A firm had sales revenue of $1 million last year. It spent $600,000 on labor, $150,000 on capital and $200,000 on materials.

The firm's factory sits on land owned by the firm that could be rented out for $30,000 per year.

What was the firm's accounting profit last year? 150,00050,00030,00020,00070,000none

What was the firm's economic profit last year? 150,00050,00030,00020,00070,000none

6.25 points

QUESTION 2

Explicit costs are: Upcoming opportunityForegone opportunityMonetary outlayOutlay of future expenses

Implicit costs are: Upcoming opportunityForegone opportunityMonetary outlayOutlay of future expenses

6.25 points

QUESTION 3

What kind of costwould an interest payment on a loan to a firm be considered?

	A.	Opportunity cost
	B.	Implicit cost
	C.	Explicit cost
	D.	Variable cost

6.25 points

QUESTION 4

Accounting profit is the difference between explicit and implicit costthe difference between revenues and total costs, explicit and implicit.the difference between revenues and explicit costs,the difference between fixed and variable cost

Economic profit is the difference between explicit and implicit costthe difference between revenues and total costs, explicit and implicit.the difference between revenues and explicit costs,the difference between fixed and variable cost

6.25 points

QUESTION 5

What is the difference between fixed costs and variable costs?

	A.	A fixed cost is one that does not vary with output, such as labor or supplies, whereas a variable cost increases with output, such as the cost of a building or land
	B.	A fixed cost is one that varies with output, such as the cost of a building or land, whereas a variable cost decreases with output, such as labor or supplies
	C.	A variable cost is one that does not vary with output, such as the cost of a building or land, whereas a fixed cost increases with output, such as labor or supplies
	D.	A fixed cost is one that does not vary with output, such as the cost of a building or land, whereas a variable cost increases with output, such as labor or supplies

6.25 points

QUESTION 6

Are there fixed costs in the long-run?

	A.	There are no fixed costs in the long run
	B.	There can be fixed costs in the long run,but not often
	C.	Depends on the lengthof the commitment
	D.	There are fixed costs in the long run

6.25 points

QUESTION 7

How is each of the following calculated:

- A. B. C. D. E.	Marginal cost
- A. B. C. D. E.	Average total cost
- A. B. C. D. E.	Average variable cost

A.	Does not match
B.	Total cost divided by marginal cost of producing one more unit
C.	total variable cost divided by units produced.
D.	total cost divided by units produced
E.	the additional cost of producing one more unit

6.25 points

QUESTION 8

What is a production technology?

	A.	The monetarytechnological cost of producing a good
	B.	the combination of capital and labor used to produce a good.
	C.	the technology required to produce a good
	D.	the amount of skilled labor needed to produce a good

6.25 points

QUESTION 9

Match the following definitions

- A. B. C. D. E.	Economies of scale
- A. B. C. D. E.	Diseconomies of scale
- A. B. C. D. E.	Constant returns to scale

A.	When total costs increase with output
B.	When total costs decrease with output
C.	an increase in average costs as output rises
D.	when average costsdo notdecrease with increases in output.
E.	when average costs decrease with increases in output.

6.25 points

QUESTION 10

Why will firms in most markets be located at or close to the bottom of the long-run average cost curve?

	A.	companies are interested only in highest possible profit per unit
	B.	long run average cost curve represents an efficient level of output.
	C.	companies will not produce along the long run average cost curve
	D.	long run average cost curve representsthe highest possiblerevenue

6.25 points

QUESTION 11

Dofixed cost affect marginal cost?

	A.	Fixed cost increases marginal cost
	B.	Fixed cost only effects marginal cost when output becomes too great for the factory to manage, and additional fixed resources must be added to increase output
	C.	Fixed cost decreases marginal cost
	D.	Fixed costsnever affectmarginal cost

6.25 points

QUESTION 12

How would an improvement in technology affect the long-run average cost curve of a firm?

	A.	Improvements in technologyincrease the costs of production
	B.	Improvements in technology reduce the costs of production
	C.	Improvements in technology reduce the costs of production but not average costs.
	D.	Improvements in technologyhave little effect onthe costs of production

6.25 points

QUESTION 13

Eddie\'s Electronics sells laptop computers for $450. At this price, the store sells 325 laptops. Eddie\'s Electronics incurs a $398 cost for each laptop it sells. Assume that this is the store\'s only cost.

Eddie's revenue is: 202500cannot compute1462502437516900129350

Eddie's profit is 202500cannot compute1462502437516900129350

6.25 points

QUESTION 14

Economists and accountants view profit differently. Choose the option that makes the statement below consistent with the difference in how these groups define profit.

Economic profit is typically higher than accounting profitlower than accounting profitalways zeroonly explicit costsonly implicit costsneither explicit nor implicit costsboth explicit and implicit costs

This stems from the difference in how costs are calculated.Accountants will include higher than accounting profitlower than accounting profitalways zeroonly explicit costsonly implicit costsneither explicit nor implicit costsboth explicit and implicit costs

while economists include higher than accounting profitlower than accounting profitalways zeroonly explicit costsonly implicit costsneither explicit nor implicit costsboth explicit and implicit costs

6.25 points

QUESTION 15

Reggie owns and operates a cheese shop in the village of Somerset. While Reggie has a degree in mechanical engineering and could easily go to work for his brother\'s company earning $72,000 a year, his true passion is for cheese. Below is a list of Reggie\'s expenses from 2010.

Revenue from 2010= $85000

Rent = $17000

Equipment = $5000

Supplies = $3000

NOTE:Enter your answers as whole numbers without commas.

Reggie's accounting profit is

Reggie's economic profit is

6.25 points

QUESTION 16

A small company that shovels sidewalks and driveways has 100 homes signed up for its

services this winter. It can use various combinations of capital and labor: lots of labor with

hand shovels, less labor with snow blowers, and still less labor with a pickup truck that has a

snowplow on front. The method choices are:

Method 1: 50 units of labor, 10 units of capital

Method 2: 20 units of labor, 40 units of capital

Method 3: 10 units of labor, 70 units of capital

If hiring labor for the winter costs $100/unit and a unit of capital costs $400, what

production method should be chosen?

	A.	Method 1
	B.	Method 2
	C.	Method 3
	D.	None of the above

6.25 points

QUESTION 17

What is the difference between fixed costs and variable costs?

	A.	A fixed cost is one that does not vary with output, such as the cost of a building or land, whereas a variable cost increases with output, such as labor or supplies
	B.	A fixed cost is one that does not vary with output, such as labor or supplies, whereas a variable cost increases with output, such as the cost of a building or land
	C.	A variable cost is one that does not vary with output, such as the cost of a building or land, whereas a fixed cost increases with output, such as labor or supplies
	D.	A fixed cost is one that varies with output, such as the cost of a building or land, whereas a variable cost decreases with output, such as labor or supplies