ECO 232 Quiz: Chapter 2, ECO mid term

Average product is the: Select one: a. Total output divided by the units of a variable resource b. Maximum level of output with one variable resource and other fixed resources c. Level of output at which total product increases d. Level of output at which total product decreases

a

Economic profit is: Select one: a. Total revenues minus the opportunity cost of the inputs b. Gross profit minus selling and operating expenses c. Total revenues from sales minus the cost of materials d. Total revenues minus fixed costs

a

Economic profits in an industry suggest the industry: Select one: a. should be larger to better satisfy consumers' desire for the product. b. has excess production capacity. c. is the size that consumers want it to be. d. can earn more profits by increasing product price.

a

Examples of command economies are: Select one: a. Cuba and North Korea. b. Mexico and Brazil. c. Sweden and Norway. d. The United States and Japan.

a

Fixed costs are those costs which are: Select one: a. Independent of the rate of output b. Implicit to a competitive firm c. Subject to diminishing marginal productivity d. Embodied in the calculation of marginal cost

a

Implicit costs are: Select one: a. "payments" for self-employed resources b. Always greater in the short run than in the long run c. Comprised entirely of variable costs d. Equal to total fixed costs

a

In a competitive market economy firms will select the least-cost production technique because: Select one: a. to do so will maximize the firms' profits. b. this will prevent new firms from entering the industry. c. such choices will result in the full employment of available resources. d. "dollar voting" by consumers mandates such a choice.

a

The advent of DVDs has virtually demolished the market for videocassettes. This is an example of: Select one: a. creative destruction. b. capital accumulation. c. the difference between normal and economic profits. d. derived demand.

a

The long run is a period of time for which: Select one: a. The amount of all resources can be varied b. The level of output is fixed c. The size of the production plant is fixed d. All resources are fixed

a

Which is the best example of a fixed cost of production to a firm? Select one: a. Depreciation of capital b. Electricity charges c. Advertising d. Wages paid to workers

a

At an output of 1,000 units per year, a firm's variable costs are $5,000 and its average fixed costs are $3. Its total costs per year are: Select one: a. $5,000 b. $8,000 c. $6,000 d. $10,000

b

Barter: Select one: a. accounts for over 30 percent of the dollar volume of all exchange in the U.S. economy. b. entails the exchange of goods for goods. c. is used to circumvent the problem of a lack of coincidence of wants among potential buyers and sellers. d. is the major means of exchange in centrally planned economies.

b

Copyrights and trademarks are examples of: Select one: a. capital goods. b. property rights. c. public goods. d. human capital.

b

If a firm's revenues just cover all its opportunity costs, then: Select one: a. Total revenues equal its implicit costs b. Economic profit is zero c. Total revenues equal its explicit costs d. Normal profit is zero

b

Of the following countries, the one that best exhibits the characteristics of a market economy is: Select one: a. Cuba. b. Canada. c. China. d. North Korea.

b

The competitive market system: Select one: a. encourages innovation because government provides tax breaks and subsidies to those who develop new products or new productive techniques. b. encourages innovation because successful innovators are rewarded with economic profits. c. discourages innovation because it is difficult to acquire additional capital in the form of new machinery and equipment. d. discourages innovation because firms want to get all the profits possible from existing machinery and equipment.

b

The division of labor means that: Select one: a. labor markets are geographically segmented. b. workers specialize in various production tasks. c. unskilled workers outnumber skilled workers. d. each worker performs a large number of tasks.

b

The main difference between the short run and the long run is that: Select one: a. In the long run, only one variable can be fixed b. In the short run, one or more inputs is fixed c. The long run always refers to a time period of one year or longer d. Firms earn zero profits in the long run

b

Which would be an implicit cost for a firm? The cost: Select one: a. Paid for production supplies for the firm b. Of wages foregone by the owner of the firm c. Paid for leasing a building for the firm d. Of worker wages and salaries for the firm

b

Accounting profits: Select one: a. Equal the difference between total revenues and the sum of implicit and explicit costs b. Are similar to pure economic rents c. Equal the difference between total revenues and explicit costs d. Are economic profits

c

As output increases, average fixed costs: Select one: a. Increase b. First increase and then decrease c. Decrease d. Remain constant

c

Cash expenditures a firm makes to pay for resources are called: Select one: a. Implicit costs b. Normal profit c. Explicit costs d. Opportunity costs

c

In terms of the circular flow diagram, households make expenditures in the _____ market and receive income through the _____ market. Select one: a. product; financial b. resource; product c. product; resource d. capital; product

c

Suppose that a firm produces 200,000 units a year and sells them all for $10 each. The explicit costs of production are $1,500,000 and the implicit costs of production are $300,000. The firm has an accounting profit of: Select one: a. $300,000 and an economic profit of $400,000 b. $200,000 and an economic profit of $500,000 c. $500,000 and an economic profit of $200,000 d. $400,000 and an economic profit of $200,000

c

The coincidence-of-wants problem associated with barter refers to the fact that: Select one: a. buyers in resource markets and sellers in product markets can never engage in exchange. b. money must be used as a medium of exchange or trade will never occur. c. for exchange to occur each seller must have a product that some buyer wants. d. specialization is restricted by the size or scope of a market.

c

The two basic markets shown by the simple circular flow model are: Select one: a. household and business. b. free and controlled. c. product and resource. d. capital goods and consumer goods.

c

Variable costs are: Select one: a. Sunk costs b. Defined as the change in total cost resulting from the production of an additional unit of output c. Costs that change with the level of production d. Multiplied by fixed costs

c

Which of the following is one of the Five Fundamental Questions? Select one: a. How much should the society save? b. Who should appoint the head of the central bank? c. What goods and services will be produced? d. Which products will be in scarce supply and which in excess supply?

c

According to the law of diminishing marginal returns, eventually: Select one: a. Additional inputs will no longer generate average output b. The additional inputs necessary to produce an additional unit of output will diminish c. Output must fall and then rise as additional units of input are employed d. The additional output generated by additional units of an input will diminish

d

Competition means that: Select one: a. sellers can manipulate market price by causing product scarcities. b. a product can be purchased at a number of different prices. c. there is more than one seller in a market. d. there are independently-acting buyers and sellers in each market.

d

Economic profit for a company is defined as the total revenues of the firm minus the: Select one: a. Explicit costs of production b. Accounting profit c. Implicit cost of production d. Opportunity cost of all resources

d

Marginal cost can be defined as the: Select one: a. Change in fixed cost resulting from one more unit of production b. Difference between fixed and variable cost at any level of output c. Difference between price and average total cost at the profit-maximizing level of output d. Amount which one more unit of output adds to total cost

d

The French term "laissez-faire" means: Select one: a. "circular flow." b. "public ownership." c. "there is no free lunch." d. "let it be."

d

The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy. This statement best describes the concept of: Select one: a. derived demand. b. market failure. c. the invisible hand. d. consumer sovereignty.

d

The invisible hand promotes society's interests because: Select one: a. individuals will produce goods for others out of concern for their fellow human beings. b. it makes sure that everyone wins from competition in the market. c. government regulation pushes business into producing the right mix of goods and services. d. individuals pursuing their self-interest will try to produce goods and services that people in society want and are willing to purchase.

d

The short run is a time period in which: Select one: a. The level of output is fixed b. All resources are fixed c. The size of the production plant is variable d. Some resources are fixed and others are variable

d

The simple circular flow model shows that: Select one: a. businesses are on the buying side of the product market and on the selling side of the resource market. b. businesses are on the selling side of both product and resource markets. c. households are on the buying side of both product and resource markets. d. households are on the selling side of the resource market and on the buying side of the product market.

d

The two general types of economic systems that exist today are: Select one: a. market systems and capitalism. b. socialism and central planning. c. laissez faire systems and pure command systems. d. market systems and command systems.

d

Well-defined property rights: Select one: a. discourage investment and growth. b. discourage hard work. c. impede exchange. d. encourage owners to maintain or improve their property.

d