Liberty University ECON 213 quiz 8 solutions answers right

Liberty University ECON 213 quiz 8 solutions answers right

How many versions: 12 different versions

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Question 1 Accounting profit is equal to:

Question 2 In the short run, average total costs and average variable costs converge as output increases because:

Question 3 If the marginal cost curve is U­shaped:

Question 4 Darrell owns a furniture store. His total costs are $225,000 per year, and his fixed costs are $150,000 per year. This means that his variable costs are:

Question 5 If workers are unable to specialize and become more productive as more labor is hired, the amount of total output produced:

Question 6 If a firm’s long­run average total costs increase as it increases its scale of production, the firm is experiencing:

Question 7 As a firm hires more labor and each worker is able to specialize, what happens to each additional worker’s marginal productivity?

Question 8 A firm’s accounting profit is always greater than its economic profit because:

Question 9 When the average variable cost curve is upward­sloping, what must be true about the marginal cost curve?

Question 10 Madison owns a boxing gym. She recently expanded the size of her gym by adding another boxing ring and moving into a larger building so that she can serve more clients. How would Madison know if she is experiencing economies of scale from increasing the size of her boxing gym?

Question 11 Use the following graph to answer the questions that follow.

A firm expands its scale of production and finds that its long­run average total cost curve looks like LRATC3. It might look this way because the firm:

Question 12 Ralph owns a small pizza restaurant, where he works full­time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total implicit costs for the year were:

Question 13 Every year the U.S. sugar industry, which is dominated by only a few firms, spends millions of dollars lobbying members of Congress and contributing to their reelection campaigns. It does so for both Democrats and Republicans. One goal of these contributions is the preservation of the U.S. sugar quota, which limits the importation of less expensive sugar from other countries. Ultimately, all of these activities are motivated by a desire among U.S. sugar producers to:

Question 14 Darrell is the owner of a furniture store. Last year, his total revenue was $525,000 and his total labor costs were $200,000. His overhead expenses, including insurance and legal fees, were $175,000. The rent on his building was $45,000. Darrell could earn $105,000 per year working at a nearby furniture distributor. From this information, we know that his accounting profit was:

Question 15 Which is the best example of diseconomies of scale?

Question 16 In the short run, the cost of __________ is variable, whereas the cost of __________ is fixed.

Question 17 If a firm experiences diseconomies of scale, its long­run average cost curve is:

Question 18 Darrell owns a furniture store. If he decided to expand the size of his store in order to sell more furniture, how would he know if he is experiencing diseconomies of scale?

Question 19 Which of the following is true about explicit costs?

Question 20 A firm’s production function is similar to a recipe used to make a cake in the sense that the production function shows us the combination of __________ used to produce __________.

Question 1 The accompanying graph represents the __________ for a firm.

Question 2 Assume that a firm hires an additional employee. If the marginal product for that employee is greater than for the previous employee hired, it must be because:

Question 3 Use the following graph to answer the questions that follow.

If the firm expanded its scale of production and found that its average costs increased, which of the curves would reflect this situation?

Question 4 If all workers are able to specialize and become more productive as more labor is hired, the amount of total output produced:

Question 5 If you were told that a firm earns positive accounting profit and nothing else, what would you know is true about its economic profit?

Question 6 Use the following graph to answer the questions that follow.

If the firm expanded its scale of production and found that its average costs decreased, which of the curves would reflect this situation?

Question 7 Refer to the following graph to answer the questions that follow.

The average total cost (ATC) and average variable cost (AVC) converge as the level of output produced increases because:

Question 8 If there are gains from specialization in a workplace, hiring another employee means that the marginal product of labor will:

Question 9 A firm is considering changing its plant size. It calculates the amount of output it would be able to produce and the total cost for various plant sizes, as shown in the accompanying table. If the firm is currently using plant size C, the firm is experiencing which of the following?

Question 10 If a firm hires another worker and her marginal product of labor is negative, we know that the firm’s total output is:

Question 11 Use the following graph to answer the questions that follow.

A firm expands its scale of production and finds that its long­run average total cost curve looks like LRATC1. It might look this way because the firm:

Question 12 Steve owns a bike store. Last year, his average cost of selling a bike was $1,000. If he expands the size of his store this year and sees his average cost remain the same, his long­run average total cost curve should be:

Question 13 When firms grow larger, they sometimes acquire more market power, meaning that they have greater ability to negotiate lower prices with their suppliers. This ability to negotiate lower prices with their suppliers leads to:

Question 14 The production function for bookshelves includes:

Question 15 Economists consider both explicit and implicit costs when measuring economic profit. The reason they consider implicit costs is that:

Question 16 A firm has a certain amount of capital and land. As it hires more labor, each worker is able to:

Question 17 If a firm experiences economies of scale, its longrun average cost curve is:

Question 18 Which of the following is a question that a firm must answer in the long run but not in the short run?

Question 19 Refer to the accompanying graph to answer the questions that follow.

The average total cost of production is minimized at what level of output?

Question 20 Should a firm always produce the level of output where marginal cost is lowest?

Question 1

Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes. If Steve sells 1,250 bikes this year (50 more than last year) and his average total cost increases to $1.28 million, we know that the:

Question 2

Steve owns a bike store. His total costs are $1.2 million per year, and his fixed costs are $450,000 per year. This means that his variable costs are:

Question 3

Explicit costs are:

Question 4

Refer to the following graph to answer the questions that follow.

The average total cost (ATC) and average variable cost (AVC) converge as the level of output produced Selected Answer: d. average fixed cost decreases as output increases.

Question 5

The change in total output divided by the change in input is known as:

Question 6

When output is 100 units, the firm’s total fixed cost is $500. What will this firm’s total fixed cost be if output doubles to 200 units?

Question 7

Darrell is the owner of a furniture store. Last year, his total revenue was $525,000 and his total labor costs were $200,000. His overhead expenses, including insurance and legal fees, were $175,000. The rent on his building was $45,000. Darrell could earn $105,000 per year working at a nearby furniture distributor. From this information, we know that his accounting profit was:

Question 8

Darrell owns a furniture store. His total costs are $225,000 per year, and his variable costs are $75,000 per year. This means that his fixed costs are:

Question 9

The full set of shortrun cost curves for a firm tells us:

Question 10

Every year the U.S. sugar industry, which is dominated by only a few firms, spends millions of dollars lobbying members of Congress and contributing to their reelection campaigns. It does so for both Democrats and Republicans. One goal of these contributions is the preservation of the U.S. sugar quota, which limits the importation of less expensive sugar from other countries. Ultimately, all of these activities are motivated by a desire among U.S. sugar producers to:

Question 11

Accountants consider only explicit costs when measuring accounting profit. The reason that they ignore implicit costs is that:

Question 12

Use the following graph to answer the questions that follow.

If the firm expanded its scale of production and found that its average costs decreased, which of the curves would reflect this situation?

Question 13

If the marginal product of labor is increasing, the marginal cost of output must be:

Question 14

Which is the best example of diseconomies of scale?

Question 15

Should a firm always produce the level of output where marginal cost is lowest?

Question 16

Madison owns a boxing gym. She recently expanded the size of her gym by adding another boxing ring and moving into a larger building so that she can serve more clients. How would Madison know if she is experiencing economies of scale from increasing the size of her boxing gym?

Question 17

Refer to the following graph to answer the questions that follow.

The firm is experiencing diminishing marginal product beyond what level of output along the marginal cost curve?

Question 18

Lauren owns a bakery that produces, among other things, wedding cakes. She currently has 7 employees; with 7 employees, her bakery can produce 12 wedding cakes per day. If she hired an eighth employee, she’d be able to produce 16 wedding cakes per day. Therefore, the marginal product of the eighth employee is __________ wedding cake(s).

Question 19

Lauren is the owner of a bakery. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her accounting profit was:

Question 20

If a firm experiences gains from specialization as it increases its scale of production, we would expect its longrun average cost curve to be:

The production function for bookshelves includes:

If a firm hires another worker and her marginal product of labor is positive, we know that the firm’s total output is:

Steve owns a bike store. Last year, his average cost of selling a bike was $1,000. If he expands the size of his store this year and sees his average cost remain the same, his long-run average total cost curve should be:

Which of the following is an example of a long-run cost for a manufacturing firm?

When firms grow larger, they sometimes add many additional layers of managers between the top executives and the entry-level employees. Because these managers do not actually produce any output themselves, we expect more layers of management to lead to:

The out-of-pocket expenses incurred in producing a good are also known as:

The change in total cost given a change in output is also known as:

A firm’s inputs are also known as its:

Accounting profit ignores which of the following costs?

The three primary factors of production are:

Steve owns a bike store. Last year, his average cost of selling a bike was $1,000. If he expands the size of his store this year and sees his average cost increase to $1,050, his long-run average total cost curve should be:

Nathan owns a coffee-roasting company. If he increases the size of his company and experiences constant returns to scale as a result, his long-run average total cost curve should be:

When output is 100 units, the firm’s total fixed cost is $500. What will this firm’s total fixed cost be if output doubles to 200 units?

In the short run, average total costs and average variable costs converge as output increases because:

If a firm has total costs of $535,000 and its implicit costs are $165,000, how much are its explicit costs?

If the marginal product of labor for a firm decreases as more workers are hired, we know that:

If a firm experiences economies of scale, its longrun average cost curve is:

Darrell owns a furniture store. If he moves into a larger store but finds that his average costs have increased in the long run, we know that Darrell is experiencing:

Refer to the accompanying graph to answer the questions that follow.
If the firm depicted in the graph had to pay higher rent to its landlord, we would expect its __________ curve to shift __________.

In the short run, the cost of __________ is variable, whereas the cost of __________ is fixed.

Question 1 The three primary inputs are:

Question 2 By looking at the full set of short­run cost curves for a firm, we can determine:

Question 3 Audrey owns a horse ranch. Her total costs are $550,000 per year, and her fixed costs are $205,000 per year. This means that her variable costs are:

Question 4 An explicit cost for a business that manufactures bicycles would be the:

Question 5 In economics, we assume that firms make decisions in order to:

Question 6 In the short run, average total costs and average variable costs converge as output increases because:

Question 7 If the marginal product of labor for a firm decreases as more workers are hired, we know that:

Question 8 The full set of short­run cost curves for a firm tells us:

Question 9 A firm is considering changing its plant size. It calculates the amount of output it would be able to produce and the total cost for various plant sizes, as shown in the accompanying table. If the firm is currently using plant size C, the firm is experiencing which of the following?

Question 10 Economic profit is equal to:

Question 11 Every year the U.S. sugar industry, which is dominated by only a few firms, spends millions of dollars lobbying members of Congress and contributing to their reelection campaigns. It does so for both Democrats and Republicans. One goal of these contributions is the preservation of the U.S. sugar quota, which limits the importation of less expensive sugar from other countries. Ultimately, all of these activities are motivated by a desire among U.S. sugar producers to:

Question 12 Steve owns a bike store. His total costs are $1.2 million per year, and his variable costs are $750,000 per year. This means that his fixed costs are:

Question 13 In the accompanying table, diminishing marginal product begins after the:

Question 14 As a firm hires more labor and each worker is able to specialize, what happens to each additional worker’s marginal productivity?

Question 15 Use the following scenario to answer the questions that follow. Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes. Steve’s average total cost was __________ per bike.

Question 16 It is important for a firm to know its minimum efficient scale of production because that is where:

Question 17 A firm’s short­run cost curves show us:

Question 18 If a firm experiences gains from specialization as it increases its scale of production, we would expect its long­run average cost curve to be:

Question 19 The production function for bookshelves includes:

Question 20 Should a firm always produce the level of output where marginal cost is lowest?

Question 1 Total revenue minus total cost is equal to:

Question 2 In the short run, the cost of __________ is variable, whereas the cost of __________ is fixed.

Question 3 Which of the following is a question that a firm must answer in the long run but not in the short run?

Question 4 If all workers are able to specialize and become more productive as more labor is hired, the amount of total output produced:

Question 5 It is important for a firm to know its minimum efficient scale of production because that is where:

Question 6 The production function of a restaurant includes items such as labor (i.e., cooks, waiters, a manager), capital (i.e., ovens, counters, tables, chairs, and a building), and land. In the short run, the owner of the restaurant will optimize production by employing a variable amount of __________ given a fixed amount of __________.

Question 7 Which is the best example of diseconomies of scale?

Question 8 Refer to the accompanying graph to answer the questions that follow. If the firm depicted in the graph had to pay higher rent to its landlord, we would expect its __________ curve to shift __________.

Question 9 Refer to the following graph to answer the questions that follow. The firm is experiencing diminishing marginal product beyond what level of output along the marginal cost curve?

Question 10 Use the following graph to answer the questions that follow. If the firm expanded its scale of production and found that its average costs increased, which of the curves would reflect this situation?

Question 11 Which is the best example of economies of scale?

Question 12 Economists consider both explicit and implicit costs when measuring economic profit. The reason they consider implicit costs is that:

Question 13 When firms grow larger, they sometimes add many additional layers of managers between the top executives and the entry­level employees. Because these managers do not actually produce any output themselves, we expect more layers of management to lead to:

Question 14 The change in total output divided by the change in input is known as:

Question 15 If a firm’s long­run average total costs increase as it increases its scale of production, the firm is experiencing:

Question 16 If the marginal product of labor for a firm decreases as more workers are hired, we know that:

Question 17 In the accompanying table, diminishing marginal product begins after the:

Question 18 If a firm hires another worker and her marginal product of labor is positive, we know that the firm’s total output is:

Question 19 Nathan owns a coffee­roasting company. If he increases the size of his company and experiences constant returns to scale as a result, his long­run average total cost curve should be:

Question 20 In the accompanying table, diminishing marginal product begins after the:

Question 1 Lauren is the owner of a bakery that earns 0 (zero) economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total implicit costs were:

Question 2 Use the following scenario to answer the questions that follow. Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes. Steve’s average total cost was __________ per bike.

Question 3 It is important for a firm to know its minimum efficient scale of production because that is where:

Question 4 Use the following graph to answer the questions that follow. Which of the curves depicts economies of scale?

Question 5 In the accompanying table, diminishing marginal product begins after the:

Question 6 Darrell owns a furniture store. If he decided to expand the size of his store in order to sell more furniture, how would he know if he is experiencing diseconomies of scale?

Question 7 Ralph owns a small pizza restaurant, where he works full­time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total accounting profit for the year was:

Question 8 Steve owns a bike store. Last year, his average cost of selling a bike was $1,000. If he expands the size of his store this year and sees his average cost remain the same, his long­run average total cost curve should be:

Question 9 Chief executive officers (CEOs) of major corporations are often paid mostly with stock options, as opposed to salaries and cash payments. These stock options often cannot be converted into stock and sold until years after they were issued. All this is ultimately intended to create incentives for the CEO to:

Question 10 Refer to the following table. What is the total cost of producing five (5) units of the good?

Question 11 In the accompanying table, diminishing marginal product begins after the:

Question 12 When a firm hires another employee and, as a result, total output increases, this change in total output is also known as:

Question 13 Which of the following is a question that a firm must answer in the long run but not in the short run?

Question 14 Ralph owns a small pizza restaurant, where he works full­time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total implicit costs for the year were:

Question 15 Steve owns a bike store. Last year his average cost of selling a bike was $1,000. If he expands the size of his store this year and sees his average cost decrease to $950, his long­run average total cost curve should be:

Question 16 In the short run, the cost of __________ is variable, whereas the cost of __________ is fixed.

Question 17 Which of the following is the best example of a variable cost in the short run?

Question 18 Darrell owns a furniture store. If he increases the size of his furniture store and experiences diseconomies of scale as a result, his long­run average total cost curve should be:

Question 19 Nathan owns a coffee­roasting company. If he increases the size of his company and experiences constant returns to scale as a result, his long­run average total cost curve should be:

Question 20 Madison owns a boxing gym. She recently expanded the size of her gym by adding another boxing ring and moving into a larger building so that she can serve more clients. How would Madison know if she is experiencing economies of scale from increasing the size of her boxing gym?

     1.   Chief executive officers (CEOs) of major corporations are often paid mostly with stock options, as opposed to salaries and cash payments. These stock options often cannot be converted into stock and sold until years after they were issued. All this is ultimately intended to create incentives for the CEO to:

a.	leave the company after a year or so.
b.	lay off as many employees as possible.
c.	increase the value of the stock by maximizing company profit.
d.	outsource all production to other countries.
e.	lobby Congress for subsidies and tax breaks.

     2.   Every year the U.S. sugar industry, which is dominated by only a few firms, spends millions of dollars lobbying members of Congress and contributing to their reelection campaigns. It does so for both Democrats and Republicans. One goal of these contributions is the preservation of the U.S. sugar quota, which limits the importation of less expensive sugar from other countries. Ultimately, all of these activities are motivated by a desire among U.S. sugar producers to:

a.	keep their prices as low as possible.
b.	make the market for sugar as competitive as possible.
c.	support one political party but not another.
d.	keep their profits as high as possible.
e.	hire as many employees as they can.

     3.   If a firm wants to cut its costs through more efficient production, we should assume that the firm is trying to:

a.	fire its employees.
b.	increase its profits.
c.	eliminate its competition.
d.	buy back its stock.
e.	gain control over its market.

     4.   In economics, we assume that firms make decisions in order to:

a.	maximize profit.
b.	minimize revenues.
c.	evade taxes.
d.	lobby officials.
e.	protect the environment.

     5.   Total revenue minus total cost is equal to:

a.	producer surplus.
b.	dividends.
c.	consumer surplus.
d.	profit.
e.	retained earnings.

     6.   A firm’s decisions are ultimately oriented toward:

a.	minimizing the number of employees it hires.
b.	maximizing profit.
c.	maximizing production.
d.	increasing total revenue.
e.	negotiating better deals with suppliers.

     7.   Explicit costs are:

a.	the opportunity cost of the means of production.
b.	always paid out of pocket.
c.	always greater than implicit costs.
d.	never greater than implicit costs.
e.	what a business sacrifices in order to produce a good.

     8.   The out-of-pocket expenses incurred in producing a good are also known as:

a.	implicit costs.
b.	fiduciary costs.
c.	explicit costs.
d.	capital costs.
e.	wages and prices.

     9.   Which of the following is true about explicit costs?

a.	They are the opportunity costs of production.
b.	They are out-of-pocket expenses.
c.	They are not measured in terms of dollars.
d.	They are not included when measuring economic profit.
e.	They are not included when measuring accounting profit.

   10.   An explicit cost for a business that manufactures bicycles would be the:

a.	value of the products that the firm’s employees could produce at another company.
b.	salary that the owner of the business could earn elsewhere.
c.	goods and services provided by the government with the taxes the firm pays.
d.	wages paid to employees.
e.	various products that could be made with the steel used to make bicycles.

   11.   If a firm has total costs of $535,000 and its implicit costs are $165,000, how much are its explicit costs?

a.	$3,242
b.	$120,000
c.	$370,000
d.	$700,000
e.	$308

   12.   Ralph owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total explicit costs for the year were:

a.	$24,000.
b.	$6,000.
c.	$60,000.
d.	$66,000.
e.	$72,000.

   13.   Lauren is the owner of a bakery that earns 0 (zero) economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total explicit costs were:

a.	$80,000.
b.	$92,000.
c.	$15,000.
d.	$77,000.
e.	$53,000.

   14.   Implicit costs are:

a.	the opportunity cost of the means of production.
b.	always paid out of pocket.
c.	never greater than explicit costs.
d.	always greater than explicit costs.
e.	not measured in terms of dollars.

   15.   Implicit costs can be difficult to measure because:

a.	business owners cannot always observe them directly.
b.	they are not measured in dollars.
c.	they are always very expensive.
d.	they are always greater than explicit costs.
e.	they include expenses like taxes.

   16.   If a firm generates $240,000 in revenue, earns $120,000 in economic profit, and its explicit costs are $80,000, how much are its implicit costs?

a.	$160,000
b.	$80,000
c.	$40,000
d.	$60,000
e.	$120,000

   17.   Ralph owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total implicit costs for the year were:

a.	$100,000.
b.	$35,000.
c.	$60,000.
d.	$66,000.
e.	$72,000.

   18.   Lauren is the owner of a bakery that earns 0 (zero) economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total implicit costs were:

a.	$145,000.
b.	$53,000.
c.	$92,000.
d.	$65.000.
e.	$15,000.

   19.   Economists consider both explicit and implicit costs when measuring economic profit. The reason they consider implicit costs is that:

a.	they are more conservative than accountants, who consider only accounting costs.
b.	most businesses forget to pay their implicit costs.
c.	a business must cover its opportunity costs as well as its out-of-pocket expenses to be truly profitable.
d.	implicit costs are typically far larger than explicit costs.
e.	implicit costs include expenses like taxes and fees to the government.

   20.   Accountants consider only explicit costs when measuring accounting profit. The reason that they ignore implicit costs is that:

a.	implicit costs are typically very small.
b.	explicit costs are always greater than implicit costs.
c.	implicit costs are not out-of-pocket expenses.
d.	implicit costs are tax deductible.
e.	implicit costs cannot be measured in terms of dollars.

   21.   Accounting profit is equal to:

a.	total revenue minus explicit costs.
b.	total revenue minus implicit costs.
c.	explicit costs plus implicit costs.
d.	explicit costs minus implicit costs.
e.	total revenue minus implicit costs and explicit costs.

   22.   Accounting profit ignores which of the following costs?

a.	implicit costs
b.	labor costs
c.	capital costs
d.	taxes paid
e.	explicit costs

   23.   A firm’s accounting profit is always greater than its economic profit because:

a.	economic profit considers implicit costs, which accounting profit does not.
b.	accounting profit considers explicit costs, which economic profit does not.
c.	economic profit is always zero, no matter what kind of firm it is.
d.	accounting profit considers implicit costs, which economic profit does not.
e.	accounting profit is always positive, no matter what kind of firm it is.

   24.   Lauren is the owner of a bakery. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her accounting profit was:

a.	$145,000.
b.	$53,000.
c.	$65,000.
d.	$15,000.
e.	$27,000.

   25.   Darrell is the owner of a furniture store. Last year, his total revenue was $525,000 and his total labor costs were $200,000. His overhead expenses, including insurance and legal fees, were $175,000. The rent on his building was $45,000. Darrell could earn $105,000 per year working at a nearby furniture distributor. From this information, we know that his accounting profit was:

a.	$525,000.
b.	$375,000.
c.	$150,000.
d.	$175,000.
e.	$105,000.

   26.   Ralph owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total accounting profit for the year was:

a.	–$1,000.
b.	$100,000.
c.	$72,000.
d.	$34,000.
e.	$35,000.

   27.   Economic profit is equal to:

a.	total revenue minus explicit costs.
b.	total revenue minus implicit costs.
c.	explicit costs plus implicit costs.
d.	total revenue minus implicit costs and explicit costs.
e.	explicit costs minus implicit costs.

   28.   A firm’s economic profit is always less than its accounting profit because:

a.	accounting profit considers explicit costs, which economic profit does not.
b.	economic profit considers implicit costs, which accounting profit does not.
c.	economic profit is always zero, no matter what kind of firm it is.
d.	accounting profit considers implicit costs, which economic profit does not.
e.	accounting profit is always positive, no matter what kind of firm it is.

   29.   If you were told that a firm earns positive accounting profit and nothing else, what would you know is true about its economic profit?

a.	It is positive because whenever accounting profit is positive, so is economic profit.
b.	It cannot be determined without knowing the firm’s implicit costs.
c.	It is zero because all firms earn zero economic profit regardless of the industry.
d.	It is equal to its accounting profit.
e.	It is negative because its accounting profit is probably not high enough to earn positive economic profit.

   30.   Ralph owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total economic profit for the year was:

a.	$34,000.
b.	–$1,000.
c.	$20,000.
d.	$65,000.
e.	–$35,000.

   31.   Lauren is the owner of a bakery. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. If she could earn $53,000 working for another bakery nearby, we know that her economic profit was:

a.	$145,000.
b.	$53,000.
c.	$12,000.
d.	$0.00.
e.	$15,000.

   32.   Darrell is the owner of a furniture store. Last year, his total revenue was $525,000 and his total labor costs were $200,000. His overhead expenses, including insurance and legal fees, were $175,000. The rent on his building was $45,000. Darrell could earn $105,000 per year working at a nearby furniture distributor. If his total revenue increases to $600,000 this year and all of his other expenses are held constant, we know that his economic profit is now:

a.	$75,000.
b.	$600,000.
c.	$0.00.
d.	$105,000.
e.	$200,000.

   33.   A firm’s inputs are also known as its:

a.	outputs.
b.	profits.
c.	factors of production.
d.	revenues.
e.	costs.

   34.   Another term for factors of production is:

a.	outputs.
b.	inputs.
c.	profits.
d.	revenues.
e.	costs.

   35.   The three primary factors of production are:

a.	revenue, profits, and costs.
b.	price, quantity, and profits.
c.	capital, interest, and savings.
d.	labor, wages, and training.
e.	land, labor, and capital.

   36.   The three primary inputs are:

a.	revenue, profits, and costs.
b.	price, quantity, and profits.
c.	land, labor, and capital.
d.	labor, wages, and training.
e.	capital, interest, and savings.

   37.   A firm has a certain amount of capital and land. As it hires more labor, each worker is able to:

a.	earn a higher wage.
b.	specialize.
c.	work more overtime.
d.	purchase more capital.
e.	purchase more land.

   38.   As a firm hires more labor and each worker is able to specialize, what happens to each additional worker’s marginal productivity?

a.	It increases at first, then decreases.
b.	It increases continuously.
c.	It decreases continuously.
d.	It decreases at first, then increases.
e.	It remains constant, no matter how much labor is hired.

   39.   A firm’s production function is similar to a recipe used to make a cake in the sense that the production function shows us the combination of __________ used to produce __________.

a.	inputs; output
b.	outputs; input
c.	costs; profit
d.	expenses; revenue
e.	taxes; deductions

   40.   The production function of a restaurant includes items such as labor (i.e., cooks, waiters, a manager), capital (i.e., ovens, counters, tables, chairs, and a building), and land. In the short run, the owner of the restaurant will optimize production by employing a variable amount of __________ given a fixed amount of __________.

a.	capital; labor and land
b.	land; capital and labor
c.	labor; capital and land
d.	labor; capital and raw materials
e.	land; labor and raw materials

   41.   If all workers are able to specialize and become more productive as more labor is hired, the amount of total output produced:

a.	increases at a decreasing rate.
b.	increases at a constant rate.
c.	increases at an increasing rate.
d.	decreases at an increasing rate.
e.	decreases at a constant rate.

   42.   The production function for automobiles includes:

a.	farmland, seeds, rain, and tractors.
b.	an aircraft carrier, planes, helicopters, sailors, and pilots.
c.	a mall, racks and shelves, mannequins, and sales clerks.
d.	lumber, shingles, windows, doors, and carpenters.
e.	a factory, an assembly line, workers, and robots.

   43.   The production function for bookshelves includes:

a.	yeast, flour, pans, ovens, and bakers.
b.	electric guitars, drums, microphones, musicians, and a stage.
c.	foam cushions, fabric, wood, nails, and furniture makers.
d.	wood, nails, carpenters, saws, and hammers.
e.	wool fabric, buttons, a zipper, a sewing machine, and a tailor.

   44.   If workers are unable to specialize and become more productive as more labor is hired, the amount of total output produced:

a.	increases at an increasing rate.
b.	increases at a constant rate.
c.	increases at a decreasing rate.
d.	decreases at an increasing rate.
e.	decreases at a constant rate.

   45.   The change in total output divided by the change in input is known as:

a.	marginal product.
b.	marginal cost.
c.	specialization.
d.	total product.
e.	marginal profit.

   46.   Marginal product is the change in:

a.	total output divided by the change in input.
b.	total output plus the change in input.
c.	total output minus the change in input.
d.	total output times the change in input.
e.	input divided by the change in total output.

   47.   When a firm hires another employee and, as a result, total output increases, this change in total output is also known as:

a.	total output.
b.	marginal employment.
c.	marginal product.
d.	labor contribution.
e.	marginal benefit.

   48.   If there are gains from specialization in a workplace, hiring another employee means that the marginal product of labor will:

a.	decrease.
b.	remain the same.
c.	increase.
d.	be 0 (zero).
e.	be negative.

   49.   Lauren owns a bakery that produces, among other things, wedding cakes. She currently has 5 employees; with 5 employees, her bakery can produce 7 wedding cakes per day. If she hired a sixth employee, she’d be able to produce 9 wedding cakes per day. Therefore, the marginal product of the sixth employee is __________ wedding cake(s).

a.	5
b.	7
c.	9
d.	2
e.	1.5

   50.   Lauren owns a bakery that produces, among other things, wedding cakes. She currently has 6 employees; with 6 employees, her bakery can produce 9 wedding cakes per day. If she hired a seventh employee, she’d be able to produce 12 wedding cakes per day. Therefore, the marginal product of the seventh employee is __________ wedding cakes.

a.	9
b.	7
c.	1.71
d.	3
e.	5

   51.   Lauren owns a bakery that produces, among other things, wedding cakes. She currently has 7 employees; with 7 employees, her bakery can produce 12 wedding cakes per day. If she hired an eighth employee, she’d be able to produce 16 wedding cakes per day. Therefore, the marginal product of the eighth employee is __________ wedding cake(s).

a.	2
b.	1
c.	8
d.	16
e.	4

   52.   If a firm hires another worker and her marginal product of labor is positive, we know that the firm’s total output is:

a.	decreasing.
b.	unchanged.
c.	increasing.
d.	0 (zero).
e.	equal to the marginal product of that worker.

   53.   If a firm hires another worker and her marginal product of labor is negative, we know that the firm’s total output is:

a.	increasing.
b.	decreasing.
c.	equal to the marginal product of that worker.
d.	unchanged.
e.	0 (zero).

   54.   If a firm hires another worker and her marginal product of labor is 0 (zero), we know that the firm’s total output is:

a.	0 (zero).
b.	unchanged.
c.	increasing.
d.	decreasing.
e.	equal to the marginal product of that worker.

   55.   If the marginal product of labor for a firm decreases as more workers are hired, we know that:

a.	all workers are paid the same wage.
b.	the marginal cost of producing output is decreasing.
c.	the gains from specialization are exhausted.
d.	the marginal cost of producing output is constant.
e.	there are still gains from specialization left to be exploited.

   56.   As a firm hires more workers, its marginal product of labor increases only if:

a.	each worker does the same tasks as all others.
b.	all workers are paid the same wage.
c.	the firm produces commodities.
d.	employees are assigned specialized tasks.
e.	all workers are paid different wages.

   57.   In the accompanying table, diminishing marginal product begins after the:

a.	first unit of input.
b.	second unit of input.
c.	seventh unit of input.
d.	fourth unit of input.
e.	sixth unit of input.

   58.   In the accompanying table, diminishing marginal product begins after the:

a.	second unit of output.
b.	fourth unit of output.
c.	fifth unit of output.
d.	third unit of output.
e.	first unit of output.

   59.   Assume that a firm hires an additional employee. If the marginal product for that employee is greater than for the previous employee hired, it must be because:

a.	the marginal product of labor is diminishing.
b.	all workers are paid the same wage.
c.	the workers all perform the exact same set of tasks.
d.	there are gains from specialization.
e.	all workers are not paid the same wage.

   60.   Based on the accompanying graph, is this firm earning positive, negative, or zero economic profits?

a.	We cannot determine the firm’s level of profit because we do not know about its revenues.
b.	It is earning positive economic profit.
c.	Because this is the short run, all firms earn positive economic profit.
d.	It is earning zero economic profit.
e.	It is earning negative economic profit.

   61.   In the short run, the cost of __________ is variable, whereas the cost of __________ is fixed.

a.	capital; labor
b.	electricity; wages
c.	capital; raw materials
d.	labor; capital
e.	raw materials; labor

   62.   Economists assume that the cost of __________ is fixed in the short run.

a.	labor
b.	capital
c.	raw materials
d.	legal expenses
e.	repairs

   63.   Which of the following can we learn by looking at a firm’s short-run costs?

a.	the profit-maximizing level of output
b.	whether the firm will experience economies of scale
c.	the optimal number of employees to hire
d.	whether the firm is earning economic profit
e.	the cost-minimizing level of output

   64.   Which of the following costs is fixed in the short run?

a.	wages
b.	utilities
c.	capital
d.	raw materials
e.	office supplies

   65.   Lauren owns a bakery. Her total costs are $150,000 per year, and her variable costs are $85,000. This means that her fixed costs are:

a.	$65,000.
b.	$150,000.
c.	$85,000.
d.	$235,000.
e.	$70,000.

   66.   Darrell owns a furniture store. His total costs are $225,000 per year, and his variable costs are $75,000 per year. This means that his fixed costs are:

a.	$75,000.
b.	$225,000.
c.	$300,000.
d.	$50,000.
e.	$150,000.

   67.   Steve owns a bike store. His total costs are $1.2 million per year, and his variable costs are $750,000 per year. This means that his fixed costs are:

a.	$1.2 million.
b.	$750,000.
c.	$450,000.
d.	$300,000.
e.	$1.95 million.

   68.   When output is 100 units, the firm’s total fixed cost is $500. What will this firm’s total fixed cost be if output doubles to 200 units?

a.	$250
b.	$500
c.	$750
d.	$1,000
e.	$125

Refer to the following graph to answer the questions that follow.

   69.   The gap between the average total cost (ATC) and average variable cost (AVC) curves represents:

a.	average fixed cost.
b.	total fixed cost.
c.	average variable cost.
d.	average total cost.
e.	total variable cost.

   70.   The average total cost (ATC) and average variable cost (AVC) converge as the level of output produced increases because:

a.	the firm is able to purchase more capital and exploit economies of scale.
b.	the firm experiences gains in productivity from employee specialization.
c.	average total cost decreases as output increases.
d.	average fixed cost decreases as output increases.
e.	the firm is able to drive its competitors out of business by lowering its price.

   71.   Lauren owns a bakery. Her total costs are $150,000 per year, and her fixed costs are $65,000. This means that her variable costs are:

a.	$65,000.
b.	$150,000.
c.	$85,000.
d.	$235,000.
e.	$70,000.

   72.   Darrell owns a furniture store. His total costs are $225,000 per year, and his fixed costs are $150,000 per year. This means that his variable costs are:

a.	$150,000.
b.	$225,000.
c.	$375,000.
d.	$50,000.
e.	$75,000.

   73.   Steve owns a bike store. His total costs are $1.2 million per year, and his fixed costs are $450,000 per year. This means that his variable costs are:

a.	$1.2 million.
b.	$750,000.
c.	$450,000.
d.	$300,000.
e.	$1.65 million.

   74.   Audrey owns a horse ranch. Her total costs are $550,000 per year, and her fixed costs are $205,000 per year. This means that her variable costs are:

a.	$550,000.
b.	$205,000.
c.	$345,000.
d.	$755,000.
e.	$108,000.

   75.   Which of the following is the best example of a variable cost in the short run?

a.	rent for an office
b.	rent for a restaurant
c.	wages for employees
d.	debt payments for a loan
e.	rent for factory space

   76.   In the short run, average total costs and average variable costs converge as output increases because:

a.	marginal cost is below average total cost.
b.	marginal cost is below average fixed cost.
c.	average fixed costs continually increase.
d.	average fixed costs continually decrease.
e.	total cost continually increases.

Use the following scenario to answer the questions that follow.

Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes.

   77.   Steve’s average total cost was __________ per bike.

a.	$625
b.	$1,000
c.	$375
d.	$1,200
e.	$600

   78.   Steve’s average variable cost was __________ per bike.

a.	$375
b.	$625
c.	$1,000
d.	$1,200
e.	$600

   79.   Steve’s average fixed cost was __________ per bike.

a.	$600
b.	$625
c.	$1,000
d.	$2,000
e.	$375

Refer to the accompanying graph to answer the questions that follow.

   80.   If the firm depicted in the graph had to pay higher rent to its landlord, we would expect its __________ curve to shift __________.

a.	average total cost (ATC); down
b.	average variable cost (AVC); down
c.	average total cost (ATC); up
d.	marginal cost (MC); up
e.	average variable cost (AVC); up

   81.   The average total cost of production is minimized at what level of output?

a.	Q5
b.	Q1
c.	Q4
d.	Q3
e.	Q2

   82.   In the short run, average total costs at first decrease and then increase as more output is produced because:

a.	marginal cost is at first greater than average total costs, then falls below it.
b.	average fixed costs continually decrease.
c.	average variable costs at first decrease and then increase at the same level of output.
d.	total cost continually increases.
e.	marginal cost is at first less than average total costs, then rises above it.

   83.   When the average total cost curve is at its minimum, we know that the:

a.	average variable cost curve intersects the average total cost curve.
b.	average variable cost curve is above the average total cost curve.
c.	marginal cost curve intersects the average total cost curve.
d.	marginal cost curve is above the average total cost curve.
e.	average fixed cost curve is above the marginal cost curve.

   84.   A firm’s short-run cost curves show us:

a.	the lowest-cost level of output.
b.	the highest-profit level of output.
c.	what will happen if the firm doubles its capital.
d.	how many other firms are in the industry.
e.	how many employees the firm has.

   85.   By looking at the full set of short-run cost curves for a firm, we can determine:

a.	the profit-maximizing level of output.
b.	the optimal number of employees to hire.
c.	what will happen if the firm increases its capital.
d.	the level of output with the cost-minimizing level of output.
e.	what will happen if the firm decreases its capital.

   86.   The full set of short-run cost curves for a firm tells us:

a.	the profit-maximizing level of output.
b.	the cost-minimizing level of output.
c.	how many other firms are competing with that firm.
d.	how many employees the firm has hired.
e.	whether the firm will experience economies of scale.

   87.   The accompanying graph represents the __________ for a firm.

a.	production function
b.	short-run cost curves
c.	long-run cost curves
d.	marginal product
e.	economies of scale

   88.   When the average total cost curve is downward-sloping, what must be true about the marginal cost curve?

a.	It is U-shaped.
b.	It is a straight line.
c.	It is upward-sloping.
d.	It is below the average total cost curve.
e.	It is above the average total cost curve.

   89.   If the marginal cost curve is U-shaped:

a.	there are no productivity gains from specialization, only diminishing marginal product.
b.	average fixed costs are continually decreasing.
c.	there are productivity gains from specialization before diminishing marginal product sets in.
d.	the average total cost curve is continually  upward-sloping.
e.	the average variable cost curve is a straight line.

   90.   When the average variable cost curve is upward-sloping, what must be true about the marginal cost curve?

a.	It is U-shaped.
b.	It is above the average variable cost curve.
c.	It is upward-sloping.
d.	It is below the average variable cost curve.
e.	It is a straight line.

   91.   The change in total cost given a change in output is also known as:

a.	differential cost.
b.	marginal cost.
c.	average cost.
d.	short-run cost.
e.	long-run cost.

   92.   If the marginal product of labor is increasing, the marginal cost of output must be:

a.	decreasing.
b.	constant.
c.	equal to average total cost.
d.	unchanged.
e.	increasing.

   93.   If a firm experiences diminishing marginal product of labor, its marginal cost:

a.	increases at an increasing rate.
b.	decreases at a decreasing rate.
c.	increases at a constant rate.
d.	decreases at a constant rate.
e.	increases at a decreasing rate.

   94.   If a firm experiences productivity gains from employee specialization, its marginal cost:

a.	increases at an increasing rate.
b.	decreases at an increasing rate.
c.	decreases at a decreasing rate.
d.	decreases at a constant rate.
e.	increases at a decreasing rate.

   95.   Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes. If Steve sells 1,250 bikes this year (50 more than last year) and his average total cost increases to $1.28 million, we know that the:

a.	average total cost of selling 1,250 bikes is $1,000.
b.	average variable cost of selling bikes has decreased.
c.	average fixed cost of selling bikes is unchanged.
d.	marginal cost of those 50 bikes is $80,000.
e.	marginal cost of those 50 bikes is $1.28 million.

Refer to the following graph to answer the questions that follow.

   96.   The firm is experiencing gains from specialization up to what level of output along the marginal cost curve?

a.	Q2
b.	Q5
c.	Q1
d.	Q3
e.	Q4

   97.   The firm is experiencing diminishing marginal product beyond what level of output along the marginal cost curve?

a.	Q5
b.	Q1
c.	Q2
d.	Q3
e.	Q4

   98.   Should a firm always produce the level of output where marginal cost is lowest?

a.	Yes. That is the level of output where costs are lowest.
b.	No. That is the level of output where employees are most efficient.
c.	No. Firms should produce where marginal cost equals average variable cost.
d.	No. That might be the best choice, but it depends on the firm’s profits.
e.	Yes. Any other level of output will have higher marginal cost.

   99.   Where would we find a firm’s minimum efficient scale of production?

a.	at the lowest point on its long-run average total cost curve
b.	at the highest point on its long-run average total cost curve
c.	in the middle of its long-run average total cost curve
d.	at the highest point on its long-run average fixed cost curve
e.	in the middle of its long-run average variable cost curve

100.   It is important for a firm to know its minimum efficient scale of production because that is where:

a.	it faces the least amount of competition.
b.	its tax burden will be lowest.
c.	long-run costs are minimized.
d.	long-run average total cost is greatest.
e.	it turns into a monopoly.

101.   How will a firm know if it has grown too large, that is, when it has exceeded its minimum efficient scale of production?

a.	Its long-run average costs begin to decrease.
b.	Its long-run average costs begin to increase.
c.	Its market power begins to diminish.
d.	The number of other firms in the market rises.
e.	All of its workers quit and go to work for the competition.

102.   Refer to the following table. What is the total cost of producing five (5) units of the good?

a.	$1,050
b.	$950
c.	$1,025
d.	$825
e.	$1,000

103.   Refer to the following table. What is the average variable cost of producing three (3) units of the good?

a.	$80
b.	$120
c.	$140
d.	$20
e.	$420

104.   Which of the following is an example of a long-run cost for a manufacturing firm?

a.	the purchase of additional raw materials
b.	hiring more employees
c.	an increase in the size of its factory
d.	paying higher tax rates
e.	increasing the size of its management team

105.   Which of the following is a question that a firm must answer in the long run but not in the short run?

a.	What is the profit-maximizing level of output?
b.	How many workers should it hire?
c.	What is the optimal amount of capital to employ?
d.	What prices should it charge for its products?
e.	How much should it pay its workers?

106.   If a firm’s average total costs decrease as it increases its scale of production, the firm is experiencing:

a.	economies of scale.
b.	diseconomies of scale.
c.	increasing returns from specialization.
d.	diminishing marginal product.
e.	constant returns to scale.

107.   Steve owns a bike store. He currently sells 1,200 bikes per year. If he doubles the size of his store so he can sell 2,400 bikes per year and his long-run average total cost per bike decreases, we know that Steve is experiencing:

a.	diseconomies of scale.
b.	diminishing marginal product.
c.	increasing marginal product.
d.	economies of scale.
e.	constant returns to scale.

108.   Steve owns a bike store. If he decided to expand the size of his store so that he could sell more bikes, how would he know if he is experiencing economies of scale in the long run?

a.	His long-run average cost of selling each bike remains unchanged.
b.	His long-run average cost of selling each bike decreases.
c.	His long-run average cost of selling each bike increases.
d.	His long-run total cost of selling bikes increases.
e.	His long-run fixed cost of selling bikes increases.

109.   Madison owns a boxing gym. She recently expanded the size of her gym by adding another boxing ring and moving into a larger building so that she can serve more clients. How would Madison know if she is experiencing economies of scale from increasing the size of her boxing gym?

a.	Her average cost per client increases.
b.	Her total cost increases.
c.	Her average cost per client remains the same.
d.	Her average cost per client decreases.
e.	Her total cost remains unchanged.

110.   Which is the best example of economies of scale?

a.	the local power company
b.	the pizza business
c.	the restaurant industry
d.	a parking garage
e.	a small family farm

Use the following graph to answer the questions that follow.

111.   Which of the curves depicts economies of scale?

a.	LRATC1 and LRATC3
b.	LRATC2
c.	LRATC2 and LRATC3
d.	LRATC1
e.	LRATC3

112.   A firm expands its scale of production and finds that its long-run average total cost curve looks like LRATC1. It might look this way because the firm:

a.	adds several additional layers of management, which increase its costs.
b.	is able to pay its employees more.
c.	has to pay higher rent.
d.	is able to negotiate lower prices with its suppliers.
e.	is able to sell more output.

113.   If the firm expanded its scale of production and found that its average costs decreased, which of the curves would reflect this situation?

a.	LRATC2 and LRATC3
b.	LRATC2
c.	LRATC1
d.	LRATC3
e.	LRATC1 and LRATC2

114.   A firm expands its scale of production and finds that it is able to negotiate better prices with its suppliers. Which of the curves best applies to this firm?

a.	LRATC1
b.	LRATC2
c.	LRATC3
d.	LRATC1 and LRATC2
e.	LRATC2 and LRATC3

115.   When firms grow larger, they sometimes acquire more market power, meaning that they have

greater ability to negotiate lower prices with their suppliers. This ability to negotiate lower prices with their suppliers leads to:

a.	diseconomies of scale.
b.	diminishing marginal returns.
c.	economies of scale.
d.	constant returns to scale.
e.	increasing marginal returns.

116.   If a firm’s long-run average total costs increase as it increases its scale of production, the firm is experiencing:

a.	economies of scale.
b.	constant returns to scale.
c.	increasing returns from specialization.
d.	diminishing marginal product.
e.	diseconomies of scale.

Use the following graph to answer the questions that follow.

117.   A firm expands its scale of production and finds that its long-run average total cost curve looks like LRATC3. It might look this way because the firm:

a.	is able to pay its employees less.
b.	adds several additional layers of management, which increase its costs.
c.	is able to reduce its tax burden.
d.	is able to produce output more efficiently.
e.	is able to sell more output.

118.   If the firm expanded its scale of production and found that its average costs increased, which of the curves would reflect this situation?

a.	LRATC1 and LRATC3
b.	LRATC2
c.	LRATC3
d.	LRATC1
e.	LRATC2 and LRATC3

119.   A firm is considering changing its plant size. It calculates the amount of output it would be able to produce and the total cost for various plant sizes, as shown in the accompanying table. If the firm is currently using plant size C, the firm is experiencing which of the following?

a.	economies of scale
b.	diseconomies of scale
c.	constant returns to scale
d.	diminishing marginal product
e.	increasing marginal product

120.   Which is the best example of diseconomies of scale?

a.	the local power company
b.	the pizza business
c.	the restaurant industry
d.	a parking garage
e.	a small family farm

121.   Darrell owns a furniture store. If he moves into a larger store but finds that his average costs have increased in the long run, we know that Darrell is experiencing:

a.	increasing marginal product.
b.	diminishing marginal product.
c.	diseconomies of scale.
d.	constant returns to scale.
e.	economies of scale.

122.   Darrell owns a furniture store. If he decided to expand the size of his store in order to sell more furniture, how would he know if he is experiencing diseconomies of scale?

a.	His total cost of selling furniture decreases.
b.	His average cost of selling furniture increases.
c.	His total cost of selling furniture remains unchanged.
d.	His average cost of selling furniture remains unchanged.
e.	His average cost of selling furniture decreases.

123.   When firms grow larger, they sometimes add many additional layers of managers between the top executives and the entry-level employees. Because these managers do not actually produce any output themselves, we expect more layers of management to lead to:

a.	diminishing marginal returns.
b.	diseconomies of scale.
c.	economies of scale.
d.	constant returns to scale.
e.	increasing marginal returns.

124.   Lauren owns a bakery. She currently bakes around 10,000 loaves of bread per year. If she increases the size of her bakery so that she can bake even more bread, and her long-run average total cost remains unchanged, we know that Lauren is experiencing:

a.	diseconomies of scale.
b.	diminishing marginal product.
c.	increasing marginal product.
d.	constant returns to scale.
e.	economies of scale.

125.   Lauren owns a bakery. If she decided to expand the size of her bakery so that she could bake more bread, how would she know if she is experiencing constant returns to scale?

a.	Her long-run average cost of baking each loaf of bread remains unchanged.
b.	Her long-run total cost of baking bread decreases.
c.	Her long-run average cost of baking each loaf of bread decreases.
d.	Her long-run total cost of baking remains unchanged.
e.	Her long-run average cost of baking each loaf of bread increases.

126.   Nathan owns a coffee roasting company. He buys raw coffee beans, roasts them, grinds them, and sells them to stores. He recently moved into a larger factory so that he can sell coffee to more stores. How would Nathan know if he is experiencing constant returns to scale from increasing the size of his factory?

a.	His long-run average cost per pound of coffee remains the same.
b.	His long-run total cost of roasting coffee remains the same.
c.	His long-run total cost of roasting coffee decreases.
d.	His long-run average cost per pound of coffee increases.
e.	His long-run average cost per pound of coffee decreases.

127.   If the firm in the accompanying graph expanded its scale of production and found that its average costs did not change, which of the curves would reflect this situation?

a.	LRATC1 and LRATC2
b.	LRATC3
c.	LRATC2
d.	LRATC1
e.	LRATC1 and LRATC3

128.   When a firm grows larger, many additional layers of managers are sometimes added that do not actually produce any output. At the same time, the firm gains additional bargaining power over the prices it pays to its suppliers. If both of these factors have an equal effect, we would expect this firm to experience:

a.	diminishing marginal returns.
b.	diseconomies of scale.
c.	constant returns to scale.
d.	economies of scale.
e.	increasing marginal returns.

129.   If a firm experiences economies of scale, its longrun average cost curve is:

a.	a horizontal line.
b.	downward-sloping.
c.	a vertical line.
d.	upward-sloping.
e.	U-shaped.

130.   If a firm experiences diseconomies of scale, its long-run average cost curve is:

a.	upward-sloping.
b.	downward-sloping.
c.	a vertical line.
d.	a horizontal line.
e.	U-shaped.

131.   Lauren owns a bakery. If she increases the size of her bakery and experiences constant returns to scale as a result, her long-run average total cost curve should be:

a.	vertical.
b.	upward-sloping.
c.	horizontal.
d.	downward-sloping.
e.	U-shaped.

132.   Darrell owns a furniture store. If he increases the size of his furniture store and experiences diseconomies of scale as a result, his long-run average total cost curve should be:

a.	vertical.
b.	downward-sloping.
c.	horizontal.
d.	upward-sloping.
e.	U-shaped.

133.   Nathan owns a coffee-roasting company. If he increases the size of his company and experiences constant returns to scale as a result, his long-run average total cost curve should be:

a.	vertical.
b.	downward-sloping.
c.	upward-sloping.
d.	horizontal.
e.	U-shaped.

134.   Steve owns a bike store. Last year, his average cost of selling a bike was $1,000. If he expands the size of his store this year and sees his average cost remain the same, his long-run average total cost curve should be:

a.	horizontal.
b.	upward-sloping.
c.	vertical.
d.	downward-sloping.
e.	U-shaped.

135.   Steve owns a bike store. Last year, his average cost of selling a bike was $1,000. If he expands the size of his store this year and sees his average cost increase to $1,050, his long-run average total cost curve should be:

a.	horizontal.
b.	U-shaped.
c.	vertical.
d.	downward-sloping.
e.	upward-sloping.

136.   Steve owns a bike store. Last year his average cost of selling a bike was $1,000. If he expands the size of his store this year and sees his average cost decrease to $950, his long-run average total cost curve should be:

a.	vertical.
b.	upward-sloping.
c.	horizontal.
d.	downward-sloping.
e.	U-shaped.

137.   If a firm experiences gains from specialization as it increases its scale of production, we would expect its long-run average cost curve to be:

a.	upward-sloping.
b.	horizontal.
c.	downward-sloping.
d.	vertical.
e.	U-shaped.

138.   If a firm adds multiple layers of management as it increases its scale of production, thus adding to its costs, we would expect its long-run average cost curve to be:

a.	downward-sloping.
b.	horizontal.
c.	upward-sloping.
d.	vertical.
e.	U-shaped.

139.   If a firm experiences some gains from specialization as it expands its scale of production, and adds additional layers of management as it does so, assuming they have the same effect, we would expect its long-run average total cost curve to be:

a.	downward-sloping.
b.	upward-sloping.
c.	horizontal.
d.	vertical.
e.	U-shaped.

1. Opportunity cost is the ______________ alternative forfeited when a choice is made.

a.         least-valued

b.        highest-valued

c.         most recently considered

d.        most convenient

e.         first

2. You decide whether to eat one more slice of pizza based on how hungry you feel. This statement best represents this economic concept:

 A) resources are scarce.

 B) the real cost of something is what you must give up to get it.

 C) “How much” is a decision at the margin.

 D) there are gains from trade.

3. Positive economics:

 A) describes opinions and perspectives on how the world should work.

 B) is based on opinion polls.

 C) describes how the world does work

 D) is the same as normative economics.

4. Economists use models to explain real-life situations because:

 A) such models tend to be exactly what is occurring in each situation.

 B) assumptions found in such models tend to make the problem more difficult.

 C) simplifications and assumptions often yield answers that can help to explain the more difficult real-life situations

 D) they do not; real-life situations are not relevant to the building of models.

5. Bob can hire someone to paint his house for $2,000, or he can do it himself at no out-of-pocket cost.  It will take him 5 days.  Bob earns $500 a day when he works outside the home.  Which option has the greater economic cost?

a.       hiring a painter

b.       painting the house himself

c.        they are the same cost

d.       not enough information to decide—one needs to know the marginal cost

6. When one producer has a comparative advantage in production,

a.         she can produce more output than someone else using the same quantity of resources.

b.        she can produce a good at a lower opportunity cost than someone else.

c.         she will not benefit from trade with other producers.

d.        she is unable to reach her production possibilities frontier (PPF).

e.         she will only trade with others who have the same comparative advantage.

7. The slope of a production possibilities frontier

a.  has no economic relevance or meaning.

b.  is always constant.

c.  is always varying.  

d.  measures the opportunity cost of producing one more unit of a good

8. Increases in resources or improvements in technology will tend to cause a society's production possibility frontier to:

 A) shift inward to the left.

 B) shift outward to the right

 C) remain unchanged.

 D) become vertical.

9. Which point(s) in the PPF above are unattainable?

a)       Point A because it is outside the production possibilities frontier

b)       All the points because the production of each has an opportunity cost.

c)       None of the points because they all are feasible.

d)       Points B, C, and D because they are on the production possibilities frontier.

e)       Point E because it is inside the production possibilities frontier.

10. Michael and Angelo are both artists who can create sculptures or paint paintings each day. The following table describes their maximum outputs per day. Does either person have an absolute advantage?

	Sculptures	Paintings
Michael	10	5
Angelo	6	2

a.       Yes, Michael has an absolute advantage in both sculptures and paintings

b.       Yes, Angelo has an absolute advantage in both sculptures and paintings.

c.        Yes, Michael has an absolute advantage in paintings, and Angelo has an absolute advantage in sculptures.

d.       Yes, Michael has an absolute advantage in sculptures, and Angelo has an absolute advantage in paintings.

e.        No, neither has an absolute advantage.

11. Michael and Angelo are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. What is Angelo’s opportunity cost of a sculpture?

	Sculptures	Paintings
Michael	10	5
Angelo	6	2

1. 1/2 painting
2. 1/3 painting
3. 3 paintings
4. 1/3 sculpture
5. 6/10 sculpture

12. The accompanying figure depicts the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between making pizzas and making stromboli. If Jim and Pam were to specialize and trade, at what exchange rate would they find some quantity of trade to be mutually beneficial?

a.       3 pizzas for 1 stromboli

b.       1 pizza for 1 stromboli

c.        10 pizzas for 2 stromboli

d.       1 pizza for 1/2 stromboli

e.        1 pizza for 1/4 of a stromboli

Figure: Production Possibility Frontier Curve for Tealand

13. (Figure: Production Possibility Frontier for Tealand) In the figure, Tealand is producing at point C on its production possibility frontier. What is the opportunity cost in Tealand of increasing the production of tea from 20 million cups to 30 million cups?

 A. 10 million cups of tea

 B. 5 million scones

 C. 10 million scones

 D. The answer is impossible to determine from the information given.

14. Consider the production possibilities frontier below.  Which line(s) represents a change in technology for producing good A?

a.         1

b.        2

c.         both

d.        neither

15. Consider the production possibilities frontier below. Which line(s) represents a change in the economy’s resources?

a.       1

b.       2

c.        both

d.       neither

16. Use the accompanying diagram to answer the question.

An increase in the number of buyers would cause the demand curve to:

a. shift from D to D2.

b. remain at D.

c. shift from D to D1.

d. shift from D1 to D.

e. shift from D1 to D2.

Figure: Demand and Supply of Gasoline

17. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. The initial equilibrium price and quantity (at intersection of S1 and D) of gasoline are:

 A.$2.00 and 450 gallons.

 B. $1.50 and 400 gallons.

 C. $2.00 and 200 gallons.

 D. $2.50 and 300 gallons

18. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. Given the initial equilibrium of S1 and D, any price lower than ________ will create pressure for the price to ________.

 A. $2.00; fall

 B. $2.50; rise

 C. $3.00; rise

 D. $2.50; fall

19. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. A factor that may have changed supply from S1 to S2 is:

 A. better technology in the production of gasoline

 B. increased demand.

 C. lower labor productivity in gasoline production.

 D. increased prices of substitutes for gasoline.

20.       “In 2008, air travel decreased substantially despite significant reductions in ticket prices.” If this information is correct, it indicates that the law of demand did not apply to air travel in 2008.

 A. True

 B. False

21. A supply curve is:

a.       downward sloping because suppliers prefer lower costs

b.       upward sloping because suppliers prefer lower costs

c.        upward sloping because suppliers will offer for sale more at a higher price

d.       downward sloping because suppliers will offer more for sale at a higher price

22. The demand curve shift shown in the figure above was caused by a(n):

a.         increase in the input cost of the good.

b.        increase in the price of a substitute of the good.

c.         decrease in the number of firms selling the good.

d.        decrease in the number of buyers in the market for the good.

e.         expectation that the future price of this good will be higher than it currently is.

23. According to the diagram above, if the price is at $10, there is a:

a. shortage of 15 units.

b. surplus of 15 units

c. shortage of 30 units.

d. surplus of 30 units.

e. surplus of 22 units.

24. When both supply and demand shift to the left,

a. the equilibrium price will always rise.

b. the equilibrium price will always fall.

c. the equilibrium quantity will always fall.

d. the equilibrium quantity will always rise.

e. the equilibrium quantity is indeterminate.

25. According to the figure below, at the price of $5:

a. the equilibrium quantity is 500.

b. the quantity demanded is 500.

c. the demand is 500.

d. there is a surplus.

e. there is a shortage.

26. When the price increases by 30% and the quantity demanded drops by 30%, the price elasticity of demand is:

a.         perfectly inelastic.

b.        inelastic.

c.         unitary elastic.

d.        elastic.

e.         perfectly inelastic.

27. What good is most likely to have an income elasticity of demand equal to 0.3?

a.         medication

b.        take-out dinner

c.         used clothing

d.        laptop

e.         a download on iTunes

28. Demand for Coca-Cola is _____ price elastic than cola products in general.

a.       More

b.       less

c.        equally

29. Peanut butter and jelly are complements. If a tax is imposed on peanut butter, how will that affect the market for jelly?

a. Demand for jelly will increase along with the price.

b. Demand for jelly will decrease along with the price

c. The supply of jelly will increase and the price will decrease.

d. Both the supply and demand for jelly will increase along with the price.

e. The supply of jelly will decrease and the price will increase.

30. Pepsi and Coke are considered substitute goods. Because of this, one would predict that, holding all else constant, if the price of Pepsi increases,

a. we would see the demand curve for Coke shift to the right.

b. we would see the demand curve for Coke shift to the left.

c. we would see no change in the demand for Coke.

d. we would see the demand curve for Pepsi shift to the right.

e. we would see the demand curve for Pepsi shift to the left.

31. Technological advances have resulted in lower prices for digital cameras.  What is the impact of this on the market for traditional (non-digital) cameras?

a.  The demand curve for traditional cameras shifts to the right.

b.  The supply curve for traditional cameras shifts to the right.

c.  The demand curve for traditional cameras shifts to the left.

d.  The supply curve for traditional cameras shifts to the left.

32. A recent news story reported that ice cream producers will increase the supply of ice cream during the summer. Summer is traditionally a time of increased demand for ice cream. How would an economist expect the price and quantity of ice cream to change from the spring to the summer given knowledge of these two changes in the market for ice cream?

A.        An increase in the price and quantity.

B.        An increase in the price and an unpredictable change in the quantity.

C.        An unknown change in both the price and quantity.

D.        An unknown change in the price and an increase in the quantity.

33. Suppose the demand curve for a product is vertical and the supply curve is upward sloping. If a unit tax is imposed in the market for this product,

A) sellers bear the entire burden of the tax.

B) buyers bear the entire burden of the tax.

C) the tax burden will be shared equally between buyers and sellers.

D) buyers share the burden of the tax with government.

34. If demand is more elastic than supply then:

A) sellers bear more of the burden of the tax.

B) buyers bear more of the burden of the tax.

C) the tax burden will be shared equally between buyers and sellers.

D) buyers share the burden of the tax with government.

35. In 1990 the U.S. government imposed a special sales tax on yachts with a price of at least $100,000. The tax was repealed in 1993 since it generated far less revenue than expected and led to significant job losses in the yacht building industry. The sales tax was unsuccessful because:

a)        the supply and the demand for yachts were relatively elastic.

b)        the supply and the demand for yachts were relatively inelastic.

c)         the tax rate was too low.

d)        yachts are a necessity.

36. Each point on a ________ curve shows the willingness of consumers to purchase a product at different prices.

A) demand

B) supply

C) production possibilities

D) marginal cost

Use this information for questions 36.1-36.3. Alfred has a willingness to pay for one car of $35,000.  The second car offers him a marginal benefit of $25,000.  A third car is worth $10,000, and his willingness to pay for a fourth is 0.  The market price for the car is $24,999.

36.1 Alfred’s willingness to pay for the marginal car is falling.  This pattern is called

a. opportunity cost

b. diminishing marginal utility

c. price effect

d. consumer surplus

36.2. At the market price, Alfred would buy ___ cars.

a. 0

b. 1

c. 2

d. 3

e. 4

36.3 At this market price, his consumer surplus is

a. 35,000

b. 24,999

c. 1

d. 10,002

Figure 4-6 above shows the demand and supply curves for the almond market.  The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf.

37.  Refer to Figure 4-6. What area represents consumer surplus prior to the imposition of the price floor?

A) A + B + E

B) A + B + C

C) A + B + C + D + E

D) E + F

38. Refer to Figure 4-6. What area represents consumer surplus after the imposition of the price floor?

A) A + B + E

B) A + B

C) A + B + E + F

D) A

39. The costs of a market activity paid for by an individual NOT engaged in the market activity are:

a.         external costs.

b.        internal costs.

c.         free-rider costs.

d.        social costs.

e.         common costs.

40. The total costs of a market activity paid for by individuals in the market as well as individuals not engaged in the market activity are:

a.         external costs.

b.        internal costs.

c.         free-rider costs.

d.        social costs.

e.         common costs.

41. A firm’s willingness to supply their product in the short run is represented on a graph by:

a.         the market supply curve.

b.        the entire marginal cost (MC) curve.

c.         the marginal revenue (MR) curve.

d.        the part of the marginal cost (MC) curve above minimum average total cost (ATC).

e.         the part of the marginal cost (MC) curve above minimum average variable cost (AVC).

42. Rachel quit her job as a chef making $30,000 per year to start her own restaurant in New York City. The first year, Rachel's restaurant earned $120,000 in revenue. Rachel pays $50,000 per year in wages to the waitresses and hostess, $20,000 per year to buy food and other supplies.  She paid $10,000 for rent and utilities, instead of earning 10% on that money in a bank CD. What is Rachel's economic profit for the year?

A) $0

B) $9,000

C) $40,000

D) $80,000

43. What directly drives the entry and exit of firms?

a. Revenues

b. Costs

c. Profits and losses

d. Marginal product of labor

44.       The law of diminishing returns states that

a) dividing the tasks to be performed through division of labor will increase the marginal product of labor.

b) the long-run average cost of production falls as output increases.

c)  adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variable input to decline.

d) producing more output by adding more of a variable input will eventually cause the marginal cost of production to decline.

e)  adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the fixed input to decline.

45. According to the accompanying figure, if a firm is producing a quantity of 100 and charging a price of $10,

a.         the firm should continue to produce 100 units but raise the price to $13 to maximize profits.

b.        the firm should increase production to 150 units but raise the price to $25 to maximize profits.

c.         the firm should continue to produce 100 units but raise the price to $25 to maximize profits.

d.        the firm should increase production to 100 units and raise the price to $13 to maximize profits.

e.         the firm is already maximizing profits and should not change the price or quantity produced.

46. Which of the following is not a characteristic of a perfectly competitive market structure?

A) There are a very large number of firms that are small compared to the market.

B) All firms sell identical products.

C) There are no restrictions to entry by new firms.

D) There are restrictions on exit of firms.

47. Both individual buyers and sellers in perfect competition

A) can influence the market price by their own individual actions.

B) can influence the market price by joining with a few of their competitors.

C) have to take the market price as a given.

D) have the market price dictated to them by government.

48. In economics, we assume that firms make decisions in order to:

a.  maximize revenues.

b.  minimize cost

c.  maximize profit.

d.  maximize production

e.  maximize the marginal product of labor

49. A firm reflected in the following graph expanded its scale of production and found that its average costs did not change.  Which of the curves shown would reflect this situation?

a.       LRATC1 and LRATC2

b.       LRATC3

c.        LRATC2

d.       LRATC1

e.        LRATC1 and LRATC3

50. A firm’s economic profit will always be less than its accounting profit because:

a.         accounting profit considers explicit costs, which economic profit does not.

b.        economic profit considers implicit costs, which accounting profit does not

c.         economic profit is always zero, no matter what kind of firm it is.

d.        accounting profit considers implicit costs, which economic profit does not.

e.         accounting profit is always positive, no matter what kind of firm it is.

51. Competitive markets exist when:

a. there are so many buyers and sellers that each has only a small impact on the market price and the market output

b. there are more buyers than sellers, giving the buyers market power.

c. there are more sellers than buyers, giving the sellers market power.

d. accounting profits become zero because of price wars.

e. prices are so low that everyone who wants the good or service gets the good or service.

52. According to the figure below, this firm’s short-run supply curve is represented by:

a.     the average total cost (ATC) curve above $20.

b.     the marginal cost (MC) curve above $15.

c.     the marginal cost (MC) curve above $8.

d.     the marginal cost (MC) curve above $20.

Figure: Long-Run Average Cost

53. Look at the figure Long-Run Average Cost. This firm has ________ in the output region from 0 to A.

A.        decreasing returns to scale

B.        constant returns to scale

C.        increasing returns to scale

D.        negative costs of production

54.       (Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has ________ in the output region from B to C.

A.        constant returns to scale

B.        decreasing returns to scale

C.        increasing returns to scale

D.        falling marginal cost

55. According to the figure, when this firm is producing at the profit-maximizing price and quantity, its total revenue is:

a.     $1,000

b.     $1,950

c.     $2,500

d.     $3,750

e.     $5,000

56. Which statement about firms’ economic profits is true?

a. Monopolists and perfectly competitive firms can earn profit in the short run only.

b. Monopolists can earn profit in the long run; perfectly competitive can earn profit in the short run only. -.-

c. Monopolists and perfectly competitive firms can earn profit in the long run only.

d. All firms always earn profit, else they would exit the market.

Visiting the public beach during summer is an example of an activity that is

When people elect to spend more years in school, this results in a __________ externality because there are __________ associated with this decision

Which of the following is true of a negative externality

Which of the following is true of a positive externality

Positive externalities exist because

Consider a market where production of the good is creating a negative externality. In the market equilibrium, there is a deadweight loss because the

The consumer optimum

Timothy is trying to figure out what combination of bags of peanuts and bags of popcorn he should buy with his $13 budget. The price of peanuts is currently $5 per bag and the price of popcorn is currently $2 per bag. If Timothy’s marginal utility from consuming his third bag of peanuts is 15 utils and his marginal utility from consuming his second bag of popcorn is 6 utils, Timothy should:

Diminishing marginal utility

Refer to the accompanying figure to answer the questions that follow

Marginal utility is negative

Refer to the accompanying table to answer the questions that follow

The marginal utility of the third unit is

Kim and James are on a road trip across the country. They both say that they get 25 utils from peanut butter sandwiches and 25 utils from trail mix. Knowing this, we can conclude that Kim

Lauren is the owner of a bakery that earns 0 (zero) economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total implicit costs were

Darrell owns a furniture store. His total costs are $225,000 per year, and his fixed costs are $150,000 per year. This means that his variable costs are

An explicit cost for a business that manufactures bicycles would be the:

Darrell owns a furniture store. His total costs are $225,000 per year, and his variable costs are $75,000 per year. This means that his fixed costs are

If a firm generates $240,000 in revenue, earns $120,000 in economic profit, and its explicit costs are $80,000, how much are its implicit costs

Darrell is the owner of a furniture store. Last year, his total revenue was $525,000 and his total labor costs were $200,000. His overhead expenses, including insurance and legal fees, were $175,000. The rent on his building was $45,000. Darrell could earn $105,000 per year working at a nearby furniture distributor. If his total revenue increases to $600,000 this year and all of his other expenses are held constant, we know that his economic profit is now

Audrey owns a horse ranch. Her total costs are $550,000 per year, and her fixed costs are $205,000 per year. This means that her variable costs are

Lauren is the owner of a bakery that earns 0 (zero) economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total explicit costs were

Which of the following characteristics best defines a public good

Visiting the public beach during summer is an example of an activity that is

When pollution (a negative externality) is created by firms, which of the following is NOT a valid way for the government to restore the social optimum

If the government decides to adopt a carbon tax, the price of goods whose production generates carbon emissions will __________ and the quantity produced will __________.

Consider a market where production of a good generates a negative externality. In the market equilibrium

The market works efficiently in the absence of externalities if the good is

Timothy is trying to figure out what combination of bags of peanuts and bags of popcorn he should buy with his $13 budget. The price of peanuts is currently $5 per bag and the price of popcorn is currently $2 per bag. If Timothy’s marginal utility from consuming his third bag of peanuts is 15 utils and his marginal utility from consuming his second bag of popcorn is 6 utils, Timothy should:

The additional satisfaction derived from consuming one more unit of a good or service is called

Refer to the accompanying table to answer the questions that follow

The marginal utility of the third unit is

When given the marginal utility of the first five units of a product, you can calculate the total utility by

Refer to the accompanying figure to answer the questions that follow

Marginal utility is negative

Which of the following statements is always true when determining the consumer optimum

Lauren is the owner of a bakery. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her accounting profit was

Which of the following costs is fixed in the short run

Darrell is the owner of a furniture store. Last year, his total revenue was $525,000 and his total labor costs were $200,000. His overhead expenses, including insurance and legal fees, were $175,000. The rent on his building was $45,000. Darrell could earn $105,000 per year working at a nearby furniture distributor. If his total revenue increases to $600,000 this year and all of his other expenses are held constant, we know that his economic profit is now:

Accounting profit is equal to

If a firm generates $240,000 in revenue, earns $120,000 in economic profit, and its explicit costs are $80,000, how much are its implicit costs

Darrell owns a furniture store. His total costs are $225,000 per year, and his variable costs are $75,000 per year. This means that his fixed costs are

Lauren owns a bakery. Her total costs are $150,000 per year, and her fixed costs are $65,000. This means that her variable costs are

Use the following scenario to answer the questions that follow.
Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes.
Steve’s average variable cost was __________ per bike.

Refer to the accompanying figure to answer the questions that follow

At the market equilibrium, price is equal to __________ units of the good are produced

Clean air becomes polluted because

The amount you pay for insurance on your car is an example of a(n):

A negative externality exists whenever

__________ can be jointly consumed by more than one person, and nonpayers are difficult to exclude

Congestion charges cause the price of driving to __________. Therefore, the number of cars on the road will __________.

Which of the following statements is always true when determining the consumer optimum

When marginal utility is positive, total utility

Kati-Lyn has to choose between eating Chinese food and Indian food. Both Chinese food and Indian food cost the same. Which of the following equations, where MU is marginal utility and U is total utility, will lead to the optimal level of consumption

Refer to the accompanying figure to answer the questions that follow

Total utility is negative

Dave gets 20 utils from consuming guacamole and 15 utils from consuming salsa; Buster gets 30 utils from the same guacamole and 15 utils from salsa. Given this information, a researcher can conclude that

Refer to the accompanying figure to answer the questions that follow

Total utility is maximized at the

Explicit costs are

Economists consider both explicit and implicit costs when measuring economic profit. The reason they consider implicit costs is that

Steve owns a bike store. His total costs are $1.2 million per year, and his fixed costs are $450,000 per year. This means that his variable costs are

Which of the following costs is fixed in the short run

Accounting profit ignores which of the following costs

Lauren is the owner of a bakery that earns 0 (zero) economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total implicit costs were

Darrell owns a furniture store. His total costs are $225,000 per year, and his fixed costs are $150,000 per year. This means that his variable costs are

Use the following scenario to answer the questions that follow.
Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes.
Steve’s average variable cost was __________ per bike