quiz 7

B. varies from industry to industry.

QUESTION 11: The amount of calendar time associated with the long run: A. is less than that associated with the immediate market period. B. varies from industry to industry. C. is the same for all firms. D. is, by definition, any length of time greater than one year.

"C. total fixed cost, total variable cost, and total cost respectively."

QUESTION 24: "In the above diagram curves 1, 2, and 3 represent:" "A. average variable cost, marginal cost, and average fixed cost respectively." "B. total variable cost, total fixed cost, and total cost respectively." "C. total fixed cost, total variable cost, and total cost respectively." "D. marginal product, average variable cost, and average total cost respectively."

"A. $5,000."

QUESTION 21: "Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and average variable costs of $150. The firm's total fixed costs are: "A. $5,000." B. $500. C. $0.50. D. $50.

C. its fixed costs.

QUESTION 22: "If a firm decides to produce no output in the short run, its costs will be: " A. its marginal costs. B. its variable costs. C. its fixed costs. D. zero.

"C. MC, ATC, AVC, and AFC curves respectively."

QUESTION 23: "In the above figure, curves 1, 2, 3, and 4 represent the: " "A. ATC, MC, AFC, and AVC curves respectively." "B. MC, AFC, AVC, and ATC curves respectively." "C. MC, ATC, AVC, and AFC curves respectively." "D. ATC, AVC, AFC, and MC curves respectively."

"B. are $1,250."

QUESTION 25: In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs: A. are $2.50. "B. are $1,250." C. are $750. "D. are $1,100."

D. $50.00.

QUESTION 26 Refer to the above data. Total fixed cost is: A. $6.25. B. $100.00. C. $150.00. D. $50.00.

B. $50.

QUESTION 27: "Refer to the above data. If the firm closed down in the short run and produced zero units of output, its total cost would be: " A. zero. B. $50. C. $150. D. $100.

A. total explicit costs.

QUESTION 2: Accounting profits equal total revenue minus: A. total explicit costs. B. total implicit costs. C. total economic costs. D. economic profits.

B. a money payment made for resources not owned by the firm itself.

QUESTION 3: An explicit cost is: A. omitted when accounting profits are calculated. B. a money payment made for resources not owned by the firm itself. C. an implicit cost to the resource owner who receives that payment. D. always in excess of a resource's opportunity cost.

"D. $94,000."

" The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the above data. Creamy Crisp's economic profit is: " "A. $150,000." "B. $80,000." "C. $230,000." "D. $94,000."

D. greater than economic profits because the former do not take implicit costs into account.

QUESTION 4: Accounting profits are typically: A. greater than economic profits because the former do not take explicit costs into account. B. equal to economic profits because accounting costs include all opportunity costs. C. smaller than economic profits because the former do not take implicit costs into account. D. greater than economic profits because the former do not take implicit costs into account.

D. explicit and implicit costs from total revenue.

QUESTION 5: Economic profits are calculated by subtracting: A. explicit costs from total revenue. B. implicit costs from total revenue. C. implicit costs from normal profits. D. explicit and implicit costs from total revenue.

D. Q1Q3.

QUESTION 16: In the above diagram the range of diminishing marginal returns is: A. 0Q3. B. 0Q2. C. Q1Q2. D. Q1Q3.

B. the firm does not have sufficient time to change the size of its plant.

QUESTION 10: The basic characteristic of the short run is that: A. barriers to entry prevent new firms from entering the industry. B. the firm does not have sufficient time to change the size of its plant. C. the firm does not have sufficient time to cut its rate of output to zero. D. a firm does not have sufficient time to change the amounts of any of the resources it employs.

A. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.

QUESTION 12: The law of diminishing returns indicates that: A. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point. B. because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped. C. the demand for goods produced by purely competitive industries is downsloping. D. beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.

"B. marginal, average, and total product curves respectively."

QUESTION 13: "In the above diagram curves 1, 2, and 3 represent the: " "A. average, marginal, and total product curves respectively." "B. marginal, average, and total product curves respectively." "C. total, average, and marginal product curves respectively." "D. total, marginal, and average product curves respectively."

B. any cost which does not change when the firm changes its output.

QUESTION 17: Fixed cost is: "A. the cost of producing one more unit of capital, for example, machinery." B. any cost which does not change when the firm changes its output. C. average cost multiplied by the firm's output. D. usually zero in the short run.

B. property insurance premiumsB. any cost which does not change when the firm changes its output.

QUESTION 18: Which of the following is most likely to be a fixed cost? A. shipping charges B. property insurance premiums C. wages for unskilled labor D. expenditures for raw materials

"D. baking supplies (flour, salt, etc.)"

QUESTION 19: "If you operated a small bakery, which of the following would be a variable cost in the short run? " A. baking ovens B. interest on business loans C. annual lease payment for use of the building "D. baking supplies (flour, salt, etc.)"

D. the former refer to non-expenditure costs and the latter to monetary payments.

QUESTION 1: Implicit and explicit costs are different in that: A. explicit costs are opportunity costs; implicit costs are not. B. There is no difference between implicit costs and explicit costs C. the latter refer to non-expenditure costs and the former to monetary payments. D. the former refer to non-expenditure costs and the latter to monetary payments.

B. change in total cost that results from producing one more unit of output.

QUESTION 20: Marginal cost is the: A. rate of change in total fixed cost that results from producing one more unit of output. B. change in total cost that results from producing one more unit of output. C. change in average variable cost that results from producing one more unit of output. D. change in average total cost that results from producing one more unit of output.

"B. $200,000 and its economic profits were zero."

QUESTION 6: "Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were: " "A. $100,000 and its economic profits were zero." "B. $200,000 and its economic profits were zero." "C. $100,000 and its economic profits were $100,000." "D. zero and its economic loss was $200,000."

"D. profits were zero and its economic losses were $500,000."

QUESTION 7: "Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting: " "A. profits were $100,000 and its economic profits were zero." "B. losses were $500,000 and its economic losses were zero." "C. profits were $500,000 and its economic profits were $1 million." "D. profits were zero and its economic losses were $500,000."

"C. $230,000."

QUESTION 8 " The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the above data. Creamy Crisp's accounting profit is: " "A. $150,000." "B. $380,000." "C. $230,000." "D. $294,000."

A. is 5.

Refer to the above data. The marginal product of the fourth worker: A. is 5. B. is 7. C. is 71/2. D. cannot be calculated from the information given.

B. total product is 18.

Refer to the above data. When two workers are employed: A. total product is 20. B. total product is 18. C. average product is 10. D. total product cannot be determined from the information given.