1. Economic profit: a) is a theoretical measure of a firm's performance and has little value in real world decision making. b) can be calculated by subtracting implicit costs of using owner-supplied resources from the firm's total revenue. c) is negative when total costs exceed total revenues. d) is generally larger than accounting profit. (1)

2. A risk premium is: a) a measure calculated to reflect the riskiness of future profits. b) subtracted from the discount rate when calculating the present value of a future stream of profits. c) lower the riskier the future stream of profits. d) an additional compensation paid to the workers of a business enterprise (3)

3. In a perfectly competitive market: a) all firms produce and sell a standardized or undifferentiated product. b) the output sold by a particular firm may be quite different from the output sold by the other firms in the market. c) firms are price-setters. d) it is difficult for new firms to enter the market due to barriers to entry. (5)

4. If the price of a complement for tires decreases, all else equal: a) quantity demanded for tires will decrease. b) quantity supplied for tires will decrease. c) demand for tires will increase. d) demand for tires will decrease. e) supply for tires will increase. (9)

5. The function a decision maker seeks to maximize or minimize is the ________ function. a) optimal b) decision-making c) objective d) marginal e) None of the choices is correct. (16)

6. Use the following marginal benefit and marginal cost functions for activity A: MB = 100 5A MC = 20 + 3A The fifth unit of activity A will a) increase net benefits by 75. b) reduce net benefits by 35. c) increase net benefits by 40. d) decrease net benefits by 40. e) reduce net benefits by 75. (20)

7. A radio manufacturer is experiencing theft problems at its warehouse and has decided to hire security guards to reduce the thefts. The firm wants to maximize the net benefit of warehouse security guards

8. Number of Security Guards	Number of Radios Stolen Per Week
   0	50
   1	30
   2	20
   3	14
   4	8
   5	6

   Given the information in the table, if each security guard is paid $200 a week and the cost of a stolen radio is $50, how many security guards should the firm hire? a) 1 b) 2 c) 3 d) 4 e) 5

9. A housecleaning company receives $25 for each house cleaned. The table below gives the relation between the number of workers and the number of houses that can be cleaned per week.

10. Number of Workers	Houses Cleaned
    1	9
    2	17
    3	24
    4	30
    5	35

    Based on the information in the table, the marginal revenue from the fourth worker is: a) $6. b) $30. c) $150. d) $750. e) None of the choices is correct (24)