Deck 3: Economic Concepts and Principles in Business Operations

Question 1

Mannheim defines ________as the sum of those methods by which a society tries to influence human behavior to maintain a given order.

A)social control
B)constitution
C)policing
D)democracy

Answer 1

social control

Question 2

Implicit costs are:

A)equal to total fixed costs.
B)comprised entirely of variable costs.
C)"payments" for self-employed resources.
D)always greater in the short run than in the long run.

Answer 2

"payments" for self-employed resources.

Question 3

Suppose a firm sells its product at a price lower than the opportunity cost of the inputs used to produce it. Which is true?

A)the firm will earn accounting and economic profits.
B)the firm will face accounting and economic losses.
C)the firm will face an accounting loss, but earn economic profits.
D)the firm may earn accounting profits, but will face economic losses.

Answer 3

the firm may earn accounting profits, but will face economic losses.

Question 4

Suppose that a firm produces 200,000 units a year and sells them all for Rs.10 each. The explicit costs of production are Rs.1,500,000 and the implicit costs of production are Rs. 300,000. The firm has an accounting profit of:

A)rs. 500,000 and an economic profit of rs. 200,000.
B)rs. 400,000 and an economic profit of rs. 200,000.
C)rs. 300,000 and an economic profit of rs. 400,000.
D)rs. 200,000 and an economic profit of rs. 500,000.

Question 5

The short run is a time period in which:

A)all resources are fixed.
B)the level of output is fixed.
C)the size of the production plant is variable.
D)some resources are fixed and others are variable.

Question 6

The marginal product of labor curve shows the change in total product resulting from:

A)one-unit increase in the quantity of a particular resource used, letting other resources vary.
B)one-unit increase in the quantity of a particular resource used, holding constant other resources.
C)change in the cost of a variable resource.
D)change in the cost of a fixed resource.

Question 7

If you know that with 8 units of output, average fixed cost is Rs. 12.50 and average variable cost is Rs. 81.25, then total cost at this output level is:

A)rs. 93.75.
B)rs. 97.78.
C)rs. 750.
D)rs. 880.

Question 8

The reason the marginal cost curve eventually increases as output increases for the typical firm is because:

A)of diseconomies of scale.
B)of minimum efficient scale.
C)of the law of diminishing returns.
D)normal profit exceeds economic profit.

Question 9

Which of the following statements best describes the general form of a production function:(i) It is a purely technological relationship between quantities of input and quantities of output.(ii) It represents the technology of an organisation, sector of an economy.(iii) Prices of inputs or of the output do not enter into the production function.(iv) It is a flow concept describing the transformation of inputs into output per unitof time.

A)(i),(ii) and (iv)
B)(i) and (ii)
C)(i) and (iv)
D)all of the above

Question 10

Which of the following statements describes the presence of diminishing returns. Holding at least one factor constant …....

A)the marginal product of a factor is positive and rising.
B)the marginal product of a factor is positive but falling.
C)the marginal product of a factor is falling and negative.
D)the marginal product of a factor is constant.

Question 11

Which of the following statements describes increasing returns to scale:

A)doubling the inputs used leads to double the output.
B)increasing the inputs by 50% leads to a 25% increase in output.
C)increasing inputs by 1/4 leads to an increase in output of 1/3.
D)none of the above.

Question 12

Economies of scale exist if:

A)as the amount of capital increases, the cost of producing per unit rises
B)as the amount of capital increases, the cost of producing per unit falls
C)as the amount of capital increases, the marginal cost rises
D)as the amount of capital increases, the marginal physical product falls