Econ 101: Final

After earning your BA, you have to decide whether to take a job that will pay you $45,000 per year or spend an additional two years earning an MBA. If you decide to pursue the graduate degree, your annual expenses for tuition, books, board, and lodging will be $32,000. You have been offered a scholarship for $10,000 per year, but to pay the remaining $22,000 per year, you would have to cash in savings bonds from your grandparents that have been earning $500 in interest per year. The annual opportunity cost of earning your MBA is: A) $67,500. B) $77,000. C) $99,000. D) $77,500.

A) $67,500.

Sarah's accountant tells her that she made a profit of $43,002 running a pottery studio in Orlando. Sarah's husband, an economist, claims Sarah lost $43,002 running her pottery studio. This means her husband is claiming that she incurred _____ in _____ costs. A) $86,004; implicit B) $43,002; implicit C) $43,002; explicit D) $86,004; explicit

A) $86,004; implicit

Which of the following statements is FALSE? A) When the marginal product of labor is upward-sloping, the marginal cost curve is upward-sloping. B) The average fixed cost curve is downward-sloping and approaches the horizontal axis. C) The marginal cost curve intersects the average variable cost curve at the minimum of average variable cost. D) When the marginal cost curve is above the average cost curve, the average cost curve is upward-sloping.

A) When the marginal product of labor is upward-sloping, the marginal cost curve is upward-sloping.

The _____ cost curve is NOT affected by diminishing returns. A) average fixed B) average variable C) average total D) marginal

A) average fixed

If marginal cost is GREATER THAN average total cost: A) average total cost is increasing. B) average total cost is decreasing. C) average total cost is unchanged. D) marginal cost is decreasing.

A) average total cost is increasing.

A firm that is able to use its inputs more efficiently as it increases production in the long run best demonstrates: A) economies of scale. B) diseconomies of scale. C) labor-intensive production. D) capital-intensive production.

A) economies of scale.

For most restaurants, the average total cost curve _____ at _____ levels of output, then _____ at _____ levels. A) falls; low; rises; high B) rises; low; falls; high C) rises; high; rises; low D) falls; high; falls; low

A) falls; low; rises; high

Once diminishing returns have set in, as output increases, the total cost curve: A) gets steeper. B) gets flatter. C) becomes horizontal. D) increases at first, and then decreases.

A) gets steeper.

The marginal cost curve intersects the average variable cost curve at: A) its lowest point. B) its maximum. C) its end point. D) no point; the curves don't intersect.

A) its lowest point.

Economic profit is: A) less than accounting profit if implicit costs exist. B) always equal to accounting profit. C) greater than accounting profit if implicit costs exist. D) less than accounting profit if implicit costs are zero.

A) less than accounting profit if implicit costs exist.

The larger the output, the more output over which fixed cost is distributed. Called the _____ effect, this leads to a ______ average _____ cost. A) spreading; lower; fixed B) spreading; higher; fixed C) diminishing returns; lower; variable D) diminishing returns; higher; variable

A) spreading; lower; fixed

You own a deli. Which of the following is most likely a fixed input at your deli? A) the dining room B) the bread used to make sandwiches C) the tomato sauce used to make soups D) the employees

A) the dining room

The sum of fixed and variable costs is _____ cost. A) total B) marginal C) variable D) average

A) total

Profit computed without implicit costs is _____ profit. A) explicit B) accounting C) implicit D) economic

B) accounting

In the long run: A) all factors are fixed. B) all factors are variable. C) production choices are more limited than in the short run. D) production is always greater than zero

B) all factors are variable.

The total cost curve(or production function) gets steeper as output increases because of: A) increasing returns to the variable input. B) decreasing returns to the variable input. C) increases in fixed cost. D) decreases in overhead costs.

B) decreasing returns to the variable input.

Buffalo Aircraft doubles the amount of all of the inputs it uses—the factory doubles in size and twice as many workers are hired. After this expansion, the number of aircraft produced triples. If the price of inputs is unchanged, this means that Buffalo Aircraft is operating with: A) increasing marginal cost. B) economies of scale. C) increasing average total cost. D) decreasing average variable cost.

B) economies of scale.

An input whose quantity CANNOT be changed in the short run is: A) marginal. B) fixed. C) incremental. D) variable.

B) fixed.

When a fine caterer produces 30 catered meals, its marginal cost and average variable cost each equal $10. Therefore, assuming normally shaped cost curves, at 29 meals its marginal cost is _____ $10 and its average variable cost is _____ $10. A) more than; less than B) less than; more than C) more than; more than D) equal to; equal to

B) less than; more than

The average total cost curve has a U shape because the ______ effect is dominant at low levels of output, and the _____ effect is dominant at high levels of output. A) diminishing returns; spreading B) spreading; diminishing returns C) comparative advantage; absolute advantage D) absolute advantage; comparative advantage

B) spreading; diminishing returns

If the accounting profit for a firm is negative: A) the economic profit must be positive. B) the economic profit must be negative. C) the firm should produce more. D) the firm will not owe any taxes.

B) the economic profit must be negative.

You own a small deli that sells sandwiches, salads, and soup. Which of the following is an implicit cost of the business? A) wages paid to part-time employees B) the job offer you did not accept at a local catering service C) bread, meat, and vegetables used to produce the items on your menu D) your monthly utility bill

B) the job offer you did not accept at a local catering service

The marginal product of labor is: A) the change in labor divided by the change in total product. B) the slope of the total product of labor curve. C) the change in average product divided by the change in the quantity of labor. D) the change in output that occurs when capital increases by one unit.

B) the slope of the total product of labor curve.

Diminishing returns/product to an input occur: A) when all inputs are fixed. B) when some inputs are fixed and some are variable. C) when all inputs are variable. D) only when there are no fixed inputs

B) when some inputs are fixed and some are variable.

The total product curve(or production function): A) shows the relation between output and the quantity of a variable input for varying levels of the fixed input. B) will become flatter as output increases if there are diminishing returns to the variable input. C) will be downward-sloping if there are diminishing returns to the variable input. D) will become horizontal when the marginal product of the variable input is constant.

B) will become flatter as output increases if there are diminishing returns to the variable input.

Suppose a local floral shop has explicit costs of $200,000 per year and implicit costs of $50,000 per year. If the store earned an economic profit of $50,000 last year, the store's accounting profit equaled: A) $10,000. B) $50,000. C) $100,000. D) $200,000.

C) $100,000.

Austin's total fixed cost is $3,600 a month at his cupcake bakery. Austin employs 20 workers and pays each worker $600 a month. If labor is his only variable cost, what is Austin's total cost? A) $3,600 B) $1,200 C) $15,600 D) $12,000

C) $15,600

You own a deli. Which of the following is a decision most likely to be made in the LONG run at your deli? A) You order more breadsticks. B) You order more soft drinks for next week. C) You renovate the second floor of your building to increase the size of the dining room. D) You advertise for part-time workers.

C) You renovate the second floor of your building to increase the size of the dining room.

A fixed cost: A) will exist only in the long run. B) depends on the level of output. C) can be positive, even if the firm doesn't produce any output in the short run. D) decreases until the point of diminishing returns is reached.

C) can be positive, even if the firm doesn't produce any output in the short run.

When marginal cost is BELOW average variable cost, average variable cost must be: A) at its minimum. B) at its maximum. C) falling. D) rising.

C) falling.

The _____ is the increase in output that is produced when a firm hires an additional worker. A) average product B) total product C) marginal product D) marginal cost

C) marginal product

Jacquelyn is a student at a major state university. Which of the following is NOT an explicit cost of her attending college? A) tuition B) textbooks C) the salary that she could have earned working full-time D) computer lab fees

C) the salary that she could have earned working full-time

Profit is the difference between _____ and _____. A) total sales; total revenues B) total profits; total costs C) total revenues; total costs D) marginal costs; marginal revenues

C) total revenues; total costs

The total cost curve for a snowmobile dealership shows how _____ cost depends on the quantity of _____. A) total; fixed inputs B) average; variable inputs C) total; output D) marginal; output

C) total; output

In the long run, all costs are: A) fixed. B) constant. C) variable. D) marginal.

C) variable.

Which of the following statements about opportunity cost is FALSE? A) Opportunity cost may be larger than monetary cost. B) Opportunity cost includes both explicit and implicit costs. C) The real or opportunity cost of something is what you must give up to get it. D) Opportunity cost is synonymous with explicit cost.

D) Opportunity cost is synonymous with explicit cost.

The term diminishing returns/product refers to: A) a falling interest rate that can be expected as one's investment in a single asset increases. B) a reduction in profits caused by increasing output beyond the optimal point. C) a decrease in total output due to the firm hiring uneducated workers. D) a decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

D) a decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

The long-run average total cost curve is tangent to an infinite number of short-run _____ cost curves. A) total B) marginal C) average variable D) average total

D) average total

The larger the output, the more variable input required to produce additional units. Called the _____ effect, this leads to a ______ average _____ cost. A) spreading; lower; fixed B) spreading; higher; fixed C) diminishing returns; lower; variable D) diminishing returns; higher; variable

D) diminishing returns; higher; variable

The change in total output resulting from a one-unit increase in the quantity of an input used, holding the quantities of all other inputs constant, is: A) average cost. B) average product. C) marginal cost. D) marginal product.

D) marginal product.

An input whose quantity can be changed in the short run is a(n) _____ input. A) marginal B) fixed C) incremental D) variable

D) variable