1.All of the following costs are included in the calculation of accounting profit, except

a. Interest payments on borrowed funds

b. Costs paid to suppliers for product ingredients

c. Opportunity cost of capital

d. Depreciation expenses related to investments in buildings and equipment

Top of Form

2.One lesson of business:

a. is tracing the consequences of a policy.

b. promoting a policy change to eradicate inefficiencies.

c. moving assets from lower to higher value uses, thereby creating wealth.

d. None of the above

Bottom of Form

Top of Form

3.An increase in demand could arise from which of the following factors

a. an increase in income

b. a decrease in the price of a complement

c. an increase in the price of a substitute

d. all of the above

Bottom of Form

Top of Form

4.If marginal costs rises above average costs, average costs must

a. Be increasing

b. Be decreasing

c. Stay constant

d. None of the above

Bottom of Form

Top of Form

5.When taxes are levied on transactions, irrespective of the party they are levied on,

a. The government can absorb all the consumer surplus from the transactions as revenue

b. The government can absorb all the producer surplus from the transactions as revenue

c. The government can absorb some of the surplus, but also creates a social loss since some of the wealth creating transactions are discouraged

d. The government can absorb all of the surplus (producer and consumer)

Top of Form

6.Average costs

a. fall at all levels of output

b. are falling when marginal costs are below average costs and rising when marginal costs are above average costs

c. are falling when marginal costs are above average costs and rising when marginal costs are below average costs

d. does not vary with output

Bottom of Form

Top of Form

7.A widget costs $1000 in the US and CAD$1200 in Canada. The current exchange rate is 1USD=1.09CAD. Given purchasing power parity, the Canadian dollar would_______to equilibrate prices

a. Appreciate

b. Depreciate

c. Not change

d. None of the above

Bottom of Form

Bottom of Form

Top of Form

8.Jim saw a decrease in the quantity demanded for his firm's product from 8000 to 6000 units a week when he raised the price of the product from $200 to $250. What is Jim's own price elasticity of demand?

a. 1.29

b. 1

c. 0.25

d. 0.78

Bottom of Form

Top of Form

9.Marginal cost

a. Is the incremental cost incurred by producing an additional unit of output.

b. Is the total cost of production.

c. Is the total fixed cost of production.

d. None of the above

Bottom of Form

Top of Form

10.A publisher is deciding whether or not to invest in a new printer. The printer would cost $500, and it would increase cash flows by $600 for the next two years.

If the cost of capital increased to 25%, would the firm invest in the printer?

a. Yes because the NPV>0

b. Yes because the NPV=0

c. Need information on the marginal benefits and costs

d. No because the NPV<0