Multiple choice questions:
Question 1
Household pretax income that is used for spending, paying taxes, and saving is:
A. disposable income.
B. private income.
C. national income.
D. personal income.
Question 2
A transfer payment is
A. money transferred from a corporation to its stockholders.
B. money received from the government for which there is no direct work performed in return.
C. income earned from rent, interest, and dividends.
D. all of the above are examples of transfer payments.
Question 3
Of the following groups, the highest average household income occurs in households headed by a:
A. female.
B. person with a college degree.
C. person in their late 20s or early 30s.
D. high school graduate.
Question 4
Durable goods:
A. have a short useful life.
B. have more than one use.
C. are recycled goods.
D. have a useful life of more than one year.
Question 5
An example of a nondurable good is:
A. a semester of education.
B. an automobile.
C. a visit to the dentist.
D. a meal at a restaurant.
Question 6
Maximizing economic well-being requires that:
A. an individual earn the maximum attainable income.
B. the benefits and costs of different courses of action be weighed.
C. an individual acquire all of the goods and services that can possibly be attained with a given income.
D. all of the above.
Question 7
The satisfaction realized from consuming a good or service is referred to by economists as:
A. consumer well-being.
B. economic gain.
C. utility.
D. consumer surplus.
Question 8
To maximize satisfaction from earning income, an individual should:
A. work as few hours as possible.
B. obtain the highest paying job possible.
C. balance the added income from working against the opportunities forgone because of work.
D. all of the above.
Question 9
Unlimited liability is a risk faced by:
A. a sole proprietor.
B. a bondholder in a corporation.
C. a stockholder in a corporation.
D. all of the above.
Question 10
A business can continue on indefinitely if it is organized as a:
A. corporation or partnership.
B. corporation.
C. partnership.
D. sole proprietorship.
Question 11
Which of the following entitles its holder to the same dividend every year?
A. Common stock of a partnership.
B. Preferred stock of a proprietorship.
C. Preferred stock of a corporation.
D. Common stock of a corporation.
Question 12
Which of the following faces unlimited liability?
A. The holder of a corporate bond.
B. The holder of a corporation's common stock.
C. The holder of a corporation's preferred stock.
D. None of the above.
Question 13
In any given year, the largest share of business receipts typically goes to:
A. proprietorships.
B. corporations.
C. partnerships.
D. partnerships and proprietorships taken together.
Question 14
The acquisition of General Motors by Ford Motor Company would be an example of a:
A. vertical merger.
B. general merger.
C. conglomerate merger.
D. horizontal merger.
Question 15
When one corporation acquires another corporation that is unrelated to its operation, this is a:
A. vertical merger.
B. horizontal merger.
C. conglomerate merger.
D. none of the above.
Question 16
A corporation formed for the purpose of owning stock in other corporations is a:
A. holding company.
B. general partnership corporation.
C. cartel.
D. blind trust.
Question 17
In economics, it is usually assumed that the fundamental objective of a business firm is to maximize:
A. its share of the market.
B. the income of its managers.
C. profit or minimize loss.
D. total revenue.
Question 18
In which of the legal forms of business do profits goes to stockholders?
A. Partnerships.
B. Corporations.
C. Sole proprietorships.
D. All of the above
Question 19
Individuals in households maximize their economic well-being by:
A. working as few hours as possible.
B. buying the lowest priced items they can find.
C. acquiring as many goods and services as possible.
D. none of the above.
Question 20
The majority of business firms in the United States are organized as:
A. partnerships.
B. trusts.
C. corporations.
D. sole proprietorships.
Question 21
The change in total satisfaction from consuming each additional unit of a good, service, or activity is:
A. total utility.
B. adjusted utility.
C. average utility.
D. marginal utility.
Question 22
Marginal utility is the:
A. change in total satisfaction from consuming an additional unit of a good or service.
B. average satisfaction from each unit of a good or service consumed.
C. satisfaction from the total amount of a good or service consumed.
D. difference between the satisfaction from consuming a good or service and its cost.
Question 23
Total utility is the:
A. difference between the satisfaction from consuming a good or service and its cost.
B. satisfaction from the total amount of a good or service consumed.
C. change in total satisfaction from consuming an additional unit of a good or service.
D. satisfaction from each unit of a good or service consumed.
Question 24
Marginal cost for a person consuming a good or service is the:
A. total cost of consuming a given amount of the good or service.
B. cost of the alternative forgone.
C. cost per unit of the good or service consumed.
D. change in total cost from consuming an additional unit of the good or service.
Question 25
Net benefit is maximized where:
A. marginal benefit exceeds marginal cost by the greatest amount.
B. total benefit equals total cost.
C. marginal benefit equals marginal cost.
D. average benefit exceeds average cost by the greatest amount.
Question 26
Payments a business makes to acquire factors of production such as labor, raw materials, and machinery are:
A. depreciated costs.
B. explicit costs.
C. implicit costs.
D. nondiscretionary costs.
Question 27
Explicit costs are:
A. variable costs.
B. payments made to acquire factors of production such as labor and machinery.
C. opportunity costs.
D. fixed costs.
Question 28
Implicit costs are:
A. fixed costs.
B. payments made to acquire factors of production such as labor and machinery.
C. variable costs.
D. opportunity costs.
Question 29
Normal profit is:
A. not a cost of production.
B. the average profit for all businesses in the United States.
C. the profit necessary to keep a business in operation.
D. the amount over and above what an entrepreneur could earn in his or her next best alternative.
Question 30
John passes up an offer for a job paying $50,000 a year and, instead, starts his own business. His new business brings in $160,000 in sales during the first year, and his total costs for items such as materials, labor, equipment, shipping, and insurance come to $65,000.
Reference: Ref 11-9
John's explicit costs are:
A. $50,000.
B. $115,000.
C. $95,000.
D. $65,000.
Question 31
John passes up an offer for a job paying $50,000 a year and, instead, starts his own business. His new business brings in $160,000 in sales during the first year, and his total costs for items such as materials, labor, equipment, shipping, and insurance come to $65,000.
Reference: Ref 11-9
John's implicit costs are:
A. $50,000.
B. $115,000.
C. $65,000.
D. $95,000.
Question 32
When calculating profit economists include:
A. explicit costs.
B. implicit costs.
C. explicit, implicit and external costs.
D. explicit and implicit costs.
Question 33
Excess profit is the profit:
A. above what is necessary to continue a business.
B. necessary to recover explicit costs.
C. necessary to continue a business.
D. necessary to recover implicit costs.
Question 34
Total revenue is the:
A. difference between the revenue from selling a good or service and its cost of production.
B. revenue from the total amount of a good or service sold.
C. revenue from one unit of a good or service sold.
D. change in revenue from selling an additional unit of a good or service.
Question 35
Total revenue is calculated as:
A. average cost x quantity sold.
B. revenue/quantity sold.
C. revenue - cost.
D. price x quantity sold.
Question 36
Given the table below, what is the marginal revenue generated when the third unit is sold?
A. $50.
B. $150.
C. $100.
D. $110.
Question 37
Benefits to a business are typically measured in terms of:
A. the number of consumers using the business's product.
B. opportunity costs.
C. units of satisfaction to the owner.
D. dollars of revenue.
Question 38
Total cost to a firm is the:
A. change in cost when one more unit of a good or service is produced.
B. cost of producing a specified number of units of a good or service.
C. difference between the explicit costs and implicit costs of production.
D. cost per unit of a good or service produced.
Question 39
The marginal cost for a product is the:
A. cost of producing a specified number of units of the good or service.
B. cost per unit of the good or service produced.
C. difference between the explicit costs and implicit costs of production.
D. change in total cost when one more unit of the good or service is produced.
Question 40
A business will maximize its profit by operating at the output where marginal revenue:
A. equals marginal cost.
B. is less than marginal cost.
C. and marginal cost are both greater than zero.
D. is greater than marginal cost.
Question 41
A producing sector classification for grouping goods, services, and the firms that produce them:
A. is broader than an industry classification.
B. may be broader or narrower than an industry classification, depending upon the types of products classified.
C. includes the same number of firms as an industry classification, but arranges the firms differently.
D. is narrower than an industry classification.
Question 42
Industries:
A. are more narrowly defined than sectors.
B. are made up of firms that use similar processes.
C. are made up of firms that produce similar products.
D. all of the above.
Question 43
A production function:
A. is the body of knowledge that exists about production and its processes.
B. is a rule for maximizing net benefits.
C. shows the type and amount of output that can be attained from a set of inputs when those inputs are combined in a specific way.
D. is the body of knowledge covering general truths and the operation of general laws.
Question 44
In economics it is most often assumed that the main concern of a firm in choosing a production technique is to:
A. maximize profit.
B. produce the largest attainable output.
C. maximize revenue.
D. use the latest available technology.
Question 45
The concept that new, technologically advanced processes and machinery cause the disuse and ultimate disappearance of old processes and machinery is called:
A. creative destruction.
B. capital-intensive production.
C. capital switching.
D. industrial unrest.
Question 46
To an economist, the short run refers to a time period:
A. during which production takes place using only fixed factors of production.
B. during which all factors of production are variable.
C. of less than one year.
D. during which production takes place using some variable and some fixed factors of production.
Question 47
In the short run, all factors of production are:
A. fixed.
B. either fixed or variable.
C. variable.
D. semi-fixed.
Question 48
To an economist, the long run refers to a time period:
A. during which some factors of production are variable in amount.
B. during which all factors of production are variable in amount.
C. during which all factors of production are owned by the firm.
D. of one year or longer.
Question 49
In the long run, all factors of production are:
A. fixed.
B. either fixed or variable.
C. semi-fixed.
D. variable.
Question 50
A cost that does not change as the amount of output produced changes is a:
A. semi-variable cost.
B. variable cost.
C. fixed cost.
D. semi-fixed cost.
Question 51
The short-run cost that is zero when nothing is produced but changes as the level of output changes is:
A. total cost.
B. total fixed cost.
C. total variable cost.
D. none of the above.
Question 52
Over the short run, total cost is equal to:
A. average fixed cost multiplied by average variable cost.
B. average total cost plus marginal cost.
C. total fixed cost plus total variable cost.
D. total variable cost multiplied by average total cost.
Question 53
Average total cost is the:
A. cost of all variable factors of production.
B. cost of all fixed factors of production.
C. change in total cost when one additional unit of output is produced.
D. cost per unit of output produced.
Question 54
Given the following table, what is the average total cost of producing 20 units of output?
A. $10.00.
B. $50.00.
C. $25.00.
D. $2.50.
Question 55
Given the following table, what is the marginal cost of the third unit of output?
A. $55.00.
B. $110.00.
C. $80.00.
D. $40.00.
Question 56
Short-run costs behave as they do because of:
A. the Law of Diminishing Returns.
B. economies and diseconomies of scale.
C. diminishing marginal utility.
D. the Law of Supply.
Question 57
The Law of Diminishing Returns governs production:
A. when all factors of production are fixed in amount.
B. in the short run.
C. in both the long run and the short run.
D. in the long run.
Question 58
Which of the following is correct?
A. The Law of Diminishing Returns causes short-run marginal cost to behave as it does.
B. The Law of Diminishing Returns underlies short-run cost behavior.
C. The Law of Diminishing Returns takes effect when students study.
D. All of the above are correct.
Question 59
Which of the following is NOT calculated for the long run?
A. Average total cost.
B. Fixed cost.
C. Marginal cost.
D. Variable cost.
Question 60
A firm's long-run average total cost curve assumes its particular shape because of:
A. the Law of Supply.
B. the Law of Diminishing Returns.
C. the cost pattern for fixed factors.
D. economies of scale, constant returns to scale, and diseconomies of scale.