Question 1(1 point)

Suppose Adam is deciding what mode of transportation to take to get to work in the morning. If Adam decides to take a taxi, which of the following is an explicit cost of his decision?

Question 1 options:

	The loss of exercise he gets when he walks to work (assume exercise gives him positive benefit)
	The $2.50 it costs to ride the subway.
	The value he gets from commuting with his wife who also takes the subway
	None of the above are explicit costs

Question 2(1 point)

Suppose a firm has annual revenue of $600,000 from producing cars. Alternatively, the firm could produce only the engines and earn revenue equal to $100,000. Assume that the firm's annual raw materials costs are equal to $400,000 and that the rent it pays for its production facilities is equal to $50,000. Then, the firm's economic profit is equal to:

Question 2 options:

	$200,000
	$150,000
	$100,000
	$50,000

Question 3(1 point)

Tommy quit his job that paid $60,000 per year and started Tommy's Wicker Furniture Store. To set up the business Tommy used the $100,000 he had saved in a mutual fund, that was earning 5% each year ($5,000). Tommy used the $100,000 to purchase furniture for the showroom. Additionally, he rented a showroom for $15,000 for the year. In his first year, his revenue from selling furniture was $150,000.

What are the total implicit costs of Tommy's Wicker Furniture Store?

Question 3 options:

	$115,000
	$60,000
	$65,000
	$85,000

Question 4(1 point)

Tommy quit his job that paid $60,000 per year and started Tommy's Wicker Furniture Store. To set up the business Tommy used the $100,000 he had saved in a mutual fund, that was earning 5% each year ($5,000). Tommy used the $100,000 to purchase furniture for the showroom. Additionally, he rented a showroom for $15,000 for the year. In his first year, his revenue from selling furniture was $150,000.

The economic profit of Tommy's Wicker Furniture Store is:

Question 4 options:

	$60,000
	$0
	-$20,000
	-$30,000

Question 5(1 point)

Bill mows lawns for money. The following table shows Bill's total benefit and total cost of mowing lawns. Using marginal analysis, what is Bill's optimal number of lawns mowed?

Quantity on Lawns Mowed	Total Cost	Total Benefit
0	$0	$0
1	$5	$10
2	$11	$18
3	$18	$26
4	$26	$31
5	$35	$35

Question 5 options:

	3
	5
	2
	4

Question 6(1 point)

Pauli's Pizza offers the following prices: one slice for $2, two slices for $3.50, three slices for $4.50, four slices for $5.00.

If a customer orders 3 slices, the marginal cost to the customer of the third slice is:

Question 6 options:

	$4.50
	$10
	$1
	$2

Question 7(1 point)

One month ago Mark got a one year membership at a gym located near his current office, the membership fee for the gym is non-refundable. Today Mark is offered a new job. The new company has a gym in its office that is free for all its employees to use. In deciding whether or not to stay at his current job or take the new job, how should Mark consider the gym membership fee he has already paid?

Question 7 options:

	He should not consider it in his decision as it is a sunk cost
	He should consider it in his decision as it is an explicit cost
	He should consider it in his decision as it is an implicit cost
	He should not consider it in his decision as it is an implicit cost

Question 8(1 point)

George makes custom guitars. He has increasing marginal costs and decreasing marginal benefits from making the guitars. Last month George produced 10 guitars. The tenth guitar cost $50 and had a marginal benefit of $40. How would you suggest George adjust his production this month?

Question 8 options:

	George should increase his production of guitars.
	George should reduce his production of guitars.
	George should consider producing ukuleles.
	There is not enough information to determine George's best course of action.

Question 9(1 point)

The long run is a planning period:

Question 9 options:

	over which a firm can consider all inputs as variable
	that is the same for all firms
	that is at least 1 year in length
	that must be over 1 month in length

Question 10(1 point)

Number of Workers	Burgers per hour
1	4
2	10
3	17
4	22
5	25

The table above provides the total number of workers and the resulting total output per hour for Burgers Unlimited, holding all other inputs constant.

What is the marginal product of the 4th worker?

Question 10 options:

	22
	5
	3
	4

Question 11(1 point)

The average total cost of baking 10 brownies is $10. The average variable cost of baking 10 brownies is $7. What is the fixed cost?

(Hint: You cannot directly calculate the fixed cost, you need to first calculate some other costs that will then allow you to calculate the fixed cost)

Question 11 options:

	$10
	$20
	$30
	$60

Question 12(1 point)

The average total cost of baking 5 cookies is 80 cents and the average total cost of baking 6 cookies is 70 cents. What is the marginal cost of producing 6th cookie?

(Hint: You cannot directly calculate the marginal cost, you need to first calculate some other cost(s) that will then allow you to calculate the marginal cost)

Question 12 options:

	10 cents
	20 cents
	70 cents
	80 cents

Question 13(1 point)

Which of the following is NOT true?

Question 13 options:

	At the minimum-cost output, the marginal cost curve crosses the average total cost curve
	At output greater than the minimum-cost output, marginal cost is greater than average total cost and average total cost is falling
	At output less than the minimum-cost output, marginal cost is less than average total cost and average total cost is falling
	At output greater than the minimum-cost output, marginal cost is greater than average total cost and average total cost is rising

Question 14(1 point)

The graph above shows the only three short-run average total cost curves available to a firm, each representing a different level of the fixed input. In the long run, a firm can choose between each of them. If the firm wants to produce at Q1 in the long run, it will choose _____; if it wants to produce at Q2 in the long run, it will choose _____.

Question 14 options:

	ATC1 ; ATC2
	ATC1 ; ATC3
	ATC2 ; ATC3
	ATC2 ; ATC2

Question 15(1 point)

Consider the production of chairs, which takes a fixed amount of equipment and a variable amount of labor. The fixed cost of the equipment is $300,000. 50,000 chairs are produced at an average total cost of $10. If the wage of each worker is $100, how many workers are being used to produce 50,000 chairs?

(Hint: Variable cost = Number of workers x Wage of each worker)

Question 15 options:

	2,000
	1,000
	3,000
	4,000