Quiz 7 of ECON251 Purdue University In Tutorial Library

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TITLE: Quiz 7 of ECON251 Purdue University

UNIVERSITY / INSTITUTE: Purdue University

CLASS / COURSE: ECON 25100: Microeconomics

QUESTION DESCRIPTION:

Quiz 7 (Chapter 7)
 
1. Which of the following definitions is correct? 
 
A. Accounting profit + economic profit = normal profit.  
B. Economic profit - accounting profit = explicit costs.  
 C. Economic profit = accounting profit - implicit costs.    
D. Economic profit - implicit costs = accounting profits.  
 
2. The following is cost information for the Creamy Crisp Donut Company:
Entrepreneur's potential earnings as a salaried worker = $50,000
Annual lease on building = $22,000
Annual revenue from operations = $380,000
Payments to workers = $120,000
Utilities (electricity, water, disposal) costs = $8,000
Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000
Entrepreneur's forgone interest on personal funds used to finance the business = $6,000
 
Refer to the above data. Creamy Crisp's total economic costs are: 
 
 A. $286,000.    
B. $150,000.  
C. $94,000.  
D. $156,000.  
 
3. Which of the following is a short-run adjustment? 
 
 A. A local bakery hires two additional bakers.    
B. Six new firms enter the plastics industry.  
C. The number of farms in the United States declines by 5 percent.  
D. BMW constructs a new assembly plant in South Carolina.  
 
4. To economists, the main difference between the short run and the long run is that: 
 
A. the law of diminishing returns applies in the long run, but not in the short run.  
 B. in the long run all resources are variable, while in the short run at least one resource is fixed.    
C. fixed costs are more important to decision making in the long run than they are in the short run.  
D. in the short run all resources are fixed, while in the long run all resources are variable.  
 
5. Answer the question on the basis of the following output data for a firm. Assume that the amounts of all non-labor resources are fixed.
 
Refer to the above data. The marginal product of the sixth worker is: 
 
A. 180 units of output.  
B. 30 units of output.  
 C. 15 units of output.    
D. negative.  
 
6. Answer the question on the basis of the following output data for a firm. Assume that the amounts of all non-labor resources are fixed.
 
Refer to the above data. Average product is at a maximum when: 
 
A. five workers are hired.  
B. four workers are hired.  
C. three workers are hired.  
 D. two workers are hired.    
 
7. Marginal product: 
 
A. diminishes at all levels of production.  
B. may initially increase, then diminish, but never become negative.  
 C. may initially increase, then diminish, and ultimately become negative.    
D. is always less than average product.  
 
8. The law of diminishing returns results in: 
 
A. an eventually rising marginal product curve.  
 B. a total product curve that eventually increases at a decreasing rate.    
C. an eventually falling marginal cost curve.  
D. a total product curve that rises indefinitely.  
 
9. If you owned a small farm, which of the following would most likely be a fixed cost? 
 
A. harvest labor  
 B. hail insurance    
C. fertilizer  
D. seed  
 
10. Refer to the above diagram. At output level Q total variable cost is: 
 
 A. 0BEQ.    
B. BCDE.  
C. 0CDQ.  
D. 0AFQ.  
 
11. Refer to the above diagram. The vertical distance between ATC and AVC reflects: 
 
A. the law of diminishing returns.  
 B. the average fixed cost at each level of output.    
C. marginal cost at each level of output.  
D. the presence of economies of scale.  
 
12. Answer the question on the basis of the following cost data:
 
Refer to the above data. The marginal cost of producing the sixth unit of output is: 
 
A. $24.  
B. $12.  
C. $16.  
 D. $8.    
 
13. Answer the question on the basis of the following information:
 
Refer to the above information. Marginal cost is: 
 
A.  
 B.      
C.  
D.  
 
14. In the short run, which of the following statements is correct? 
 
A. The marginal cost curve intersects the average variable and average fixed cost curves at their minimum points.  
B. Average variable cost declines continuously as total output is expanded.  
 C. Total cost will exceed variable cost.    
D. If the inputs of all resources are increased by equal amounts, total output will expand by diminishing amounts.  
 
15. Refer to the above short-run production and cost data. The curves of Figures A and B suggest that: 
 
A. marginal product and marginal cost reach their maximum points at the same output.  
 B. marginal cost reaches a minimum where marginal product is at its maximum.    
C. marginal cost and marginal product reach their minimum points at the same output.  
D. AVC cuts MC at the latter's minimum point.  
 
16. Suppose that, when producing 10 units of output, a firm's AVC is $22, its AFC is $5, and its MC is $30. This: 
 
A. firm's ATC is $35.  
B. firm's ATC is $57.  
 C. firm's total cost is $270.    
D. firm's total cost is $30.  
 
17. Answer the question on the basis of the following cost data:
 
Refer to the above data. The average total cost of five units of output is: 
 
A. $69.  
 B. $78.    
C. $3.  
D. $10.  
 
18. Introduction of the Verson Stamping Machine helped firms in the automobile industry: 
 
A. eliminate diminishing returns in production.  
 B. achieve greater economies of scale.    
C. reach their minimum efficient scale at a lower level of production.  
D. shift their AVC, ATC, and MC curves upward.  
 
19. Which of the following is an example of a sunk cost, as it relates to a firm? 
 
A. an expenditure on raw materials used in the production process.  
 B. an expenditure on a nonrefundable, nontransferable airline ticket.    
C. an expenditure to buy a delivery van.  
D. an expenditure for a new factory.  
 
20. Susie purchased a non-refundable ticket to a soccer match for $20. It will cost her $10 worth of gas and wear and tear to drive to the match, and $5 to park her car. On the day of the match, Susie's boss offers her $100 to come to work instead. In considering what to do, which of the above would be considered a sunk cost? 
 
 A. The $20 ticket to the match.    
B. The $10 cost to drive to the match.  
C. The $5 cost to park at the stadium.  
D. The $100 offered by Susie's boss.  
 
 
  

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1. Business Economics
2. Economics
3. Microeconomics

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