Deck 11: The Cost of Doing Business

Question 1

_____ is the positive difference between revenue and cost.

A) Loss
B) Sales
C) Overhead
D) Profit

Answer 1

D

Question 2

Total revenue minus total cost is:

A) loss.
B) sales.
C) overhead.
D) profit.

Answer 2

D

Question 3

_____ costs are input costs that involve actual payments of money.

A) Implicit
B) Explicit
C) Finance
D) Economic

Answer 3

B

Question 4

Costs that require a monetary payment are known as _____ costs.

A) implicit
B) explicit
C) finance
D) economic

Question 5

_____ profit is total revenue minus accounting costs.

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

Question 6

_____ profit is total revenue minus explicit costs.

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

Question 7

_____ costs are explicit costs of production.

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

Question 8

_____ costs do not involve the payment of money.

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

Question 9

_____ profit is total revenue less economic costs.

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

Question 10

_____ profit is total revenue minus implicit and explicit costs.

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

Question 11

Economists include _____ in calculating economic profit.

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

Question 12

Accountants include _____ in calculating accounting profit.

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

Question 13

In determining a firm's costs, accountants include _____ costs, and economists include _____ costs.

A) implicit; no implicit
B) implicit; no explicit
C) implicit and explicit; no implicit
D) explicit; implicit and explicit

Question 14

When Flora quits her job earning $85,000 a year to open hers own business, the income that she gives up is considered _____ cost.

A) an explicit
B) an implicit and explicit
C) an opportunity
D) a derived

Question 15

Gerald, a certified public accountant, informs his client, Simon, a small business owner, that Simon's production expenses for the last year were $40,000. Revenues were $100,000. Simon gave up a job that paid $70,000 to open his business. What is Simon's accounting profit or loss?

A) $40,000
B) $60,000
C) $70,000
D) -$10,000

Question 16

Gerald, a certified public accountant, informs his client, Simon, a small business owner, that Simon's production expenses for the last year were $40,000. Revenues were $100,000. Simon gave up a job that paid $70,000 to open his business. What is Simon's economic profit or loss?

A) $40,000
B) $60,000
C) $70,000
D) -$10,000

Question 17

Gerald, a certified public accountant, informs his client, Simon, a small business owner, that Simon's production expenses for the last year were $40,000. Revenues were $100,000. Simon gave up a job that paid $70,000 to open his business. What is Simon's implicit cost of opening his business?

A) $40,000
B) $60,000
C) $70,000
D) $110,000

Question 18

A negative economic profit is referred to as _____ loss.

A) an explicit
B) an economic
C) an accounting
D) a derived

Question 19

An economic loss is a _____ profit.

A) negative explicit
B) negative economic
C) positive implicit
D) positive accounting

Question 20

Anthony uses $10,000 from his savings (earning 8% interest) to open his business. After the first year, Anthony incurs a loss of $40,000, which includes the interest that was lost when he withdrew funds from savings. His accounting loss is _____, and his tax expense loss is:

A) $39,200; $40,000.
B) $40,000; $50,000.
C) $39,200; $39,200.
D) $30,000; $40,000.

Question 21

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:

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

Question 22

Edward uses $10,000 from his savings (earning 5% interest) to open his business. After the first year, Edward incurs a loss of $15,000, which includes the interest that was lost when he withdrew funds from savings. His economic loss is:

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

Question 23

_____ profit entails a normal accounting profit.

A) Zero economic
B) Normal
C) Positive
D) Negative

Question 24

Wayne, a small business owner, had production expenses last year of $40,000. Revenues were $100,000. Wayne gave up a job that paid $60,000 to open his business. Wayne's economic profit last year was:

A) zero.
B) $40,000.
C) $60,000.
D) $100,000.

Question 25

Wayne, a small business owner, had production expenses last year of $40,000. Revenues were $100,000. Wayne gave up a job that paid $60,000 to open his business. Wayne earned an:

A) accounting profit of $100,000.
B) economic profit of $100,000.
C) accounting profit of zero.
D) economic profit of zero.

Question 26

Wayne, a small business owner, had production expenses last year of $40,000. Revenues were $100,000. Wayne gave up a job that paid $60,000 to open his business. Wayne earned:

A) an accounting profit of $100,000.
B) an economic profit of $100,000.
C) a negative rate of return.
D) a normal rate of return.

Question 27

The short run is defined as:

A) zero to 12 months.
B) one to five years.
C) the time period during which at least one variable cannot be changed.
D) the time period during which all variables can be changed.

Question 28

The short run is defined as:

A) zero to 12 months.
B) one to five years.
C) the time period that is too short to make all adjustments to changing business conditions.
D) the time period during which all adjustments to changing business conditions can be made.

Question 29

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

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

Question 30

The _____ function indicates the amount of output that can be produced with various levels of inputs, given the current technology.

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

Question 31

_____ is the additional output that is obtained with the addition of another worker, assuming that physical capital and other inputs are fixed.

A) Labor production
B) Marginal labor
C) The marginal physical product of labor
D) The physical product of labor

Question 32

The additional output from an additional unit of labor, holding the amount of physical capital and other inputs fixed, is:

A) labor production.
B) marginal labor.
C) the marginal physical product of labor.
D) the physical product of labor.

Question 33

To derive marginal physical product of labor, _____ the change in labor.

A) multiply the change in output by
B) divide the change in output by
C) add the change in output to
D) subtract the change in output from

Question 34

(Figure: Production Function Data 0) In the table, what is the MPP of the second unit of labor?
$\begin{array}{|l|l|}\hline \text { Labor (L) } & \text { Total Product (TP) } \\\hline 0 & 0 \\\hline 1 & 85 \\\hline 2 & 150 \\\hline 3 & 200 \\\hline 4 & 240 \\\hline\end{array}$

A) 50
B) 65
C) 150
D) 215

Question 35

(Figure: Production Function Data 0) In the table, what is the MPP of the third unit of labor?
$\begin{array}{|l|l|}\hline \text { Labor (L) } & \text { Total Product (TP) } \\\hline 0 & 0 \\\hline 1 & 85 \\\hline 2 & 150 \\\hline 3 & 200 \\\hline 4 & 240 \\\hline\end{array}$

A) 50
B) 65
C) 150
D) 215

Question 36

(Figure: Production Function Data 0) In the table, what is the MPP of the fourth unit of labor?
$\begin{array}{|l|l|}\hline \text { Labor (L) } & \text { Total Product (TP) } \\\hline 0 & 0 \\\hline 1 & 85 \\\hline 2 & 150 \\\hline 3 & 200 \\\hline 4 & 240 \\\hline\end{array}$

A) 40
B) 55
C) 200
D) 280

Question 37

(Figure: Production Function Data 0) In the table, what is the MPP of the first unit of labor?
$\begin{array}{|l|l|}\hline \text { Labor (L) } & \text { Total Product (TP) } \\\hline 0 & 0 \\\hline 1 & 85 \\\hline 2 & 150 \\\hline 3 & 200 \\\hline 4 & 240 \\\hline\end{array}$

A) 0
B) 42.5
C) 65
D) 85

Question 38

(Figure: Production Function Data 0) In the table, the MPP of the fifth unit of labor is 30. What is the total product of five units of labor?
$\begin{array}{|l|l|}\hline \text { Labor (L) } & \text { Total Product (TP) } \\\hline 0 & 0 \\\hline 1 & 85 \\\hline 2 & 150 \\\hline 3 & 200 \\\hline 4 & 240 \\\hline\end{array}$

A) 30
B) 60
C) 150
D) 270

Question 39

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

A) 40
B) 50
C) 75
D) 85

Question 40

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

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

Question 41

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

A) 45
B) 60
C) 200
D) 280

Question 42

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

A) 55
B) 90
C) 200
D) 280

Question 43

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

A) 75
B) 90
C) 165
D) 215

Question 44

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

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

Question 45

The _____ theory states that, in the short run, the marginal physical product of labor declines as more labor is employed.

A) labor
B) marginal physical product
C) law of increasing returns
D) law of diminishing returns

Question 46

_____ costs are short-run costs that do not change with the quantity of output.

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

Question 47

_____ costs are short-run costs that change with the quantity of output.

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

Question 48

_____ costs are the cost of all inputs in production.

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

Question 49

In the short run, _____ cost is the sum of fixed costs and variable costs.

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

Question 50

Deborah owns a flower shop with monthly _____ costs that include $1,200 for insurance and $5,000 for rent.

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

Question 51

Doreen's expenses for her landscaping business included rent of $1,000, payroll of $3,000, utilities of $600, and gas for the lawnmowers of $500. What are her monthly fixed costs?

A) $500
B) $1,300
C) $1,600
D) $2,400

Question 52

Doreen's expenses for her landscaping business included rent of $1,000, payroll of $3,000, utilities of $600, and gas for the lawnmowers of $500. What are her monthly variable costs?

A) $500
B) $1,100
C) $1,900
D) $3,500

Question 53

Doreen's expenses for her landscaping business included rent of $1,000, payroll of $3,000, utilities of $600, and gas for the lawnmowers of $500. What are her monthly total costs?

A) $1,600
B) $2,100
C) $4,600
D) $5,100

Question 54

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

A) $500
B) $1,300
C) $1,900
D) $3,500

Question 55

Average _____ cost is fixed costs per unit.

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

Question 56

Average _____ cost is variable costs per unit.

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

Question 57

Average _____ cost is total cost per unit.

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

Question 58

The additional costs that a business incurs from one additional unit of output is the _____ cost.

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

Question 59

If the costs to make 12 cakes total $1,200, the average cost is:

A) $100.
B) $120.
C) $12,000.
D) $14,400.

Question 60

If the total cost to paint six houses is $10,000, then the average total cost is:

A) $1,000.
B) $1,667.
C) $10,000.
D) $60,000.

Question 61

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

A) $11.
B) $9.50.
C) $3.67.
D) $5.50

Question 62

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

A) $11.
B) $9.50.
C) $3.67.
D) $5.50.

Question 63

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

A) $11.
B) $2.75.
C) $3.67.
D) $5.50.

Question 64

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

A) $11.
B) $2.75.
C) $3.67.
D) $2.20.

Question 65

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

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

Question 66

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

A) $2.21.
B) $4.67.
C) $5.75.
D) $7.20.

Question 67

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

A) $2.78.
B) $4.
C) $4.67.
D) $7.20.

Question 68

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

A) $2.78.
B) $4.
C) $4.67.
D) $7.20.

Question 69

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

A) $19
B) $10
C) $9.50
D) $5

Question 70

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

A) $25
B) $10
C) $8.34
D) $6

Question 71

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

A) $8.50
B) $9
C) $34
D) $2.75

Question 72

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

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

Question 73

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

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

Question 74

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

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

Question 75

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

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

Question 76

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

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

Question 77

(Figure: Costs) In the figure, what is the fixed cost at 40 units?

A) $6
B) $8
C) $14
D) $240

Question 78

(Figure: Costs) In the figure, what is average fixed cost at 40 units?

A) $6
B) $8
C) $14
D) $240

Question 79

(Figure: Costs) In the figure, what are total costs at 40 units?

A) $8
B) $14
C) $320
D) $560

Question 80

(Figure: Costs) In the figure, what is variable cost at 40 units?

A) $8
B) $14
C) $320
D) $560