1. A dedicated teacher loves being in the classroom and would teach for $40,000 per year, but he is actually paid $55,000 per year. This individual
A) receives economic rent of $20,000.
B) receives accounting profit of $20,000.
C) has an opportunity cost of $15,000.
D) receives economic rent of $15,000.
2. Economic rent directs resources to
A) the people who can use them most efficiently.
B) people only.
C) large corporations.
D) labor-intensive industries only.
3. Mathematically, economic profit is
A) total revenue × (explicit costs – implicit costs)
B) total revenue – (explicit costs – implicit costs)
C) total revenue + (explicit costs + implicit costs)
D) total revenue – (explicit costs + implicit costs)
4. If, as an entrepreneur, I am earning accounting profits of $50,000 per year and the opportunity cost of my time is $40,000,
A) I am earning economic profits of $10,000.
B) I am earning economic profits of $50,000.
C) I should close my business.
D) I am in a long-run equilibrium position.
5. Refer to Table A. The accounting costs for this firm are
A) $900
B) $2,790
C) $3,510
D) $3,690
E) $4,410
F) $7,200
G) $9,990
H) $10,890
I) $0
6. Refer to Table A. The accounting profits for this firm are
A) $900
B) $2,790
C) $3,510
D) $3,690
E) $4,410
F) $7,200
G) $9,990
H) $10,890
I) $0
7. Refer to Table A. The implicit costs for this firm are
A) $900
B) $2,790
C) $3,510
D) $3,690
E) $4,410
F) $7,200
G) $9,990
H) $10,890
I) $0
8. Refer to Table A. The economic profits for this firm are
A) $900
B) $2,790
C) $3,510
D) $3,690
E) $4,410
F) $7,200
G) $9,990
H) $10,890
I) $0
9. Dave currently earns a salary of $1,800 per week as an economics instructor. His next best career would have been an assistant manager at Nittany Burger, where he would have earned $25 per hour, and would have worked for 40 hours per week. What weekly economic rent does Dave receive from being an economics instructor?
A) $25
B) $800
C) $1,000
D) $1,775
E) $1,800
F) $0 since he is in his first chosen career
10. In considering economic profit in a market economy, it is correct to say that
A) there should never be any economic profit.
B) economic profit will only occur, even in the short run, as a result of imperfect competition.
C) economic profit performs an important function in allocating resources to their most highly valued uses.
D) economic profit tends to reduce the production efficiency of the economy, leading to wasted resources.