Question 1

An increase the number of firms producing espresso would lead to a(n)

Accepted Answer

A)  decrease in quantity supplied. 
B)  decrease in supply. 
C)  increase in quantity supplied. 
D)  increase in supply. 
E)  increase in the price of espresso. 
A)  decrease in quantity supplied. 
B)  decrease in supply. 
C)  increase in quantity supplied. 
D)  increase in supply. 
E)  increase in the price of espresso.

Question 2

If buyers and sellers were free to pursue their own selfish interests,according to the invisible hand theory,the result would be

Accepted Answer

A)  anarchy. 
B)  exploitation of workers and natural resources. 
C)  an equitable allocation of resources. 
D)  poor customer service. 
E)  an efficient allocation of resources. 
A)  anarchy. 
B)  exploitation of workers and natural resources. 
C)  an equitable allocation of resources. 
D)  poor customer service. 
E)  an efficient allocation of resources.

Question 3

The demand for clothing decreases.As a result,the price of clothing falls below the minimum possible average cost of producing it.In the long run,if the clothing industry is a perfectly competitive industry,

Accepted Answer

A)  the price of clothing will fall. 
B)  the supply of clothing will increase. 
C)  some of the firms in the clothing industry are likely to go out of business. 
D)  there will be no effect on the supply of clothing. 
E)  firms will enter the clothing industry. 
A)  the price of clothing will fall. 
B)  the supply of clothing will increase. 
C)  some of the firms in the clothing industry are likely to go out of business. 
D)  there will be no effect on the supply of clothing. 
E)  firms will enter the clothing industry.

Question 4

When we double the size of a firm,which of the following matches the concept of constant returns to scale?

Accepted Answer

A)  Total costs remain the same. 
B)  Total fixed costs remain the same. 
C)  Total variable costs remain the same. 
D)  Per-unit variable costs remain the same. 
E)  Per-unit fixed costs remain the same. 
A)  Total costs remain the same. 
B)  Total fixed costs remain the same. 
C)  Total variable costs remain the same. 
D)  Per-unit variable costs remain the same. 
E)  Per-unit fixed costs remain the same.

Question 5

Which of the following would NOT be included in the calculation of accounting profit?

Accepted Answer

A)  Wages of workers. 
B)  The salary the owner could have earned working elsewhere. 
C)  Rent. 
D)  Medical insurance coverage for workers. 
E)  Access to the Internet. 
A)  Wages of workers. 
B)  The salary the owner could have earned working elsewhere. 
C)  Rent. 
D)  Medical insurance coverage for workers. 
E)  Access to the Internet.

Question 6

-Use the data in the table above.An output level of 25 units results in

Accepted Answer

A)  economic profit of zero. 
B)  positive economic profit. 
C)  normal profit. 
D)  accounting profit of zero. 
E)  negative accounting profit. 
A)  economic profit of zero. 
B)  positive economic profit. 
C)  normal profit. 
D)  accounting profit of zero. 
E)  negative accounting profit.

Question 7

The long-run average cost curve is equal to

Accepted Answer

A)  the minimum short-run average total cost for each output level. 
B)  the minimum short-run average total cost for each given plant or factory size. 
C)  the downward-sloping portion of all short-run average total cost curves. 
D)  the summation of all short-run average cost curves for each output level. 
E)  the difference between the highest and the lowest short-run average cost for each output level. 
A)  the minimum short-run average total cost for each output level. 
B)  the minimum short-run average total cost for each given plant or factory size. 
C)  the downward-sloping portion of all short-run average total cost curves. 
D)  the summation of all short-run average cost curves for each output level. 
E)  the difference between the highest and the lowest short-run average cost for each output level.

Question 8

-Use the data in the table above.If the output is divisible and need not be produced in batches of five,the profit-maximizing output is

Accepted Answer

A)  less than 10. 
B)  10. 
C)  15. 
D)  20. 
E)  more than 20. 
A)  less than 10. 
B)  10. 
C)  15. 
D)  20. 
E)  more than 20.

Question 9

Harvey quit his job at the University of Toronto where he earned $45,000 a year,the same as other employees of normal ability,the same as other employees of normal ability.But Harvey is unusually talented in another area,and he figures his entrepreneurial talent,or forgone entrepreneurial income,to be $5000 a year.He cashed in $100,000 in bonds that earned 10% interest annually to buy a software company,Extreme Gaming.In the first year,the firm sold 11,000 units of software at $75 per unit.Of the $75 per unit,$55 goes for the costs of production,packaging,marketing,employee wages and benefits,and rent on a building.
-Refer to the above information.The accounting profit in the first year was

Accepted Answer

A)  $50,000. 
B)  $70,000. 
C)  $150,000. 
D)  $220,000. 
E)  $250,000. 
A)  $50,000. 
B)  $70,000. 
C)  $150,000. 
D)  $220,000. 
E)  $250,000.

Question 10

Long-run average total cost is equivalent to

Accepted Answer

A)  long-run average variable cost. 
B)  long-run average fixed cost. 
C)  long-run average fixed cost plus long-run variable cost. 
D)  long-run average fixed cost minus long-run variable cost. 
E)  long-run average variable cost minus long-run opportunity cost. 
A)  long-run average variable cost. 
B)  long-run average fixed cost. 
C)  long-run average fixed cost plus long-run variable cost. 
D)  long-run average fixed cost minus long-run variable cost. 
E)  long-run average variable cost minus long-run opportunity cost.

Question 11

Economic losses are

Accepted Answer

A)  very common. 
B)  less important than accounting losses. 
C)  encountered when total revenues minus explicit costs is negative. 
D)  a signal that a reallocation of resources out of the industry needs to occur. 
E)  present if firms just earn a normal profit. 
A)  very common. 
B)  less important than accounting losses. 
C)  encountered when total revenues minus explicit costs is negative. 
D)  a signal that a reallocation of resources out of the industry needs to occur. 
E)  present if firms just earn a normal profit.

Question 12

Right Panel: The market: a shift of short-run supply in response to an increase in demand.  
-Refer to the diagrams above.If the market demand for wheat and the market supply of wheat are represented by D' and SRS,respectively,the market price is ____ per bushel and the firm will produce _____ bushels of wheat per year.

Accepted Answer

A)  $1.20;12 million 
B)  $1.20;12 thousand 
C)  more than $1.20;more than 12 thousand 
D)  less than $1.20;more than 12 million 
E)  more than $1.20;more than 12 million 
A)  $1.20;12 million 
B)  $1.20;12 thousand 
C)  more than $1.20;more than 12 thousand 
D)  less than $1.20;more than 12 million 
E)  more than $1.20;more than 12 million

Question 13

-Refer to the diagram above.If the seller expects a price of $48,

Accepted Answer

A)  it is not profitable to produce any level of output. 
B)  any level of output will be profitable. 
C)  the minimum level of production is 18. 
D)  the minimum level of production is 21. 
E)  the maximum level of production is 24. 
A)  it is not profitable to produce any level of output. 
B)  any level of output will be profitable. 
C)  the minimum level of production is 18. 
D)  the minimum level of production is 21. 
E)  the maximum level of production is 24.

Question 14

Which of the following is NOT an example of implicit costs?

Accepted Answer

A)  The return stockholders could have earned with another company. 
B)  The fees the firm could have earned from leasing its computers. 
C)  The revenue the firm could collect from selling its furniture. 
D)  The interest the owners could have earned on their personal monies invested in the firm. 
E)  The salary of the CEO. 
A)  The return stockholders could have earned with another company. 
B)  The fees the firm could have earned from leasing its computers. 
C)  The revenue the firm could collect from selling its furniture. 
D)  The interest the owners could have earned on their personal monies invested in the firm. 
E)  The salary of the CEO.

Question 15

Normal profit occurs when

Accepted Answer

A)  accounting profit is positive. 
B)  economic profit is positive. 
C)  accounting profit is positive and economic profit is negative. 
D)  economic profit is zero. 
E)  total revenue is greater than explicit and implicit costs. 
A)  accounting profit is positive. 
B)  economic profit is positive. 
C)  accounting profit is positive and economic profit is negative. 
D)  economic profit is zero. 
E)  total revenue is greater than explicit and implicit costs.

Question 16

Suppose that all firms in a perfectly competitive industry are experiencing economic losses to varying degrees.One can predict that

Accepted Answer

A)  the market price will fall. 
B)  market supply will increase. 
C)  market demand will decrease. 
D)  market supply will decrease. 
E)  the number of firms will remain the same. 
A)  the market price will fall. 
B)  market supply will increase. 
C)  market demand will decrease. 
D)  market supply will decrease. 
E)  the number of firms will remain the same.

Question 17

The ability of the invisible hand to allocate resources efficiently is

Accepted Answer

A)  improved by the existence of barriers to entry. 
B)  rarely observed in practice. 
C)  undamaged by the existence of barriers to entry. 
D)  a fiction of the economist's mind. 
E)  severely reduced by the presence of barriers to entry. 
A)  improved by the existence of barriers to entry. 
B)  rarely observed in practice. 
C)  undamaged by the existence of barriers to entry. 
D)  a fiction of the economist's mind. 
E)  severely reduced by the presence of barriers to entry.

Question 18

When a firm is facing constant returns to scale,total costs will

Accepted Answer

A)  decrease as the firm increases its output. 
B)  increase at a decreasing rate as the firm increases its output. 
C)  decrease at an increasing rate as the firm increases its output. 
D)  increase at an increasing rate as the firm increases its output. 
E)  increase proportionately to output. 
A)  decrease as the firm increases its output. 
B)  increase at a decreasing rate as the firm increases its output. 
C)  decrease at an increasing rate as the firm increases its output. 
D)  increase at an increasing rate as the firm increases its output. 
E)  increase proportionately to output.

Question 19

The correct definition of economic profit is

Accepted Answer

A)  total revenue minus explicit and implicit costs. 
B)  total revenue minus implicit costs. 
C)  total revenue minus fixed and variable costs. 
D)  accounting profit plus implicit costs. 
E)  total revenue minus accounting profit. 
A)  total revenue minus explicit and implicit costs. 
B)  total revenue minus implicit costs. 
C)  total revenue minus fixed and variable costs. 
D)  accounting profit plus implicit costs. 
E)  total revenue minus accounting profit.

Question 20

Suppose that all firms in a perfectly competitive industry are experiencing economic profits.One can predict that

Accepted Answer

A)  the market price will fall. 
B)  market supply will decrease. 
C)  market demand will increase. 
D)  the number of firms will not change. 
E)  market demand will decrease. 
A)  the market price will fall. 
B)  market supply will decrease. 
C)  market demand will increase. 
D)  the number of firms will not change. 
E)  market demand will decrease.

An increase the number of firms producing espresso would lead to a(n)

If buyers and sellers were free to pursue their own selfish interests,according to the invisible hand theory,the result would be

The demand for clothing decreases.As a result,the price of clothing falls below the minimum possible average cost of producing it.In the long run,if the clothing industry is a perfectly competitive industry,

When we double the size of a firm,which of the following matches the concept of constant returns to scale?

Which of the following would NOT be included in the calculation of accounting profit?

-Use the data in the table above.An output level of 25 units results in

The long-run average cost curve is equal to

-Use the data in the table above.If the output is divisible and need not be produced in batches of five,the profit-maximizing output is

Long-run average total cost is equivalent to

Economic losses are

-Refer to the diagram above.If the seller expects a price of $48,

Which of the following is NOT an example of implicit costs?

Normal profit occurs when

Suppose that all firms in a perfectly competitive industry are experiencing economic losses to varying degrees.One can predict that

The ability of the invisible hand to allocate resources efficiently is

When a firm is facing constant returns to scale,total costs will

The correct definition of economic profit is

Suppose that all firms in a perfectly competitive industry are experiencing economic profits.One can predict that

Thinking Like an Economist

Comparative Advantage: the Basis for Exchange

Supply and Demand: an Introduction

Demand: the Benefit Side of the Market

Perfectly Competitive Supply: the Cost Side of the Market

The Quest for Profit and the Invisible Hand

Monopoly and Other Forms of Imperfect Competition

Thinking Strategically

Externalities and Property Rights

The Economics of Information

Labour Markets

The Economics of Public Policy

Public Goods and Taxation

Income Distribution

Filters

Exam 6: Efficiency and Exchange

An increase the number of firms producing espresso would lead to a(n)

If buyers and sellers were free to pursue their own selfish interests,according to the invisible hand theory,the result would be

The demand for clothing decreases.As a result,the price of clothing falls below the minimum possible average cost of producing it.In the long run,if the clothing industry is a perfectly competitive industry,

When we double the size of a firm,which of the following matches the concept of constant returns to scale?

Which of the following would NOT be included in the calculation of accounting profit?

-Use the data in the table above.An output level of 25 units results in

The long-run average cost curve is equal to

-Use the data in the table above.If the output is divisible and need not be produced in batches of five,the profit-maximizing output is

Long-run average total cost is equivalent to

Economic losses are

-Refer to the diagram above.If the seller expects a price of $48,

Which of the following is NOT an example of implicit costs?

Normal profit occurs when

Suppose that all firms in a perfectly competitive industry are experiencing economic losses to varying degrees.One can predict that

The ability of the invisible hand to allocate resources efficiently is

When a firm is facing constant returns to scale,total costs will

The correct definition of economic profit is

Suppose that all firms in a perfectly competitive industry are experiencing economic profits.One can predict that

Thinking Like an Economist

Comparative Advantage: the Basis for Exchange

Supply and Demand: an Introduction

Demand: the Benefit Side of the Market

Perfectly Competitive Supply: the Cost Side of the Market

The Quest for Profit and the Invisible Hand

Monopoly and Other Forms of Imperfect Competition

Thinking Strategically

Externalities and Property Rights

The Economics of Information

Labour Markets

The Economics of Public Policy

Public Goods and Taxation

Income Distribution

Filters