1.What do economists call the process of transforming inputs, or resources, into marketable outputs?

Production

Construction

Efficiency

Conglomeration

2.The principles of production are a foundation for __________.

establishing ownership

entrepreneurship

analyzing costs

the laws of supply and demand

3.If Geeta buys wood and piano wire every month to manufacture pianos in the plant she has leased for 4 years, she is operating __________.

in the long run

without a production function

a vertically integrated firm

in the short run

4.What doestheprinciple of diminishing returnsstate?

As more units of a variable input are added to a set of fixed inputs, the resulting additions to output eventually become increasingly smaller.

As more units of a variable input are added to another set of variable inputs, output will increase or diminish, depending on the ratio of the input sets.

In the short run, at least one input is fixed.

In the long run, fixed inputs are added to variable inputs.

5.How is the marginal product of labor calculated, whereMP_Lis the marginal product of labor,TPis the change in the total product, and Lis the change in the number of units of labor employed?

6.Guido's Travel Agency had accounting profits of $50,000 and implicit costs of $30,000. What is its economic profit?

$50,000

$30,000

$20,000

$80,000

7.Economists definethe long run

as the period long enough so that all __________.

resources are fixed

outputs can vary

inputs can vary

costs are fixed

8.Pietro's Pedal Pushers is a clothing firm that currently produces at the level of output that equates marginal costs with marginal revenues. What is this situation called?

resource minimization

profit maximization

deficit minimization

marginal maximization

9.As AdirondackChairsPlus.com's plant size grew, it became more productive and cost effective to run. However, as its scale increased too much, it became less efficient and incurred higher long-run average costs. This second scenario reflects __________.

economies of scale

short-run expenditures

diseconomies of scale

average cost savings

10. Harry gives his granddaughter Darla a yacht worth $120,000. She can keep the yacht to take her business clients fishing, or she can sell it. When Darla asks herself, "Is this asset more valuable as a $120,000 investment if I sell it or as part of my firm's capital?" she is really considering __________.

normal profit

opportunity costs

implicit costs

economic profit