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- 1. Multiple Choice
What is the Profit Maximizing Formula?
Revenue > Expenses
MR > ATC
MR = MC
AFC + AVC = ATC
- 2. Multiple Choice
What is the difference between Accounting (Normal) Profit and Economic Profit?
Merchandise Costs
Opportunity Cost
Labor Cost
Expenses
- 3. Multiple Choice
Bob currently earns $50,000 per year as a financial planner. If he quit his job and opened an ice cream stand on the beach, earning $25,000 per year in accounting profit, what is his Economic Profit?
$25,000
$50,000
$75,000
-$25,000
- 4. Multiple Choice
According to the Profit Maximizing Formula, how many units should this firm produce?
2
3
4
5
- 5. Multiple Choice
Which of the following is the best definition for Marginal Cost?
The cost of producing more units
The cost of producing one additional unit
Fixed costs
Variable Costs
- 6. Multiple Choice
Which costs change based on the number of units produced?
Fixed
Variable
- 7. Multiple Choice
Which costs do not change based on the number of units produced?
Fixed Costs
Variable Costs
- 8. Multiple Choice
Rent and machinery are an example of which of these?
Fixed Costs
Variable Costs
- 9. Multiple Choice
Labor, utilities, and raw materials are an example of which of these?
Fixed Costs
Variable Costs
- 10. Multiple Choice
A change in Fixed Costs affect which of the following? (check all that apply)
AFC
AVC
ATC
MC
- 11. Multiple Choice
A change in Variable Costs affect which of the following? (check all that apply)
AFC
AVC
ATC
MC
- 12. Multiple Choice
Does an increase in Fixed Costs affect a firm's output?
Yes
No
Maybe
- 13. Multiple Choice
Does an increase in Variable Costs affect a firm's output?
Yes
No
Maybe
- 14. Multiple Choice
Which of the following best explains why firms experience Increasing Marginal Returns?
Workers can specialize
Workers reach the limit of fixed resources
Managers motivate workers to produce more
Poor management leads to low motivation
- 15. Multiple Choice
Which of the following best explains why firms experience Decreasing Marginal Returns?
Workers can specialize
Workers reach the limit of fixed resources
Managers motivate workers to produce more
Poor management leads to low motivation
- 16. Multiple Choice
With which worker does this firm begin to experience Diminishing Marginal Returns?
First
Second
Third
Fourth
- 17. Multiple Choice
With which worker does this firm begin to experience Negative Marginal Returns?
Second
Third
Fourth
Fifth
- 18. Multiple Choice
What is the best definition for Short Run?
A period of time in which at lease one resource is fixed
A period of time in which all resources can change
A period of 1 to 5 years
A period of 5 or more years
- 19. Multiple Choice
What is the best definition for Long Run?
A period of time in which at lease one resource is fixed
A period of time in which all resources can change
A period of 1 to 5 years
A period of 5 or more years
- 20. Multiple Choice
A firm expands its fixed resources and its overall costs of production go down. It is experiencing...
Increasing returns to scale
Constant returns to scale
Negative returns to scale
- 21. Multiple Choice
A firm expands its fixed resources and its overall costs of production go up. It is experiencing...
Increasing returns to scale
Constant returns to scale
Negative returns to scale
- 22. Multiple Choice
A firm expands its fixed resources and its overall costs of production stay the same. It is experiencing...
Increasing returns to scale
Constant returns to scale
Negative returns to scale
- 23. Multiple Choice
Which type of market have we studies in this unit?
Perfect Competition
Monopolistic Competition
Oligopoly
Monopoly
- 24. Multiple Choice
Which of these is NOT a characteristic of Perfectly Competitive markets?
Many small firms
Virtually identical products
High barriers to entry
No need to advertise
- 25. Multiple Choice
Which of these best explains why Mr. Darp is horizontal?
Demand in that market is perfectly elastic
Demand in that market is perfectly inelastic
Firms can sell as many units as they want for the same price
Mr. Darp is taking a nap
- 26. Multiple Choice
If a firm's Marginal Costs increase, its output will...
Increase
Decrease
Stay the Same
Shut down
- 27. Multiple Choice
If a firm's Marginal Revenue increases, its output will...
Increase
Decrease
Stay the Same
Shut down
- 28. Multiple Choice
In the long run, a Perfectly Competitive Firm will..
Earn zero economic profit
Earn an economic profit
Make an economic loss
Shut down
- 29. Multiple Choice
Which of the following best describes Productive Efficiency?
Minimum ATC
Minimum AVC
Minimum MC
Minimum AFC
- 30. Multiple Choice
Which of the following best describes Allocative Efficiency?
D = ATC
D = AVC
D = MC
Run = DMC
- 31. Multiple Choice
What will happen when there is short-term PROFIT in a market?
Firms will enter the market, and prices will rise.
Firms will enter the market, and prices will fall.
Firms will leave the market, and prices will rise.
Firms will leave the market, and prices will fall.
- 32. Multiple Choice
What will happen when there is short-term LOSS in a market?
Firms will enter the market, and prices will rise.
Firms will enter the market, and prices will fall.
Firms will leave the market, and prices will rise.
Firms will leave the market, and prices will fall.
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