1)The higher the interest rate:

the greater the present value of a future amount.

the smaller the present value of a future amount.

the greater the level of inflation.

None of the statements associated with this question are correct.

2)If the interest rate is 10 percent and cash flows are $1,000 at the end of year one and $2,000 at the end of year two, then the present value of these cash flows is:

$2,562.

$3,200.

$439.

$3,000.

3)Accounting profits are:

total revenue minus total cost.

total cost minus total revenue.

marginal revenue minus total cost.

total revenue minus marginal cost.

4)Economic profits are:

total revenue minus total cost.

marginal revenue minus marginal cost.

total revenue minus total opportunity cost.

total profits of the economy as a whole.

5)Which of the following is an implicit cost to a firm that produces a good or service?

Labor costs

Costs of operating production machinery

Foregone profits of producing a different good or service

Costs of renting or buying land for a production site

6)Which of the following is an implicit cost of going to college?

Tuition

Cost of books and supplies

Room and board

Foregone wages

7)Which of the following are signals to the owners of scarce resources about the best uses of those resources?

Profits of businesses

Government regulations

Economic indicators

The accounting cost of those resources

8)The primary inducement for new firms to enter an industry is:

increased technology.

availability of labor.

low capital costs.

presence of economic profits.

9)As more firms enter an industry:

accounting profits increase.

economic profits decrease.

prices rise.

None of the statements associated with this question are correct.

10)Scarce resources are ultimately allocated toward the production of goods most wanted by society because:

firms attempt to maximize profits.

they are most efficiently utilized in these areas.

consumers demand inexpensive goods and services.

managers are benevolent.