Questions:
1. 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)
2. If, as an entrepreneur, I am earning accounting profits of $50,000 per year and the opportunity cost of my time is $60,000,
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.
3.Refer to Table A. The accounting costs for this firm are
A) $54,450
B) $49,950
C) $36,000
D) $22,050
E) $18,450
F) $17,550
G) $13,950
H) $4,500
I) $0
4. Refer to Table A. The accounting profits for this firm are
A) $54,450
B) $49,950
C) $36,000
D) $22,050
E) $18,450
F) $17,550
G) $13,950
H) $4,500
I) $0
5. Refer to Table A. The implicit costs for this firm are
A) $54,450
B) $49,950
C) $36,000
D) $22,050
E) $18,450
F) $17,550
G) $13,950
H) $4,500
I) $0
6. Refer to Table A. The economic profits for this firm are
A) $54,450
B) $49,950
C) $36,000
D) $22,050
E) $18,450
F) $17,550
G) $13,950
H) $4,500
I) $0
7. Dave currently earns a salary of $1,540 per week as an economics instructor. His next best career would have been an assistant manager at Nittany Burger, where he would have earned $24 per hour, and would have worked for 40 hours per week. What weekly economic rent does Dave receive from being an economics instructor?
A) $960
B) $1,540
C) $24
D) $1,516
E) $580
F) $0 since he is in the his first chosen career
8.For these next five problems, use the above table. Hint: You may have to add some columns to the table in order to find more numbers. Look at Lessons > Supplements > Cost and Product Math Practice for some great practice in doing this type of problem! In Table B, what is the APL when 3 workers are hired?
A) 3 sandwiches
B) 8 sandwiches
C) 12 sandwiches
D) 24 sandwiches
9.In Table B, what is the marginal product of labor for the 4th worker?
A) 16 sandwiches
B) 24 sandwiches
C) 40 sandwiches
D) 10 sandwiches
10. In Table B, diminishing MPL begins with which worker? In other words, which is the first worker who adds less output than the previous worker?
A) first worker
B) second worker
C) third worker
D) fourth worker
E) fifth worker
F) sixth worker
G) seventh worker
H) eighth worker
I) we do not see diminishing MPL in the table yet.
11. In Table B, assume all workers get paid the same wage rate of w = $60. Assume that there are no costs associated with capital (TFC = 0). Which of the following is true?
A) The marginal cost of sandwiches made by the 6th worker is $2.
B) The sandwich with the lowest marginal cost was made by worker #4.
C) The marginal cost of sandwiches increases when L increases from 3 to 4
D) The marginal cost of sandwiches increases when L increases from 6 to 7
E) The marginal cost of all sandwiches is the same.
F) Both [A] and [D] are true.
12. In Table B, assume all workers get paid the same wage rate of w = $60. Assume that there are no costs associated with capital (TFC = 0). Which of the following is true?
A) The average variable cost of sandwiches will always decrease when we hire more workers since we are spreading overhead costs
B) The average variable cost of sandwiches begins to increase with worker #3
C) The average variable cost of sandwiches is minimized when L = 4
D) The average variable cost of sandwiches is $6 when 6 workers are employed
E) The average variable cost of sandwiches is $5 when 5 workers are employed
13. Which of the following would be a fixed input to an automobile firm?
A) Steel
B) A factory in Detroit
C) Car batteries
D) Engineers
14. In economics, how long is the long run?
A) More than 12 months
B) 24 months or longer
C) 5 years or more
D) Whatever time it takes a firm to vary all inputs
15. Fred's Franks originally sold hotdogs and soft drinks from a cart located in front of City Hall. Then Fred purchased another hotdog cart and hired someone to sell hotdogs and soft drinks near the high school. Both locations have been successful. When Fred's Franks expanded to two locations, which of the following did NOT occur?
A) Fred's production function changed.
B) Production increased.
C) The company increased the inputs it employs.
D) The firm employed additional capital.
16. If the average product of 20 workers is 100 bushels of wheat and the average product of 21 workers of wheat is 99 bushels of wheat, then the marginal product of the 21st worker was
A) -1 bushel of wheat.
B) 5 bushels of wheat.
C) 79 bushels of wheat.
D) 99 bushels of wheat.
17. The law of diminishing marginal product is a statement
A) that concerns changes in variable input and changes in output.
B) that concerns the long run.
C) that concerns changes in profits.
D) that relates to plant size.
18. If average variable costs are increasing while average total costs are decreasing, then
A) marginal cost must lie between average variable and average total costs.
B) marginal cost must equal average variable cost.
C) marginal cost must equal average total cost.
D) fixed costs must be zero.
19.Use the above figure. The ATC at output 10 is
A) $30.00
B) $10.00
C) $2.00
D) $3.00
20. Use the above figure. The AFC at output level 10 is
A) $3
B) $2
C) $1
D) $10
21. If a firm gets so large that management of employees and other resources becomes a costly problem, it will be experiencing
A) diseconomies of scale.
B) diminishing marginal product.
C) constant returns to scale.
D) economies of scale.
22. Suppose a firm doubles its output in the long run. At the same time the average cost of production remains unchanged. We can conclude that the firm is
A) exploiting the economies of scale available to it.
B) facing constant returns to scale.
C) facing diseconomies of scale.
D) not using the available technology efficiently.
23.In the above figure, point B is called
A) the maximum efficient scale.
B) the minimum efficient scale.
C) the planning horizon.
D) the point of diminishing marginal product.
24.Video Question. Watch the following video: https://www.youtube.com/watch?v=56dpnShzRhs (skip the advertisement if one pops up).
According to the video, what is a cause of diseconomies of scale?
A) duplication of effort
B) office politics
C) communication costs
D) all of the above