Chapter 8 Practice Quiz + Answers PDF

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Chapter 8 Practice Quiz + Answers...

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Practice Quiz

Chapter 8

1. Which of the following goals of the firm is most widely assumed by economists? A. staff maximization B. sales maximization C. growth maximization D. profit maximization 2. Implicit costs are defined as A. a direct monetary outlay from a firm to an input supplier B. costs that do not change C. the opportunity cost of the firm’s input D. accounts payable 3. The revenue of a firm less its explicit costs are defined as the firm’s: A. normal profit B. accounting profit C. economic profit D. economic rent 4. Economic profit is A. a return over and above the alternative cost of all inputs B. the opportunity cost of capital C. the opportunity cost of a normal profit D. can be achieved in the long run but not the short run 5. Normal profit is A. always included in accounting profit B. an implicit cost of production C. greater than economic profit D. Added to total revenue 6. In the short run, A. all factors of production are variable B. all factors of production can be altered after two years C. plant capacity can be altered after one year D. plant capacity is fixed and all other factors of production can be altered 7. Because of the law of diminishing returns A. the marginal product of labour eventually falls B. marginal cost continuously falls C. plant capacity can be altered D. long run average cost eventually rises 8. Fixed costs are costs A. reflects the law of diminishing returns B. includes labour and raw material costs C. and do not vary with output D. and do vary with output

9. Marginal Cost can be defined as A. the additional cost of labour B. the extra or additional cost of producing one more unit C. downward sloping D. total cost divided by quantity Graph 8-1

A Shor Run Aver ge Cost

B C

D Quantity 10. Refer to Graph 8-1, average fixed cost (AFC) is A. A B. B C. C D. D 11. Refer to Graph 8-1, average total cost (ATC) is A. A B. B C. C D. D 12. Refer to Graph 8-1, marginal cost (MC) is A. A B. B C. C D. D 13. Refer to Graph 8-1, average variable cost (AVC) is A. A B. B C. C D. D

14. Average fixed costs (AFC) can be calculated by taking the difference between average total costs (ATC) and A. marginal cost (MC) B. average variable cost (AVC) C. fixed cost D. variable cost 15. If ATC=$25 at quantity 10, total cost (TC) is equal to A. $250 B. $35 C. $15 D. $2.5 16. Shelley estimates her costs per month for her burger business as follows: TFC=$1150, Variable cost per burger = $1.41, selling price=$4.95 How many burgers must Shelley sell per month in order to break even? A. 181 B. 233 C. 325 D. 816 17. The long run A. permits the variation of all factors of production B. is different for different firms C. experiences economies and diseconomies of scale D. all of the above 18. Specialization will result in A. diseconomies of scale B. economies of scale C. constant economies of scale D. diminishing marginal returns 19. A firm may experience diseconomies of scale due to A. rising costs B. wage increase or strike C. an increase in marginal cost (MC) D. lack of communication 20. Minimum efficient scale (MES) is defined as the A. smallest level of output where long run average costs are minimized B. flat section of the long run average cost curve C. difference between the long run and short run D. profit maximizing quantity in the long run

Answers 1. D 2. C 3. B 4. A 5. B 6. D 7. A 8. C 9. B 10. D 11. B 12. A 13. C 14. B 15. A 16. C 17. D 18. B 19. D 20.

A...