Question 1

If a firm uses factor inputs that are personally owned by the firm's owner, then economists refer to the opportunity cost of these inputs as

Accepted Answer

A)  sunk costs. 
B)  direct production costs. 
C)  implicit costs. 
D)  inverted costs. 
E)  accounting costs. 
A)  sunk costs. 
B)  direct production costs. 
C)  implicit costs. 
D)  inverted costs. 
E)  accounting costs.

Question 2

Economists use the notation Q = f(L,K) to describe

Accepted Answer

A)  the technological relationship between the inputs that a firm uses and the outputs that it produces. 
B)  the flow of labour (L) and capital (K) services that are available when output is (Q). 
C)  the arithmetic relationship between the outputs that a firm uses and the inputs that it produces. 
D)  the financial relationship between the inputs that a firm uses and the outputs that it produces. 
E)  the level of output (Q) required to fully employ labour (L) and capital (K). 
A)  the technological relationship between the inputs that a firm uses and the outputs that it produces. 
B)  the flow of labour (L) and capital (K) services that are available when output is (Q). 
C)  the arithmetic relationship between the outputs that a firm uses and the inputs that it produces. 
D)  the financial relationship between the inputs that a firm uses and the outputs that it produces. 
E)  the level of output (Q) required to fully employ labour (L) and capital (K).

Question 3

FIGURE 7- 1
-Refer to Figure 7- 1. Total product is increasing at a decreasing rate

Accepted Answer

A)  from 0 to 20 units of output. 
B)  from 0 to 32 units of output. 
C)  between 140 to 200 units of output. 
D)  between 140 to 250 units of output. 
E)  over the whole production range. 
A)  from 0 to 20 units of output. 
B)  from 0 to 32 units of output. 
C)  between 140 to 200 units of output. 
D)  between 140 to 250 units of output. 
E)  over the whole production range.

Question 4

The point of diminishing marginal productivity is the point where

Accepted Answer

A)  the total product begins to fall. 
B)  marginal product has reached its maximum. 
C)  the marginal product curve lies below the average product curve. 
D)  average product has reached its maximum. 
E)  the marginal product begins to fall at an increasing rate. 
A)  the total product begins to fall. 
B)  marginal product has reached its maximum. 
C)  the marginal product curve lies below the average product curve. 
D)  average product has reached its maximum. 
E)  the marginal product begins to fall at an increasing rate.

Question 5

The table below provides information on output per month and short- run costs for a firm producing outdoor wooden lounge chairs. $$\begin{array}{l}
\begin{array} { | l | l | l | } 
\hline \text { TFC } & \text { TVC } & \text { TC } \
\hline 200 & 200 & 400 \
\hline 200 & 220 & 420 \
\hline 200 & 240 & 440 \
\hline 200 & 260 & 460 \
\hline 200 & 350 & 550 \
\hline 200 & 810 & 1010 \
\hline
\end{array}\
\text { TABLE 7- } 5
\end{array}$$
-Refer to Table 7- 5. Given the information in the table about short- run costs, this firm would minimize the average total cost of production when producing

Accepted Answer

A)  30 chairs. 
B)  25 chairs. 
C)  15 chairs. 
D)  20 chairs. 
E)  10 chairs. 
A)  30 chairs. 
B)  25 chairs. 
C)  15 chairs. 
D)  20 chairs. 
E)  10 chairs.

Question 6

Which of the following statements is NOT true of a corporation?

Accepted Answer

A)  It can incur debt that is an obligation of the corporation but not of its individual owners. 
B)  It has the right to sue and be sued. 
C)  It is an entity separate from the individuals who own it. 
D)  It is legally obliged to distribute all profits to shareholders. 
E)  It can enter into contracts. 
A)  It can incur debt that is an obligation of the corporation but not of its individual owners. 
B)  It has the right to sue and be sued. 
C)  It is an entity separate from the individuals who own it. 
D)  It is legally obliged to distribute all profits to shareholders. 
E)  It can enter into contracts.

Question 7

Which of the following items is part of a firm's financial capital as distinct from its real capital?

Accepted Answer

A)  a $500 000 balance in a bank account 
B)  a fleet of delivery trucks 
C)  a network of personal computers 
D)  inventory of goods valued at $1 000 000 
E)  a new bulldozer 
A)  a $500 000 balance in a bank account 
B)  a fleet of delivery trucks 
C)  a network of personal computers 
D)  inventory of goods valued at $1 000 000 
E)  a new bulldozer

Question 8

The table below provides the total revenues and costs for a small landscaping company in a recent year. $\begin{array}{|l|l|}
\hline \text { Total Revenues }(\$) & 250,000 \
\hline & \
\hline \text { Total Costs }(\$) & \
\hline \text { - wages and salaries } & 150,000 \\hline \text { risk- free return of } 2 \% \text { on owner's capital of } \$ 20 & 400 \000\\hline \text { interest on bank loan } & 1500 \
\hline \text { cost of supplies } & 27000 \
\hline \text { depreciation of capital equipment } & 8000 \
\hline \text { additional wages the ow ner could have earned } & 30000 \\text {in next best alternative }\
\hline \text {- risk premium of } 4 \% \text { on owner's capital of } \$ 20&800\000\\hline
\end{array}$
$\text { TABLE 7- } 2$
-Refer to Table 7- 2. The accounting profits for this firm are

Accepted Answer

A)  $71 500. 
B)  $63 100. 
C)  $32 300. 
D)  $32 700. 
E)  $63 500. 
A)  $71 500. 
B)  $63 100. 
C)  $32 300. 
D)  $32 700. 
E)  $63 500.

Question 9

The vertical distance between the total cost curve and the total variable cost curve is

Accepted Answer

A)  average total cost. 
B)  total fixed cost. 
C)  average fixed cost. 
D)  marginal cost. 
E)  average variable cost. 
A)  average total cost. 
B)  total fixed cost. 
C)  average fixed cost. 
D)  marginal cost. 
E)  average variable cost.

Question 10

The opportunity cost of any factor of production is

Accepted Answer

A)  the benefit forgone by not using it in its best alternative. 
B)  the benefit forgone by not using it in its worst alternative. 
C)  the money actually paid to the factors of production. 
D)  its explicit cost. 
E)  its accounting cost. 
A)  the benefit forgone by not using it in its best alternative. 
B)  the benefit forgone by not using it in its worst alternative. 
C)  the money actually paid to the factors of production. 
D)  its explicit cost. 
E)  its accounting cost.

Question 11

A firm's depreciation costs

Accepted Answer

A)  are an estimate of the loss of value of the firm's physical capital. 
B)  are the cost of money borrowed to buy a durable asset. 
C)  measure payments to those outside the firm. 
D)  are irrelevant to an accounting of the firm's total costs. 
E)  are a measure of the depreciation of financial assets of the firm. 
A)  are an estimate of the loss of value of the firm's physical capital. 
B)  are the cost of money borrowed to buy a durable asset. 
C)  measure payments to those outside the firm. 
D)  are irrelevant to an accounting of the firm's total costs. 
E)  are a measure of the depreciation of financial assets of the firm.

Question 12

The table below provides the annual revenues and costs for a family- owned firm producing catered meals. $\begin{array}{|l|l|}
\hline \text { Total Revenues }(\$) & 500,000 \
\hline & \
\hline \text { Total Costs (\$) } & \
\hline \text { wages and salaries } & 200,000 \\hline \text { risk- free return of } 6 \% \text { on owners' capital of } 250,000 & 15,000 \
\hline \text { rent } & 105,000 \
\hline \text { - depreciation of capital equipment } & 25,000 \
\hline \text { risk premium of } 8 \% \text { on owners' capital of } 250,000 & 20,000 \
\hline \text { - intermediate inputs } & 150,000 \
\hline \text { forgone wages of owners in alternative employment } & 80,000 \
\hline \text { interest on bank loan } & 10,000 \
\hline
\end{array}$
$\text { TABLE 7- } 1$
-Refer to Table 7- 1. The accounting profits for this family- owned firm are

Accepted Answer

A)  $0 
B)  $10 000 
C)  $30 000 
D)  $500 000 
E)  - $15 000 
A)  $0 
B)  $10 000 
C)  $30 000 
D)  $500 000 
E)  - $15 000

Question 13

The table below provides the total revenues and costs for a small landscaping company in a recent year. $\begin{array}{|l|l|}
\hline \text { Total Revenues }(\$) & 250,000 \
\hline & \
\hline \text { Total Costs }(\$) & \
\hline \text { - wages and salaries } & 150,000 \\hline \text { risk- free return of } 2 \% \text { on owner's capital of } \$ 20 & 400 \000\\hline \text { interest on bank loan } & 1500 \
\hline \text { cost of supplies } & 27000 \
\hline \text { depreciation of capital equipment } & 8000 \
\hline \text { additional wages the ow ner could have earned } & 30000 \\text {in next best alternative }\
\hline \text {- risk premium of } 4 \% \text { on owner's capital of } \$ 20&800\000\\hline
\end{array}$
$\text { TABLE 7- } 2$
-Refer to Table 7- 2. The explicit costs for this firm are

Accepted Answer

A)  $217 300. 
B)  $217 700. 
C)  $178 500. 
D)  $186 900. 
E)  $186 500. 
A)  $217 300. 
B)  $217 700. 
C)  $178 500. 
D)  $186 900. 
E)  $186 500.

Question 14

The table below provides the annual revenues and costs for a family- owned firm producing catered meals. $\begin{array}{|l|l|}
\hline \text { Total Revenues }(\$) & 500,000 \
\hline & \
\hline \text { Total Costs (\$) } & \
\hline \text { wages and salaries } & 200,000 \\hline \text { risk- free return of } 6 \% \text { on owners' capital of } 250,000 & 15,000 \
\hline \text { rent } & 105,000 \
\hline \text { - depreciation of capital equipment } & 25,000 \
\hline \text { risk premium of } 8 \% \text { on owners' capital of } 250,000 & 20,000 \
\hline \text { - intermediate inputs } & 150,000 \
\hline \text { forgone wages of owners in alternative employment } & 80,000 \
\hline \text { interest on bank loan } & 10,000 \
\hline
\end{array}$
$\text { TABLE 7- } 1$
-Refer to Table 7- 1. To an accountant, this family- owned catering company is earning .To an economist, the same firm is earning _ .

Accepted Answer

A)  zero profit; economic losses 
B)  zero profit; normal profits 
C)  economic profits; economic losses 
D)  economic profits; economic profits 
E)  positive profits; economic losses 
A)  zero profit; economic losses 
B)  zero profit; normal profits 
C)  economic profits; economic losses 
D)  economic profits; economic profits 
E)  positive profits; economic losses

Question 15

FIGURE 7- 1
-Refer to Figure 7- 1. If the firm hires the 15th unit of labour,

Accepted Answer

A)  the extra output will be zero. 
B)  average product will fall. 
C)  marginal product will be unchanged. 
D)  the firm will reach its capacity. 
E)  both A and B are correct. 
A)  the extra output will be zero. 
B)  average product will fall. 
C)  marginal product will be unchanged. 
D)  the firm will reach its capacity. 
E)  both A and B are correct.

Question 16

Churches, the YMCA, the Salvation Army, and the Nature Conservancy are examples of

Accepted Answer

A)  corporations. 
B)  non- profit organizations. 
C)  single proprietorship. 
D)  partnership. 
E)  limited partnership. 
A)  corporations. 
B)  non- profit organizations. 
C)  single proprietorship. 
D)  partnership. 
E)  limited partnership.

Question 17

The theory of the firm is based on the following two key assumptions:

Accepted Answer

A)  Each firm has a highly diversified product, and this leads to profit maximization. 
B)  Firms seek to maximize profit, and to distribute the maximum value in dividends. 
C)  Firms seek to maximize revenues, and to maximize undistributed profits. 
D)  Firms seek to maximize profits, and the firm is a single, consistent decision- making unit. 
E)  Firms seek to become as large as possible, and they seek to maximize total revenue. 
A)  Each firm has a highly diversified product, and this leads to profit maximization. 
B)  Firms seek to maximize profit, and to distribute the maximum value in dividends. 
C)  Firms seek to maximize revenues, and to maximize undistributed profits. 
D)  Firms seek to maximize profits, and the firm is a single, consistent decision- making unit. 
E)  Firms seek to become as large as possible, and they seek to maximize total revenue.

Question 18

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital. When answering the questions, you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100. $\begin{array}{|l|l|}
\hline\begin{array}{l}
\text { Labour per unit of } \
\text { time }
\end{array}&\text { Total Output }\\hline 0 & 0 \
\hline 1 & 25 \
\hline 2 & 75 \
\hline 3 & 175 \
\hline 4 & 250 \
\hline 5 & 305 \
\hline
\end{array}$
$\text { TABLE 7- } 4$
-Refer to Table 7- 4. The average total cost for 250 units of output is approximately

Accepted Answer

A)  33 cents. 
B)  40 cents. 
C)  63 cents. 
D)  80 cents. 
E)  $1.00. 
A)  33 cents. 
B)  40 cents. 
C)  63 cents. 
D)  80 cents. 
E)  $1.00.

Question 19

Economic profits are less than accounting profits because the calculation of economic profit

Accepted Answer

A)  includes the implicit charges for the use of capital owned by the firm and for risk taking. 
B)  is stipulated in regulations set forth by the Canada Revenue Agency. 
C)  includes the implicit charges for the use of capital owned by the firm and for income taxes. 
D)  includes an explicit charge for risk taking. 
E)  includes an amount for depreciation. 
A)  includes the implicit charges for the use of capital owned by the firm and for risk taking. 
B)  is stipulated in regulations set forth by the Canada Revenue Agency. 
C)  includes the implicit charges for the use of capital owned by the firm and for income taxes. 
D)  includes an explicit charge for risk taking. 
E)  includes an amount for depreciation.

Question 20

The table below provides the annual revenues and costs for a family- owned firm producing catered meals. $\begin{array}{|l|l|}
\hline \text { Total Revenues }(\$) & 500,000 \
\hline & \
\hline \text { Total Costs (\$) } & \
\hline \text { wages and salaries } & 200,000 \\hline \text { risk- free return of } 6 \% \text { on owners' capital of } 250,000 & 15,000 \
\hline \text { rent } & 105,000 \
\hline \text { - depreciation of capital equipment } & 25,000 \
\hline \text { risk premium of } 8 \% \text { on owners' capital of } 250,000 & 20,000 \
\hline \text { - intermediate inputs } & 150,000 \
\hline \text { forgone wages of owners in alternative employment } & 80,000 \
\hline \text { interest on bank loan } & 10,000 \
\hline
\end{array}$
$\text { TABLE 7- } 1$
-Refer to Table 7- 1. The economic profits for this family- owned firm are

Accepted Answer

A)  $0 
B)  $115 000 
C)  $10 000 
D)  - $105 000 
E)  - $10 000 
A)  $0 
B)  $115 000 
C)  $10 000 
D)  - $105 000 
E)  - $10 000

If a firm uses factor inputs that are personally owned by the firm's owner, then economists refer to the opportunity cost of these inputs as

Economists use the notation Q = f(L,K) to describe

FIGURE 7- 1 -Refer to Figure 7- 1. Total product is increasing at a decreasing rate

The point of diminishing marginal productivity is the point where

Which of the following statements is NOT true of a corporation?

Which of the following items is part of a firm's financial capital as distinct from its real capital?

The vertical distance between the total cost curve and the total variable cost curve is

The opportunity cost of any factor of production is

A firm's depreciation costs

FIGURE 7- 1 -Refer to Figure 7- 1. If the firm hires the 15th unit of labour,

Churches, the YMCA, the Salvation Army, and the Nature Conservancy are examples of

The theory of the firm is based on the following two key assumptions:

Economic profits are less than accounting profits because the calculation of economic profit

Economic Issues and Concepts

Economic Theories, Data, and Graphs

Demand, Supply, and Price

Elasticity

Markets in Action

Consumer Behaviour

Producers in the Long Run

Competitive Markets

Monopoly, Cartels, and Price Discrimination

Imperfect Competition

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets

Interest Rates and the Capital Market

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

The Gains From International Trade

Trade Policy

Filters

Exam 7: Producers in the Short Run

If a firm uses factor inputs that are personally owned by the firm's owner, then economists refer to the opportunity cost of these inputs as

Economists use the notation Q = f(L,K) to describe

FIGURE 7- 1 -Refer to Figure 7- 1. Total product is increasing at a decreasing rate

The point of diminishing marginal productivity is the point where

Which of the following statements is NOT true of a corporation?

Which of the following items is part of a firm's financial capital as distinct from its real capital?

The vertical distance between the total cost curve and the total variable cost curve is

The opportunity cost of any factor of production is

A firm's depreciation costs

FIGURE 7- 1 -Refer to Figure 7- 1. If the firm hires the 15th unit of labour,

Churches, the YMCA, the Salvation Army, and the Nature Conservancy are examples of

The theory of the firm is based on the following two key assumptions:

Economic profits are less than accounting profits because the calculation of economic profit

Economic Issues and Concepts

Economic Theories, Data, and Graphs

Demand, Supply, and Price

Elasticity

Markets in Action

Consumer Behaviour

Producers in the Long Run

Competitive Markets

Monopoly, Cartels, and Price Discrimination

Imperfect Competition

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets

Interest Rates and the Capital Market

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

The Gains From International Trade

Trade Policy

Filters