Multiple Choices PDF

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CHAPTER 1 The basic law of demand says that all other things being the same, _____. a) The lower the price of a product, the less of it consumers will purchase b) The higher the price of a product, the less of it consumers will purchase c) The lower the price of a product, the more of it consumers w...

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CHAP CHAPTTER 1 1. The basic law of demand says that all other things being the same, _____________________. a) The lower the price of a product, the less of it consumers will purchase b) The higher the price of a product, the less of it consumers will purchase c) The lower the price of a product, the more of it consumers will purchase d) The higher the price of a product, the more of it consumers will purchase e) The greater the number of units of a product sold in the past, the more of it consumers will purchase that product in the future. 2. If a firm is producing as efficiently as it knows how, the how will the total cost function slope? a) Upward b) Downward c) No Slope d) Downward until an output threshold value, then upward e) Upward until an output threshold value, then downward 3. Which of the following cost line items would be a fixed cost? a) Commissions to Salespeople b) Rent c) Raw Materials d) Packaging e) Shipping/Delivery Charges 4. If TC(Q)=1000Q² +100Q+10, what is the formula for AC(Q)? a) 2000Q+100 b) 2000Q²+100Q c)1000Q²+100Q+10 d)1000Q+100+10/Q e) 100Q+10+1/Q 5. Which of the following best describes marginal cost? a) The per-unit-of-output cost for a product b) The incremental cost of producing one more unit of output. c) A cost invariant to the firm’s output d) The sum of all costs associate with the production of a product e) The cost of fixed items such as general and administrative expenses

6. Which of the following statements is true regarding the relationship between average and marginal cost functions? a) When average cost is a decreasing function of output, marginal cost is greater than average cost. b) When average cost neither increases or decreases (because it is constant or at a minimum point), marginal cost is equal to average cost c) The average cost function is always smaller than the marginal cost function d) The average cost function is always greater than the marginal cost function e) When average cost is an increasing function of output, marginal cost is less than average cost 7. The following figure plots Short Run Average Cost functions for small, medium, and large plants. Based on the figure and plots provided, for which quantity level is a medium plant the best choice? a) Q1 b) Q2 c) Q3 d) Q4 e) Q5

8. What is a sunk cost? a) A cost that can be avoided if certain choices are made b) A cost that always varies with the output of a factory c) The average cost of operating a plant d) The “lower envelope” of short-run average cost functions e) A cost incurred no matter what the decision is and cannot be avoided 9. Suppose an entrepreneur starts a business earning $2M in revenue in 2009 while at the same time incurring $1.8M in costs. If the entrepreneur’s best outside alternative employment opportunity is to earn $300K, what are the firms accounting and economic profits? a) $200K, -$100K b) $200K, $100K c) $300K, $100K d) $300K, -$100K e) $200K, $200K

10. Which of the following variables does not influence the quantity of product that a firm is able to sell? a) Price of the product b) Price of related products c) Plant production costs d) Incomes and tastes of consumers e) Advertising 11. In which of the following markets is a consumer less sensitive to price? a) Airlines b) Refrigerators c) Health Care d) Computer components e) Washing Machines 12. In which of the following markets is a consumer more sensitive to price? a) Credit Cards b) Items sold door to door c) Customized software upgrade d) Copier/Printer Toner e) Health Care 13. Which of the following best describes marginal revenue? a) How sales revenue varies as a function of how much product is sold b) The incremental sales from producing one more unit of output c) Rate of change in total revenue that results from the sale of ΔQ additional units of output d) The total sales for a given product based on plant output e) Percentage change in quantity divided by percentage change in price 14. At what point can a firm achieve a profit maximizing quantity? a) MR>MC b) MC=D c) MR...