Exam 9: Decision Making by Individuals and Firms

For most firms, economic profit is: A.less than accounting profit. B.equal to accounting profit. C.greater than accounting profit. D.negative.

In economics, a marginal value refers to: A.the value associated with an unimportant, or marginal, activity. B.a value entered as an explanatory item in the margin of a balance sheet or other accounts. C.the value associated with one more unit of an activity. D.a value that is most appropriately identified in a footnote.

Which of the following is true of the relationship between accounting profit and economic profit? A.Economic profit is less than accounting profit if implicit costs exist. B.Economic profit is always equal to accounting profit. C.Economic profit is greater than accounting profit if implicit costs exist. D.Economic profit is less than accounting profit if implicit costs are zero.

Jacquelyn is a student at a major state university.Which of the following is not an example of an explicit cost of her attending college? A.tuition B.textbooks C.the salary that she could have earned working full-time D.computer lab fees

If the marginal cost of any activity is constant at $4, then at the optimal quantity of the activity, the marginal benefit will be $4.

(Table: Marginal Analysis of Sweatshirt Production II) Look at the table Marginal Analysis of Sweatshirt Production II.Given the information provided, the net benefit at the optimal quantity of sweatshirts is: A.$15. B.$16. C.$48. D.$80.

(Table: TC's Pizza Parlor) Look at the table TC's Pizza Parlor.Assume that the marginal benefit is constant in intervals of production.Suppose five slices of pizza are currently being produced.What is the marginal benefit of producing one more slice of pizza? A.$3 B.$2 C.$15 D.$55

Figure: The Marginal Cost Curve (Figure: The Marginal Cost Curve) Look at the figure The Marginal Cost Curve.According to the marginal cost curve, the total cost of mowing four lawns is approximately: A.$10. B.$15. C.$50. D.$100.

Samantha is an artist who operates her studio and gallery in town.She produces watercolor paintings in the studio and sells them in the gallery.Give an example of an explicit and an implicit cost that Samantha is likely to incur.

In economics, the assumption is that consumers and firms will make choices that maximize the ________ of each activity. A.total net benefit B.total benefit C.sum of total benefit and total cost D.product of total benefit and total cost

At whatever quantity ________, the decision maker should do of the activity. A.MB < MC; that amount B.MB < MC; less C.MB > MC; less D.MB > MC; none

Firms will continue to produce if: A.the marginal benefits of producing an additional unit are greater than the marginal costs of producing an additional unit. B.the marginal benefits of producing an additional unit are less than the marginal costs of producing an additional unit. C.the marginal benefit of producing an additional unit is equal to the marginal cost of producing an additional unit. D.the costs of producing the unit stay constant.

The costs economists use in the concept of economic profit are: A.accounting costs. B.strictly dollar costs, not opportunity costs. C.opportunity costs, or the value of the best opportunity forgone. D.accounting costs and opportunity costs (i.e., the value of the best opportunity forgone).

A person with loss aversion: A.is unwilling to spend money to buy insurance. B.is likely to maximize total revenue rather than profit. C.is unlikely to ignore sunk costs. D.is more likely to use a credit card than to pay cash.

At whatever quantity ________, the decision maker should do of the activity. A.MB < MC; that amount B.MB < MC; more C.MB > MC; more D.MB > MC; none

If the accounting profit for a firm is negative: A.the economic profit must be positive B.the economic profit must be negative. C.the firm should produce more. D.the firm will not owe any taxes to the government.

Which of the following is not a common mistake that leads to irrational decisions? A.mental accounting B.loss aversion C.risk aversion D.misperceptions about opportunity costs

Scenario: Accounting and Economic Profit Rather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year, Tommy Wang quit his job that paid $60,000 per year and started Wang's Wicker Furniture Store.He rented a showroom for $15,000 for the year, purchased capital equipment that depreciates $5,000 each year, purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising.Instead of using the capital for his own business he could rent it to a rival firm and earn $5,000 a year, In his first year, his revenue was $150,000. (Scenario: Accounting and Economic Profit) The accounting profit of Wang's Wicker Furniture Store is: A.$200,000. B.$60,000. C.$30,000. D.$0.

(Table: Expected Exam Scores from Studying Economics and Accounting) Look at the table Expected Exam Scores from Studying Economics and Accounting.If you studied for a total of 3 hours, you would expect your combined scores to be points. A.145 B.150 C.155 D.165

Bessie wants to calculate the accounting and economic profits on her cattle farm in Nebraska.She pays $30,000 per year for the cost of raising cattle, $80,000 in wages, and $20,000 in insurance.she forgoes $30,000 per year that she could make as a teacher.If her total revenue equals $140,000, that means her accounting profit is ________ and her economic profit is _. A.$10,000; -$20,000 B.$30,000; -$30,000 C.-$10,000; -$10,000 D.$60,000; $30,000