restaurants that advertise a dish that contains grizzly bear paws. Since it is unlikely that grizzly bear paws are purchased from a private producer of animal paws, we can likely conclude that a. international laws making it illegal to sell grizzly bear paws are likely to be very effective at eliminating these offerings at Hong Kong restaurants b. higher penalties for poaching grizzly bears will prevent poachers from killing. c. there are likely to be very few grizzly bear poachers. d. allowing individuals to own and raise grizzly bears for meat would likely reduce the threat of extinction to grizzly bear populations.
c
Shelley's Salsa produces and sells organic salsa. Last year it sold 3 million tubs of salsa at a price of $3 per tub. For last year, the firm's a. accounting profit was $9 million b. economic profit was $9 million c. total revenue was $9 million d. explicit costs were $9 million.
a
The Tragedy of the Commons occurs because a. common resources are rival in consumption. b. government does not efficiently allocate society's scarce resources. c. people consider the value of resources in the future more than in the present. d. markets do not account for the presence of property rights.
a
The Tragedy of the Commons results when a good is a. rival in consumption and not excludable b. excludable and not rival in consumption. c. both rival in consumption and excludable. d. neither rival in consumption nor excludable.
false
The U-shaped average-total-cost curve reflects the U-shaped average-fixed-cost curve. true false
d
The Wooden Chair Factory experiences diminishing marginal product of labor with the addition of which worker? a. the third worker b. the fourth worker c. the fifth worker d. the sixth worker
c
The free-rider problem a. forces the supply of a public good to exceed its demand b. results in common resources becoming club goods. c. explains why many local governments supply public goods. d. results in public goods becoming private goods
false
The marginal-cost curve intersects the average-fixed-cost curve at the minimum of marginal cost True False
true
The shape of the total-cost curve is inversely related to the shape of the production function true false
b
The things that must be forgone to acquire a good are called a. implicit costs b. opportunity costs c. explicit costs d. accounting costs
a
Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's costs. a. Tyler says his costs are $25,900, and Greg says his costs are $66,500 b. Tyler says his costs are $25,000, and Greg says his costs are $65,000 c. Tyler says his costs are $66,500, and Greg says his costs are $66,500. d. Tyler says his costs are $75,000, and Greg says his costs are $41,500
b
What is average variable cost when output is 50 units? a. $3.60 b. $4.00 c. $4.40 d. $4.80
a
What is the average fixed cost of producing 8 units of output? a. $1.25 b. $3.13 c. $20.00 d. $24.37
c
What is the fixed cost for this production process? a. $0 b. $12 c. $24 d. $16
c
What is the total cost of producing 7 units of output? a. $10 b. $143 c. $123 d. $185
d
What is the value of G? a. $30 b. $120 c. $220 d. $270
c
When a firm experiences diseconomies of scale, a. short-run average total cost is minimized. b. long-run average total cost is minimized. c. long-run average total cost increases as output increases d. long-run average total cost decreases as output increases.
a
When something of value has no price attached to it, a. externalities will be present. b. production of the product has no cost c. government should not intervene to produce the product. d. private companies will eventually produce the product, and the good will no longer be free.
d
Which of the following explains why long-run average cost at first decreases as output increases? a. diseconomies of scale b. less-efficient use of inputs c. fixed costs becoming spread out over more units of output d. gains from specialization of inputs
a
Which of the following expressions is correct? a. accounting profit = total revenue - explicit costs b. economic profit = total revenue - implicit costs c. economic profit = total revenue - explicit costs d. Both a and b are correct
a
Which of the following goods is rival in consumption and excludable? a. a DVD b. a movie in an empty theater c. an outdoor movie shown at a public park d. a movie shown on cable television
d
Which of the following is an example of an implicit cost? a. salaries paid to owners who work for the firm b. interest on money borrowed to finance equipment purchases c. cash payments for raw materials d. foregone rent on office space owned and used by the firm
b
Which of the following is an example of general knowledge, as opposed to specific knowledge that can be patented? a. the invention of a longer-lasting battery b. a mathematical theorem c. a method for constructing a high-performance microchip d. the chemical formula for an adhesive
d
Which of the following is not a common resource? a. clean air b. clean water c. open grazing land d. national defense
d
Which of the following statements about private goods and public goods is correct? a. Private goods and public goods are both excludable. b. Private goods and public goods are both rival in consumption. c. Private goods are not excludable and public goods are excludable d. Private goods are rival in consumption and public goods are not excludable
b
Which of the following statements is true of the tax on gasoline? a. It is preferred to tolls as the best solution to road congestion. b. It discourages driving on noncongested roads, even though there is no congestion externality for these roads. c. Both b and c are correct
b
Why is the commercial value of ivory a threat to the elephant, while the commercial value of beef is the cow's guardian? a. Elephants live in Africa, whereas cows live in the United States. b. Elephants are a common resource. c. Cows are a common resource d. Cows are a public good
sunk cost
a cost that has already been committed and cannot be recovered
Monopoly
a firm that is the sole seller of a product without close substitutes
competitive market
a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker
natural monopoly
a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms
Tragedy of the Commons
a parable that illustrates why common resources are used more than is desirable from the standpoint of society as a whole
free rider
a person who receives the benefit of a good but avoids paying for it
cost-benefit analysis
a study that compares the costs and benefits to society of providing a public good
marginal cost
change in tc/change in q
variable costs
costs that vary with the quantity of output produced
profit
exit or profit, (P-ATC) X Q
exit
exit or profit, P>ATC
profit
exit or profit, TR-TC
profit
exit or profit, TR/Q-TC/Q X Q
EXIT
exit or profit, TR?Q<TC/Q
exit
exit or profit, tr<tc
average fixed cost
fc/q
average fixed cost
fixed cost divided by the quantity of output
private goods
goods that are both excludable and rival in consumption
common resources
goods that are rival in consumption but not excludable
implicit costs
input costs that do not require an outlay of money by the firm
explicit costs
input costs that require an outlay of money by the firm
national defense, basic research, fighting poverty
name 3 important public goods
average total cost
tc/q
total cost
the amount that the firm pays to buy inputs
price discrimination
the business practice of selling the same good at different prices to different customers
marginal revenue
the change in total revenue from an additional unit sold
marginal product
the increase in output that arises from an additional unit of input
marginal cost
the increase in total cost that arises from an extra unit of production: change in total cost/change in quantity
Excludability
the property of a good whereby a person can be prevented from using it
rivalry in consumption
the property of a good whereby one person's use diminishes other people's use
economies of scale
the property whereby long-run average total cost falls as the quantity of output increases
diseconomies of scale
the property whereby long-run average total cost rises as the quantity of output increases
constant returns to scale
the property whereby long-run average total cost stays the same as the quantity of output changes
diminishing marginal product
the property whereby the marginal product of an input declines as the quantity of the input increases
efficient scale
the quantity of output that minimizes average total cost
production function
the relationship between quantity of inputs used to make a good and the quantity of output of that good
total revenue
the total amount of money a firm receives by selling goods or services
average total cost
total cost divided by the quantity of output
profit
total revenue - total cost
average revenue
total revenue divided by the quantity sold
economic profit
total revenue minus total cost, including both explicit and implicit costs
accounting profit
total revenue minus total explicit cost
average variable cost
variable cost divided by the quantity of output
average variable cost
vc/q
clean air and water, congested roads, wildlife
what are 3 common resources
enter
what does. a firm do if P>ATC
constant returns to scale
when long-run average total cost is constant as output increases
