Question 1

The difference between zero accounting profit and zero economic profit is that

Accepted Answer

A) economists include opportunity cost in zero economic profit,while accountants do not include opportunity cost in zero accounting profit. 
B) economists do not include opportunity cost in zero economic profit,while accountants do include opportunity cost in zero accounting profit. 
C) economists include opportunity cost in zero accounting profit,while accountants do not include opportunity cost in zero economic profit. 
D) economists do not include opportunity cost in zero accounting profit,while accountants do include opportunity cost in zero economic profit. 
A) economists include opportunity cost in zero economic profit,while accountants do not include opportunity cost in zero accounting profit. 
B) economists do not include opportunity cost in zero economic profit,while accountants do include opportunity cost in zero accounting profit. 
C) economists include opportunity cost in zero accounting profit,while accountants do not include opportunity cost in zero economic profit. 
D) economists do not include opportunity cost in zero accounting profit,while accountants do include opportunity cost in zero economic profit.

Question 2

The short run is a time period such that

Accepted Answer

A) the existing firms in the market do not have sufficient time to change the amounts of any of the inputs that they employ. 
B) the existing firms in the market do not have sufficient time to either increase or decrease their current rate of output. 
C) the existing firms in the market do not have sufficient time to increase the size of their existing plant or build a new factory. 
D) new firms may build plants and enter the industry. 
A) the existing firms in the market do not have sufficient time to change the amounts of any of the inputs that they employ. 
B) the existing firms in the market do not have sufficient time to either increase or decrease their current rate of output. 
C) the existing firms in the market do not have sufficient time to increase the size of their existing plant or build a new factory. 
D) new firms may build plants and enter the industry.

Question 3

For a firm that wants to remain in business,which of the following costs could be avoided if it halted current production?

Accepted Answer

A) fixed costs 
B) variable costs 
C) sunk costs 
D) implicit costs 
A) fixed costs 
B) variable costs 
C) sunk costs 
D) implicit costs

Question 4

Suppose you are planning to open a lemonade stand.List separately all the explicit and implicit costs that might be involved.

Accepted Answer

The obvious explicit costs would include

Question 5

If the government levies a $1 excise tax on each unit of a good sold,what will happen to the producer's cost curve?

Accepted Answer

A) The average total cost and marginal cost curves will shift downward by the amount of the tax. 
B) The average total cost and marginal cost curves will shift upward by the amount of the tax. 
C) The marginal cost curve will shift upward by the amount of the tax;the average total cost curve will remain unchanged. 
D) Both the marginal cost and average total costs will remain the same since taxes are not a cost of production. 
A) The average total cost and marginal cost curves will shift downward by the amount of the tax. 
B) The average total cost and marginal cost curves will shift upward by the amount of the tax. 
C) The marginal cost curve will shift upward by the amount of the tax;the average total cost curve will remain unchanged. 
D) Both the marginal cost and average total costs will remain the same since taxes are not a cost of production.

Question 6

If most businesses in an industry are earning a 13 percent rate of return on their assets,but your firm is earning 23 percent,your rate of economic profit is

Accepted Answer

A) zero. 
B) 10 percent. 
C) 23 percent. 
D) 36 percent. 
A) zero. 
B) 10 percent. 
C) 23 percent. 
D) 36 percent.

Question 7

The average variable cost curve and average total cost curve become closer together as output increases because

Accepted Answer

A) the marginal cost curve intersects the average total cost curve at its minimum. 
B) average fixed cost remains constant as output rises. 
C) average fixed cost,which is the difference between them,declines with output. 
D) output is rising more rapidly than inputs are being increased. 
A) the marginal cost curve intersects the average total cost curve at its minimum. 
B) average fixed cost remains constant as output rises. 
C) average fixed cost,which is the difference between them,declines with output. 
D) output is rising more rapidly than inputs are being increased.

Question 8

You purchased an automobile a year ago for $10,000.Its current market price is $6,000,and the expected market value one year from now is $4,000.If the interest rate is 10 percent,how much will it cost you to keep the car for an additional year (over and above operation and maintenance costs)?

Accepted Answer

A) $2,000 
B) $2,600 
C) $4,000 
D) $6,000 
A) $2,000 
B) $2,600 
C) $4,000 
D) $6,000

Question 9

In the short run,the firm's average fixed costs

Accepted Answer

A) always increase as output increases. 
B) always decline as output increases. 
C) equal zero. 
D) remain constant as output expands. 
A) always increase as output increases. 
B) always decline as output increases. 
C) equal zero. 
D) remain constant as output expands.

Question 10

As output is expanded,if MC is less than ATC,

Accepted Answer

A) ATC must be at its minimum. 
B) ATC must be at its maximum. 
C) ATC must be decreasing. 
D) the firm must be earning economic profit. 
A) ATC must be at its minimum. 
B) ATC must be at its maximum. 
C) ATC must be decreasing. 
D) the firm must be earning economic profit.

Question 11

A downward-sloping portion of a long-run average total cost curve is the result of

Accepted Answer

A) economies of scale. 
B) diseconomies of scale. 
C) diminishing returns. 
D) the existence of fixed resources. 
A) economies of scale. 
B) diseconomies of scale. 
C) diminishing returns. 
D) the existence of fixed resources.

Exam 21: Acosts and the Supply of Goods

The difference between zero accounting profit and zero economic profit is that

The short run is a time period such that

For a firm that wants to remain in business,which of the following costs could be avoided if it halted current production?

Suppose you are planning to open a lemonade stand.List separately all the explicit and implicit costs that might be involved.

If the government levies a $1 excise tax on each unit of a good sold,what will happen to the producer's cost curve?

If most businesses in an industry are earning a 13 percent rate of return on their assets,but your firm is earning 23 percent,your rate of economic profit is

The average variable cost curve and average total cost curve become closer together as output increases because

You purchased an automobile a year ago for $10,000.Its current market price is $6,000,and the expected market value one year from now is $4,000.If the interest rate is 10 percent,how much will it cost you to keep the car for an additional year (over and above operation and maintenance costs)?

In the short run,the firm's average fixed costs

As output is expanded,if MC is less than ATC,

A downward-sloping portion of a long-run average total cost curve is the result of

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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