Question 1

Economists include _____ in calculating economic profit.

Accepted Answer

A)  only implicit costs 
B)  only explicit costs 
C)  both implicit and explicit costs 
D)  neither implicit nor explicit costs 
A)  only implicit costs 
B)  only explicit costs 
C)  both implicit and explicit costs 
D)  neither implicit nor explicit costs

Question 2

(Figure: Long-Run and Short-Run Average Total Cost Curves)
In the figure, in general, if a firm expects to maximize profits, which average total cost (ATC) will it select? Which ATC would a firm typically choose when it is expecting to produce a larger level of output with a lot of physical capital? Which ATC would a firm typically choose when it is expecting output to remain low?

Accepted Answer

A firm will choose the average total cos

Question 3

Average total cost is _____ whenever marginal cost equals average total cost.

Accepted Answer

A)  at its minimum 
B)  at its maximum 
C)  decreasing 
D)  increasing 
A)  at its minimum 
B)  at its maximum 
C)  decreasing 
D)  increasing

Question 4

Maria's expenses for her painting business include rent of $2,000, insurance of $3,500, utilities of $1,000, and painting supplies of $1,500. What are her fixed costs, variable costs, and total costs?

Accepted Answer

Fixed costs are rent, insuranc

Question 5

Average _____ cost is fixed costs per unit.

Accepted Answer

A)  marginal 
B)  total 
C)  variable 
D)  fixed 
A)  marginal 
B)  total 
C)  variable 
D)  fixed

Question 6

(Figure: Cost Schedule) In the figure, what is the average total cost to produce 5 units?
 $\begin{array}{|c|c|c|c|}
\hline \text { Quantity } & \text { Fixed Cost } & \begin{array}{c}
\text { Variable } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Cost }
\end{array} \
\hline 0 & \$ 11 & \$ 0 & - \
\hline 1 & 11 & 3 & \$ 3 \
\hline 2 & 11 & 8 & 5 \
\hline 3 & 11 & 14 & 6 \
\hline 4 & 11 & 23 & 9 \
\hline 5 & 11 & 36 & 13 \
\hline
\end{array}$

Accepted Answer

A)  $9.40 
B)  $13 
C)  $47 
D)  $2.20 
A)  $9.40 
B)  $13 
C)  $47 
D)  $2.20

Question 7

Explain why the marginal cost curve is upward sloping.

Accepted Answer

The marginal cost curve is upward slopin

Question 8

(Figure: Cost Schedule) In the figure, the average variable cost to produce five units is:
 $\begin{array}{|c|c|c|c|}
\hline \text { Quantity } & \text { Fixed Cost } & \begin{array}{c}
\text { Variable } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Cost }
\end{array} \
\hline 0 & \$ 11 & \$ 0 & - \
\hline 1 & 11 & 3 & \$ 3 \
\hline 2 & 11 & 8 & 5 \
\hline 3 & 11 & 14 & 6 \
\hline 4 & 11 & 23 & 9 \
\hline 5 & 11 & 36 & 13 \
\hline
\end{array}$

Accepted Answer

A)  $1.88. 
B)  $7.20. 
C)  $36. 
D)  $47. 
A)  $1.88. 
B)  $7.20. 
C)  $36. 
D)  $47.

Question 9

_____ profit is total revenue less economic costs.

Accepted Answer

A)  Sales 
B)  Implied 
C)  Accounting 
D)  Economic 
A)  Sales 
B)  Implied 
C)  Accounting 
D)  Economic

Question 10

(Figure: Costs) In the figure, which represents ATC?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 11

At the minimum of the average total cost (ATC) curve:

Accepted Answer

A)  AVC = MC. 
B)  ATC = MC. 
C)  ATC = AVC. 
D)  AVC = AFC. 
A)  AVC = MC. 
B)  ATC = MC. 
C)  ATC = AVC. 
D)  AVC = AFC.

Question 12

(Figure: MPP L) In the figure, what is the total physical product of three workers?

Accepted Answer

A)  45 
B)  60 
C)  225 
D)  250 
A)  45 
B)  60 
C)  225 
D)  250

Question 13

_____ costs should not affect decision making.

Accepted Answer

A)  Variable 
B)  Fixed 
C)  Total 
D)  Sunk 
A)  Variable 
B)  Fixed 
C)  Total 
D)  Sunk

Question 14

The technical relationship between different combinations of inputs and maximum output is illustrated by the _____ function.

Accepted Answer

A)  profit 
B)  resource 
C)  production 
D)  technical 
A)  profit 
B)  resource 
C)  production 
D)  technical

Question 15

(Figure: Costs) In the figure, which represents AVC?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 16

Gloria uses $10,000 from her savings (earning 5% interest) to open a business. After the first year, Gloria incurs a loss of $15,000, which includes the interest that was lost when she withdrew funds from savings. Her accounting loss is:

Accepted Answer

A)  $5,000. 
B)  $10,000. 
C)  $14,500. 
D)  $15,000. 
A)  $5,000. 
B)  $10,000. 
C)  $14,500. 
D)  $15,000.

Question 17

_____ costs are explicit costs of production.

Accepted Answer

A)  Implicit 
B)  Absolute 
C)  Accounting 
D)  Economic 
A)  Implicit 
B)  Absolute 
C)  Accounting 
D)  Economic

Question 18

(Figure: Costs) In the figure, which represents MC?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 19

Average _____ cost is total cost per unit.

Accepted Answer

A)  marginal 
B)  total 
C)  variable 
D)  fixed 
A)  marginal 
B)  total 
C)  variable 
D)  fixed

Question 20

(Figure: MPP L) In the figure, what is the marginal physical product (MPP) of the third unit of labor?

Accepted Answer

A)  50 
B)  60 
C)  80 
D)  90 
A)  50 
B)  60 
C)  80 
D)  90

Exam 11: The Cost of Doing Business

Economists include _____ in calculating economic profit.

Average total cost is _____ whenever marginal cost equals average total cost.

Maria's expenses for her painting business include rent of $2,000, insurance of $3,500, utilities of $1,000, and painting supplies of $1,500. What are her fixed costs, variable costs, and total costs?

Average _____ cost is fixed costs per unit.

(Figure: Cost Schedule) In the figure, what is the average total cost to produce 5 units? Quantity Fixed Cost Variable Cost Marginal Cost 0 \ 11 \ 0 - 1 11 3 \ 3 2 11 8 5 3 11 14 6 4 11 23 9 5 11 36 13

Explain why the marginal cost curve is upward sloping.

(Figure: Cost Schedule) In the figure, the average variable cost to produce five units is: Quantity Fixed Cost Variable Cost Marginal Cost 0 \ 11 \ 0 - 1 11 3 \ 3 2 11 8 5 3 11 14 6 4 11 23 9 5 11 36 13

_____ profit is total revenue less economic costs.

(Figure: Costs) In the figure, which represents ATC?

At the minimum of the average total cost (ATC) curve:

(Figure: MPP L) In the figure, what is the total physical product of three workers?

_____ costs should not affect decision making.

The technical relationship between different combinations of inputs and maximum output is illustrated by the _____ function.

(Figure: Costs) In the figure, which represents AVC?

Gloria uses $10,000 from her savings (earning 5% interest) to open a business. After the first year, Gloria incurs a loss of $15,000, which includes the interest that was lost when she withdrew funds from savings. Her accounting loss is:

_____ costs are explicit costs of production.

(Figure: Costs) In the figure, which represents MC?

Average _____ cost is total cost per unit.

(Figure: MPP L) In the figure, what is the marginal physical product (MPP) of the third unit of labor?

The Basics of Economics

Why We Trade

The Supply and Demand Model

Elasticity

Consumer Choice

The Economic Efficiency of Markets

Taxation: An Economic Analysis

Externalities, the Environment, and Public Goods

Organizing a Business

Stocks and Bonds

Perfect Competition

Monopoly and Antitrust Laws

Monopolistic Competition and Price Discrimination

Oligopoly

Behavioral Economics and Strategy

Labor and Other Resources

The Distribution of Income

Information and Health Economics

GDP and the Price Level

Unemployment and the Business Cycle

Long Run Economic Growth

Saving, Investment, and the Federal Budget Deficit

The Monetary System

Money and the Price Level in the Long Run

Aggregate Supply and Aggregate Demand

Monetary Policy and Interest Rates

Fiscal Policy and the Business Cycle

The Aggregate Expenditure Model

Inflation Expectations and Stabilization Policies

International Trade

Foreign Exchange Markets

International Finance

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