2. When firms see their cost per unit drop while at the same time their output is increasing, this is an example of a. diminishing returns. b. economies of scale. c. long-run cost. d. marginal cost. 3. Variable costs a. are the change in cost associated with producing an additional unit of output. b. are costs such as mortgage payments and property taxes. c. are costs that can be changed within a period of one year. d. are costs that change as output changes. 4. Which of the following is an equation that a firm would use to calculate its total profit? a. total profit = total revenue - total costs b. total profit = (price x quantity sold) - (fixed costs + variable costs) c. total profit = (price x quantity sold) - total costs d. all of the above 5. A company's fixed costs and variable costs at an output of 400 units are both $600. What is the company's total expenditures at an output of 400 units? a. $600 b. $1200 c. $1600 d. $2400 6. What is the marginal cost per unit if a company increases production from 60 to 70 units and total costs increase from $500 to $570? a. $7 b. $70 c. $700 d. Cannot be determined with information provided. 17. Which of the following market structures is the easiest to enter and leave? a. monopolistic competition b. monopoly c. oligopoly d. perfect competition 19. If you have invented a new product, and you want to maintain a monopoly on the manufacture and sale of that product, what would be the most likely means of ensuring this? a. collusion b. deregulation c. patent d. privatization 20. A natural monopoly occurs a. in an industry such as logging or fishing. b. when a patent gives the producer sole right to produce and sell a product. c. when one producer can produce more efficiently because of high fixed costs. d. when the government issues a licence. 21. Which of the following is not a common barrier to entry into a monopoly? a. collusion b. high fixed costs c. government licence d. government patent 22. If you had a hot dog cart vending business that was granted a monopoly by the municipal government, a. both the output and price of your hot dogs would be higher than if the same business ran in a perfectly competitive market. b. both the output and price of your hot dogs would be lower than if the same business ran in a perfectly competitive market. c. the price of your hot dogs would be higher and the output would be lower than if the same business ran in a perfectly competitive market. d. the price of your hot dogs would be lower and the output would be higher than if the same business ran in a perfectly competitive market. 23. Which of the following industries would most likely be found in perfect competition? a. banking b. cable TV delivery c. farming d. izza delivery restaurants 29. The Theory of the Firm attempts to answer the basic economic question of a. for whom to produce. b. how to produce. c. what to produce. d. why to produce. 31. The principle that individuals pursue their own interests and as a consequence promote the interests of the whole society was identified by Adam Smith and called a. collusion. b. economies of scale. c. increasing returns. d. the invisible hand. 32. Which of the following is likely to be a fixed cost? a. fuel costs b. mortgage payments c. raw materials d. wages 33. Maximizing the output from the use of resources is known as a. marginal cost. b. perfect competition. c. product differentiation. d. productivity. 34. When did the Industrial Revolution begin? a. 16th century b. 17th century c. 18th century d. 19th century 35. In medieval Europe, much of the production was labour intensive and done in homes or small shops. This kind of production was known as a. home economics. b. home industry. c. house production. d. the cottage system. 41. The sale of public assets to private firms is known as a. command economics. b. deregulation. c. natural monopoly. d. privatization