CCP Econ Chp 4
B) Long term
Fixed costs are also known as ________________ costs because they are much harder for a business to change. A) Short term B) Long term C) Variable D) Static
C) Vary all the inputs
In the process of long term profit maximization, the business makes decisions under the assumption that it can... A) Change only short term costs B) Change only long term costs C) Vary all the inputs D) Eliminate all unnecessary expenses
C) Average product
Inputs to production do NOT include... A) Labor B) Land C) Average product D) Business know-how
C) Labor
Inputs used by a business in the production process include A) Revenue B) Profit C) Labor D) Cost
A) Embodied
Many times, technology is ________________ in the equipment a company buys. A) Embodied B) Not present C) Produced D) Part of the production process
A) Rises with
Marginal cost generally _______________ quantity produced. A) Rises with B) Decreases with C) Stays the same with varying D) Is not related to
B) Being the lowest price competitor
One strategy for long term profit maximization is... A) Innovation B) Offering consistently higher prices C) Being the lowest price competitor D) Utilization of private business incubators
B) Marginal product
Output divided by the number of hours worked or by the number of workers is called... A) Average input B) Average product C) Marginal product D) Marginal revenue
D) Cost
Profit is the difference between revenue and... A) Marginal product B) Average cost C) Long term costs D) Costs
B) Short term costs
Variable costs are also known as... A) Long term costs B) Short term costs C) Production costs D) Variable average product
B) Short term everyday decision making
Variable costs are relevant for... A) Long term strategic planning B) Short term everyday decision making C) Business only D) Calculating fixed cost percentages
D) Marginal revenue exceeds marginal cost
A profit-marginalizing business will increase production as long as... A) Marginal cost exceeds marginal revenue B) Marginal price exceeds average product C) Average product exceeds marginal price D) Marginal revenue exceeds marginal cost
C) Hourly labor
An example of variable costs is... A) Rent on the building a business occupies B) Loans on equipment purchased C) Hourly labor D) Insurance premiums to protect assets
B) Marginal cost exceeds marginal revenue after the price increase
As the market price of a good rises, businesses will respond by producing more of that food because... A) The rising price causes marginal cost to fall B) Marginal cost exceeds marginal revenue after the price increase C) Laws and regulations require them to do so D) Marginal revenue exceeds marginal cost after the price increases
B) Maximize profits
Economists generally assume that the main goal of most businesses in the economy is to... A) Be responsible corporate citizens B) Maximize profits C) Provide jobs for the local populations D) Avoid having to make very many decisions
D) Production function
Economists think of a business as a machine, where you put inputs in one end and get outputs from the other end. This metaphor is called the... A) Revenue process B) Cost process C) Profit process D) Production function
A) Exactly $2,250
If June can earn $1,500 in revenue from painting two houses, how much can she earn in revenue from painting three houses? (Assume she is just one house painter in a large market of house painters, and that she can easily find a third customer) A) Exactly $2,250 B) Less than $2,250 C) More than $2,250 D) Exactly $4,500
D) $80
If Sara can produce 25 muffins for a total cost of $15, but her production process is subject to increasing marginal costs, which of the following could be the total cost of producing 100 muffins? A) $15 B) $17.50 C) $60 D) $80
A) Increasing marginal revenue
If you add too many inputs, your business may experience... A) Increasing marginal revenue B) Diminishing marginal product C) Diminishing cost input D) Accelerated product function
B) Inputs
In a simple grass-mowing business, the law mower and labor would be... A) Outputs B) Inputs C) Production D) Profit
C) Outputs would increase
In a simple lawn-mowing business where you have a push mower and labor as input, by adding additional input in the form of a gas self-propelled mower (capital), what would be the impact on output? A) Output would remain the same B) Output would decrease C) Output would increase D) Labor would decrease
D) Production function
The __________________ summarizes the output of the business, given the level of inputs. A) Marginal function B) Average cost C) Marginal revenue D) Production function
B) Marginal cost
The added expense of producing one more unit of output is called the... A) Marginal product B) Marginal cost C) Average cost D) Production cost
C) Marginal revenue
The additional money a business gets from producing and selling one more unit of output is... A) Marginal product B) Long term revenue C) Marginal revenue D) Average profit
B) Businesses focus on achieving as much profit as they can, given that they can vary all inputs, even to the point of shutting down
The difference between long term and short term profit maximization is that in the short term... A) Businesses focus on achieving as much as they can, given that fixed costs cannot be changed B) Businesses focus on achieving as much profit as they can, given that they can vary all inputs, even to the point of shutting down C) Businesses are not able to maximize profits because they can vary all of their inputs, making the calculations too complicated D) Businesses focus on achieving as much profit as they can, but in the long term, businesses always eventually shut down
D) Marginal product
The extra amount of output a business can generate by adding one more hour of labor is called... A) Marginal revenue B) Labor input C) Marginal cost D) Marginal product
A) Intermediate inputs
The goods or services purchased by a business for immediate use in the production process are known as... A) Intermediate inputs B) Intermediate outputs C) Production inputs D) Production processes
A) Labor
The hours of work supplied by various types of workers are referred to by economists as... A) Labor B) Production C) Revenue D) Cost
C) Capital
The long-lived physical equipment and structures that a business uses in its production process are called... A) Boot B) Land C) Capital D) Function
A) Profit maximization
The main objective of a business in a market economy is... A) Profit maximization B) Controlling costs C) Decreasing revenue D) Managing the production function
C) Labor cost
The price of labor per unit times the amount of labor used is called... A) Marginal cost B) Marginal labor C) Labor cost D) Labor input
B) Business know-how
The technology or knowledge necessary for the production process called... A) Production input B) Business know-how C) Technology input D) Knowledge input
A) Labor, capital and land, intermediate inputs, and accumulating business know-how
The total cost of production is determined by adding which of the following costs? A) Labor, capital and land, intermediate inputs, and accumulating business know-how B) Labor, capital, revenue, and marginal product C) Labor, land, capital, and revenue D) Labor, business know-how, capital and land
B) It must be less than 18
Theodore can make 6 pizzas in one hour. If Theodore's labor has a diminishing marginal product, what must be true about the number of pizzas that Theodore can make in three hours? A) It must be less than 12 B) It must be less than 18 C) It must be equal to 18 D) It must be greater than 18
A) More capital generally causes the marginal product of labor to rise
What happens to the marginal product of labor if my capital is added to a production process? A) More capital generally causes the marginal product of labor to rise B) More capital will cause the marginal product of labor not to diminish C) More capital generally causes the marginal product of labor to fall D) More capital will affect the marginal product of capital, not the marginal product of labor
D) Profit
What is the difference between revenue and cost? A) Production B) Input C) Output D) Profit
D) Production
What is the economic process of turning inputs into outputs that a business will sell to customers? A) Revenue B) Profit C) Profit maximization D) Production
D) Inputs
What word describes the goods and services that are used to produce outputs for a business? A) Production B) Cost C) Revenue D) Inputs
A) Cost
What word describes the money that a business pays for its inputs? A) Cost B) Output C) Revenue D) Production
B) Revenue
What word describes the money that customers pay for the output of a business? A) Cost B) Revenue C) Input D) Output
B) Revenue rises because the business is selling more output
When a business expands production and increases sales, what generally happens to revenue? A) Revenue falls because costs also rise B) Revenue rises because the business is selling more output C) Revenue is unaffected by the level of production or the number of sales D) It depends on whether the firm has increasing or diminishing marginal revenue
D) An accountant who makes her living preparing tax returns for other people
Which of the following is an example of a profit maximizing business? A) A charitable organization that provides medical care for disaster victims B) A local government that provides a police force C) A household in which family member takes care of the children D) An accountant who makes her living preparing tax returns for other people
C) The cost function
____________ shows the potential cost for each level of output. A) The product function B) The average marginal cost C) The cost function D) The production process
B) Revenue
________________ is the amount of money a company receives for selling the product or service. A) Profit B) Revenue C) Cost D) Average marginal revenue
D) Marginal cost
__________________ is the added cost to produce one more unit of output. A) Marginal product B) Marginal revenue C) Average cost D) Marginal cost
D) Marginal revenue
___________________ is the added revenue from producing and selling one more unit of output. A) Added revenue B) Marginal profit C) Marginal cost D) Marginal revenue