1. A vertically integrated firm might own

A) a ski factory, an Alpine resort hotel, and an emergency medical center.

B) several plants that manufacture different qualities of skis.

C) a ski factory, a cigar manufacturer, and a carpet factory.

D) several plants in different countries that manufacture skis.

2. In the short run, if a firm has zero output, its total cost is

A) equal to zero.

B) the same as its average variable cost.

C) the same as its total variable cost.

D) the same as its total fixed cost.

E) the same as its average fixed cost.

3. Which of the following always decreases as output increases?

A) Fixed cost

B) Average cost

C) Average fixed cost

D) Marginal cost

E) Total cost

4. The Southern Tree Trimming Corporation reported an accounting profit of $35,000 and a normal rate of return of 15 percent on capital and enterprise of $30,000. The opportunity cost of labor is $15,500. What is the economic profit?

A) $110,500

B) $19,500

C) $15,000

D) $5,000

5. Ralph's Travel Agency had accounting profits of $50,000 and implicit costs of $30,000. What were economic profits?

A) $50,000

B) $30,000

C) $20,000

D) The amount cannot be determined from the information given.

6. If Fred Morris buys wood and ivory every month to manufacture pianos in the plant he has leased for four years, he is operating

A) in the long run.

B) without a production function.

C) in the short run.

D) a vertically integrated firm.

7. Because of diminishing marginal product in the short run, a tripling of the total product (assuming input prices are constant) requires

A) a tripling of marginal cost.

B) a tripling of total cost.

C) less than a tripling of total variable cost.

D) increased average fixed cost.

E) more than a tripling of total variable cost.

8. The short run is

A) less than six months.

B) more than six months, but less than a year.

C) in the short run, some productive resources may be fixed although some other resources may be varied.

D) the period of time in which all the productive resources can be varied.

E) the period of time in which all the inputs are fixed.

9. Firms exist for all but which one of the following reasons?

A) To reduce transactions costs

B) To produce things

C) To organize teams

D) To monitor shirking

E) To reduce the costs of buying

10. What is one thing that entrepreneurs do NOT do?

A) They identify consumer demands.

B) They establish supply and demand.

C) They organize production.

D) They allocate resources.

E) They acquire assets.