Economics Final Exam Vocab 1

Total cost is calculated as A) the sum of total fixed cost and total variable cost. B) the product of average total cost and price. C) the sum of all the firm's explicit costs. D) the sum of average fixed cost and average variable cost.

A) the sum of total fixed cost and total variable cost.

A clothing manufacturer produced 5,000 sweaters, but sold only 4,000 of them. The remaining 1,000 sweaters would be classified as A) a loss to the firm. B) part of the firmʹs tangible capital. C) part of the firmʹs intangible capital. D) a factor of production.

B) part of the firmʹs tangible capital.

Salaries of NFL quarterbacks, like Tom Brady, are A) too high. B) related to the additional revenues team owners expect to enjoy as a result of having them on the team roster. C) the result of perfectly competitive markets. D) All of the above are correct.

B) related to the additional revenues team owners expect to enjoy as a result of having them on the team roster.

Refer to Figure 9.1. If this farmer is maximizing profits, his total revenue will be A) $90. B) $135. C) $180. D) $240.

C) $180.

Firms that offer to pay for college tuition for their employees are investing in ________ capital. A) tangible B) productive C) social D) human

D) human

Economic profit is A) TR -TC. B) TR -TFC. C) TR -TVC. D) TVC -TFC.

A) TR -TC.

Which statement is TRUE? Fixed costs A) do NOT exist in the long run. B) depend on the firmʹs level of output. C) are zero if the firm is producing nothing. D) are the difference between total costs and average variable costs.

A) do NOT exist in the long run.

Economic costs A) include both a normal rate of return on investment and the opportunity cost of each factor of production. B) are equal to the direct costs of hiring all factors of production. C) are the opportunity cost of each factor of production minus any interest charges paid on borrowed funds. D) are equal to total revenue minus accounting profit.

A) include both a normal rate of return on investment and the opportunity cost of each factor of production.

Refer to Scenario 9.1. Amyʹs profit is A) $0. B) $20,000. C) $30,000. D) $50,000.

B) $20,000.

Refer to Figure 9.1. This farmerʹs fixed costs are A) $0. B) $24. C) $45. D) indeterminate unless we know the level of output the firm is producing.

B) $24.

The formula for average fixed costs is A) TFC -q. B) TFC/q. C) q/TFC. D) Δq/ΔTFC.

B) TFC/q

Refer to Figure 9.1. If this farmer is maximizing his profits, his TVC is A) $24. B) $42. C) $108. D) $255.

C) $108.

Refer to Figure 7.1. A corn producer's profit is $200 and is producing 100 bushels of corn. Then he must have a cost per bushel of ________. A) $1 B) $2 C) $3 D) $4

C) $3

Refer to Figure 9.1. For this farmer to maximize profits he should produce ________ bushels of wheat. A) 6 B) 9 C) 12 D) 16

C) 12

The formula for total fixed cost is A) TFC = TC + TVC. B) TFC = TVC -TC. C) TFC = TC/TVC. D) TFC = TC -TVC.

D) TFC = TC -TVC.

The Oh So Humble Bakery sells 300 muffins at a price of $1 per muffin. Its explicit costs for producing 300 muffins are $250. If the bakery is earning a normal rate of return, then implicit costs must be A) $50. B) $100. C) $250. D) $350

A) $50.

Refer to Figure 7.1. This corn producer earns a total revenue of $900. Each bushel of corn is sold for $5. This corn producer must be selling ________ bushels of corn. A) 180 B) 450 C) 900 D) 4,500

A) 180

Which of the following would constitute an act of investment by a household, as economists use the term? A) Building a new construction vacation home B) Purchasing 100 shares of Microsoft stock C) Buying a corporate bond D) Borrowing money from the bank to pay for a vacation cruise

A) Building a new construction vacation home

An example of tangible capital is A) arestaurantʹs unsold, unopened cans of soda. B) an idea for a new business. C) the goodwill a firm has established through advertising. D) knowledge of how to program a computer.

A) a restaurantʹs unsold, unopened cans of soda.

Assume firms break even in an industry. New firms ________ attracted to the industry and current ones ________ exiting it. A) are not; are not B) are not; are C) are; are not D) are; are

A) are not; are not

As output increases, average fixed costs A) decrease. B) initially decrease and then increase. C) remain constant. D) increase.

A) decrease.

Firms that are "breaking even" are A) earning zero economic profits. B) earning less than a normal rate of return. C) shutting down in the short run. D) All of the above are correct.

A) earning zero economic profits.

In the short run, a firm A) has at least one fixed factor of production. B) can enter an industry where positive profits are being earned. C) can exit an industry and all of its factors of production are variable.. D) both B and C are correct.

A) has at least one fixed factor of production.

When a large amount of output is produced per unit of the input, the input is said to 5exhibit A) high productivity. B) low productivity. C) marginal productivity. D) derived productivity.

A) high productivity.

You take a class that improves your critical thinking skills. This represents an investment in your A) human capital. B) social capital. C) tangible capital. D) financial capital.

A) human capital

In the capital market, households ________ supply the financial resources to firms that allow them to purchase ________. A) indirectly; capital B) directly; capital C) indirectly; land D) indirectly; labor

A) indirectly; capital

Marginal cost A) is the increase in total cost resulting from producing one more unit. B) is the average cost of production divided by output. C) equals the increase in AVC resulting from producing one more unit. D) always equals average cost.

A) is the increase in total cost resulting from producing one more unit.

The marginal revenue product of labor is A) the additional revenue a firm earns by employing one additional unit of labor. B) the additional profit a firm earns by employing one additional unit of labor. C) the marginal product of capital times the price of labor. D) the additional revenue the firm makes by selling one unit of labor.

A) the additional revenue a firm earns by employing one additional unit of labor.

The term investment as it is used by an economist refers to A) the creation of new capital. B) the act of buying a share of stock or a bond. C) ahouseholdʹs savings. D) the net worth of a companyʹs financial assets.

A) the creation of new capital.

Refer to Scenario 7.1. Your accounting profit last year was A) $10,000. B) $30,000. C) $50,000. D) $60,000.

B) $30,000.

Refer to Scenario 7.1. A yearly normal rate of return for your computer software firm would be A) $20,000. B) $40,000. C) $60,000. D) $100,000.

B) $40,000.

Refer to Scenario 9.1. Amyʹs total costs equal A) $39,000. B) $40,000. C) $50,000. D) $59,000.

B) $40,000.

In the short run A) existing firms do NOT face limits imposed by a fixed input. B) all firms have costs that they must bear regardless of their output. C) new firms can enter an industry. D) existing firms can exit an industry.

B) all firms have costs that they must bear regardless of their output

Goods produced by the economic system that are used as inputs in the production of future goods and services are A) consumable goods. B) capital goods. C) tangible goods. D) depreciation goods.

B) capital goods.

The idea that the demand for auto workers stems from the demand for automobiles is A) the value of the marginal product of auto workers. B) derived demand. C) indirect demand. D) output demand.

B) derived demand.

In the short run, firms earning a profit will want to ________ their profits while firms suffering losses will want to ________ their losses. A) maximize; maximize B) maximize; minimize C) minimize; maximize D) minimize; minimize

B) maximize; minimize

A firm's capital is measured as a(n) ________ while investment in new capital is measured as a(n) ________. A) flow; stock B) stock; flow C) stock; change D) physical amount; dollar value

B) stock; flow

A decrease in the wage rate will change A) only the amount of labor hired. B) the amount of labor employed, and it may also change the amount of other inputs employed. C) the price the firm charges for the product, but it will not affect the demand for any of the inputs. D) thefirmʹs profit-maximizing level output, but not its usage of inputs.

B) the amount of labor employed, and it may also change the amount of other inputs employed.

In the long run, A) a firm can shut down, but it cannot exit the industry. B) there are no fixed factors of production. C) a firm can vary all inputs, but it cannot change the mix of inputs it uses. D) all firms must make economic profits.

B) there are no fixed factors of production.

Refer to Scenario 9.1. Amyʹs total fixed costs equal A) $1,000. B) $9,000. C) $10,000. D) $21,000.

C) $10,000.

If a pet grooming salon hires an additional groomer, that worker can groom 4 additional pets per day. The average grooming fee is $25. The most the salon would be willing to pay that groomer is A) $4 per day. B) $25 per day. C) $100 per day. D) indeterminate with the given information.

C) $100 per day.

Refer to Scenario 7.1. During the year your economic costs were A) $40,000. B) $60,000. C) $100,000. D) $130,000.

C) $100,000.

If the marginal product of a worker for a calculator manufacturer is 10 calculators, and the price of a calculator is $10, the firmʹs marginal revenue product is A) $1.00. B) $10.00. C) $100.00. D) $1,000.00.

C) $100.00.

A university requires that all entering first-year students learn how to use word processing and spreadsheet software. This is an investment in what type of capital? A) Tangible B) Financial C) Human D) Productive

C) Human

________ are likely a fixed cost of a firm. A) Wages paid to employees B) The payments for supplies C) Lease payments for office space D) Travel expenses to meet with clients

C) Lease payments for office space

Operating profit is A) TR -TC. B) TR -TFC. C) TR -TVC. D) TVC -TFC.

C) TR -TVC.

The demand for ________ is a ʺderived demand.ʺ A) ice cream cones on a hot day B) tax-free municipal bonds C) a hair stylist by a salon owner D) a birthday cake for your brother

C) a hair stylist by a salon owner

The measure of a firm's ________ is the current market value of its plant, equipment, inventories, and intangible assets. A) investment B) depreciation C) capital stock D) capital flow

C) capital stock

Average fixed costs A) are the costs associated with producing an additional unit of output. B) provide a per unit measure of costs. C) fall as output rises. D) reach their minimum at the output level where the average fixed cost curve is intersected by the marginal cost curve.

C) fall as output rises.

As the inventory of a firm falls, A) there is no change in its capital. B) its intangible capital decreases. C) its tangible capital decreases. D) its social capital increases.

C) its tangible capital decreases.

Capital goods yield benefits A) as soon as the investment decision is made. B) before they are put to use. C) over their life span. D) in the present only.

C) over their life span.

Total revenue minus total cost is equal to A) the rate of return. B) marginal revenue. C) profit. D) net cost.

C) profit.

Refer to Figure 9.1. If this farmer is maximizing profits, his total costs will be A) $11. B) $66. C) $90. D) $132.

D) $132.

Refer to Figure 7.1. This corn producer produces 100 bushels of corn and sells each bushel at $5. The cost of producing each bushel is $2. This corn producerʹs total revenue is ________ and profit is ________. A) $200; $300. B) $300; $200 C) $500; $200 D) $500; $300

D) $500; $300

The marginal revenue product A) is the product of the marginal product of labor and the price of the output. B) eventually increases as labor input increases. C) measures the benefit to the firm from hiring an additional unit of labor. D) Both A and C are correct.

D) Both A and C are correct.

Demand for the services of Derek Jeter is A) horizontal. B) unrelated to his true productivity. C) an output demand. D) derived from the demand for Yankee's tickets when Jeter plays.

D) derived from the demand for Yankee's tickets when Jeter plays.

If economic profit is zero, a firm A) earns a negative rate of return. B) will leave the industry. C) earns a positive but below normal rate of return. D) earns exactly a normal rate of return.

D) earns exactly a normal rate of return.

Which statement is NOT true? Variable costs A) are equal to total costs in the long run. B) are zero if output is zero. C) are equal to the difference between total cost and total fixed cost. D) remain constant as output goes up.

D) remain constant as output goes up.

Perfectly competitive firms must make all of the following decisions EXCEPT A) how much output to supply. B) which production technology to use. C) how much of each input to demand. D) what price to charge for its output.

D) what price to charge for its output.