Question 1 (1 point)

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

Question 1 options:

	costs of renting or buying land for a production site
	costs of operating production machinery
	foregone profits of producing a different good or service
	labor costs

Question 2 (1 point)

The additional cost incurred by using an additional unit of the managerial control variable is defined as the

Question 2 options:

	net benefit.
	net cost.
	total cost.
	marginal cost.

Question 3 (1 point)

What is the marginal benefit of producing the hundredth unit?

Number Units Produced	Total Benefit	Total Costs
0	0	0
20	120	40
40	200	100
60	270	170
80	310	260
100	330	370

Question 3 options:

	100
	10
	20
	1

Question 4 (1 point)

In order to maximize net benefits, firms should produce where

Question 4 options:

	marginal benefits equal marginal costs.
	total benefits equal total costs.
	profits are zero.
	marginal cost is minimized.

Question 5 (1 point)

When dealing with present value, a higher interest rate

Question 5 options:

	only changes the costs of the project.
	does not affect the present value of the future amount.
	increases the present value of a future amount.
	decreases the present value of a future amount.

Question 6 (1 point)

[Appendix material: calculus required] Suppose total benefits and total costs are given by B(Y) = 600Y 12Y² and C(Y) = 20Y². What is the maximum level of net benefits?

Question 6 options:

	2,812.5
	7,500
	2,500.75
	1,916.4

Question 7 (1 point)

The higher the interest rate,

Question 7 options:

	the smaller the level of inflation.
	the greater the present value of a future amount.
	the greater the level of inflation.
	the smaller the present value of a future amount.

Question 8 (1 point)

The power of input suppliers implies

Question 8 options:

	a lower price of an input favors both suppliers and purchasing firms.
	a higher price of an input hurts the supplier while favoring the firm purchasing the inputs.
	a lower price of an input hurts both suppliers and purchasing firms.
	a higher price of an input favors the supplier while hurting the firm purchasing the input.

Question 9 (1 point)

If the interest rate is 5 percent, the present value of $200 received at the end of five years is

Question 9 options:

	$176.41.
	$132.62.
	$156.71
	$121.34.

Question 10 (1 point)

You are considering paying $200,000 for an annuity today, and you know you need a yearly cash stream of $10,000 for expenses. What is the minimum annual interest rate (that would create a perpetual cash flow stream) needed for the annuity?

Question 10 options:

	5 percent
	20 percent
	0.5 percent
	1 percent

Question 11 (1 point)

[Appendix material: calculus required]. Suppose total benefits and total costs are given by B(Y) = 600Y 12Y² and C(Y) = 20Y². What is the maximum level of total benefits?

Question 11 options:

	7,500
	1,600
	2,812.5
	5,625

Question 12 (1 point)

[Appendix material: calculus required] When MB = 171 8Y and TC = 5Y² + 108, the optimal level of Y is

Question 12 options:

	25.
	24.
	9.5.
	8.

Question 13 (1 point)

What is the level of net benefits when three units are produced?

Number Units Produced	Total Benefit	Total Costs
0	0	0
1	100	50
2	180	110
3	250	180
4	290	270
5	310	380

Question 13 options:

	70.
	20.
	0.
	70.

Question 14 (1 point)

At what level of output does marginal cost equal marginal benefit?

Number Units Produced	Total Benefit	Total Costs
0	0	0
1	100	50
2	180	110
3	250	180
4	290	270
5	310	380

Question 14 options:

	3
	2
	4
	1

Question 15 (1 point)

Economic profits are

Question 15 options:

	total revenue minus total opportunity cost.
	marginal revenue minus marginal cost.
	total revenue minus total cost.
	total profits of the economy as a whole.

Question 16 (1 point)

Find the annual interest rate that would create a perpetual cash flow stream of $20,000 when the present value of the asset is $250,000.

Question 16 options:

	25 percent
	8 percent
	12.5 percent
	2.5 percent

Question 17 (1 point)

A firm will have constant profits of $100,000 per year for the next four years, and the interest rate is 6 percent. Assuming these profits are realized at the end of each year, what is the present value of these future profits?

Question 17 options:

	$325,816.49
	$376,741.64
	$400,000.85
	$346,510.56

Question 18 (1 point)

The primary inducement for new firms to enter an industry is

Question 18 options:

	increased technology.
	presence of economic profits.
	low capital costs.
	availability of labor.

Question 19 (1 point)

Accounting profits are

Question 19 options:

	total revenue minus total cost.
	total cost minus total revenue.
	marginal revenue minus total cost.
	total revenue minus marginal cost.

Question 20 (1 point)

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

Question 20 options:

	Costs of renting or buying land for a production site.
	Foregone salary of working in the other job.
	Costs of operating production machinery.
	Labor costs.

Question 21 (1 point)

A farm must decide whether or not to purchase a new tractor. The tractor will reduce costs by $2,000 in the first year, $2,500 in the second, and $3,000 in the third and final year of usefulness. The tractor costs $9,000 today, while the above cost savings will be realized at the end of each year. If the interest rate is 7 percent, what is the net present value of purchasing the tractor?

Question 21 options:

	-$3,467.46
	$2,320.12
	$6,501.65
	-$2,498.35

Question 22 (1 point)

[Appendix material: calculus required] Suppose total benefits and total costs are given by B(Y) = 600Y 12Y² and C(Y) = 20Y². What level of Y will yield the maximum net benefits?

Question 22 options:

	600/64
	300/8
	300/64
	600/32

Question 23 (1 point)

If the interest rate is 4 percent, the present value of $500 received at the end of four years is

Question 23 options:

	$431.71.
	$416.41.
	$432.68.
	$427.40.

Question 24 (1 point)

The change in net benefits that arises from a one-unit change in quantity is the

Question 24 options:

	total net benefits.
	variable benefits.
	marginal net benefits.
	present value benefits.

Question 25 (1 point)

If you put $1,000 in a savings account at an interest rate of 10 percent, how much money will you have in one year?

Question 25 options:

	$1,200
	$1,100
	$950
	$909