1. Economic rent helps ensure that
A) there is a more equal distribution of income among individuals
B) resources are put in their highest-valued use
C) firms can make enough profit to survive in the long run
D) all of the above

2. Mathematically, economic profit is
A) total revenue × (explicit costs - implicit costs)
B) total revenue - (explicit costs - implicit costs)
C) total revenue + (explicit costs + implicit costs)
D) total revenue - (explicit costs + implicit costs)

3. If, as an entrepreneur, I am earning accounting profits of $50,000 per year and the opportunity cost of my time is $40,000,
A) I am earning economic profits of $10,000.
B) I am earning economic profits of $50,000.
C) I am earning economic losses of $10,000.
D) I should close my business.

4. Refer to Table A. The accounting costs for this firm are
A) $900
B) $3,200
C) $3,500
D) $11,500
E) $14,700

5. Refer to Table A. The accounting profits for this firm are
A) $0
B) $4,500
C) $1,300
D) $12,800
E) $16,000

6. Refer to Table A. The economic profits for this firm are
A) $0
B) $4,500
C) $1,300
D) $12,800
E) $16,000

7. Dave currently earns a salary of $2,150 per week as an economics instructor. His next best career would have been an assistant manager at Nittany Burger, where he would have earned $32 per hour, and would have worked for 40 hours per week. What weekly economic rent does Dave receive from being an economics instructor?
A) $2,150
B) $870
C) $32
D) $1,280
E) $2,118
F) $0 since he is in the his first chosen career

8. Economic profits are
A) the same as accounting profits when firms do not own capital equipment.
B) always greater than accounting profits.
C) equal to accounting profits plus the implicit costs of the firm.
D) whatever remains after all explicit costs and opportunity costs have been taken into account.

9. The production function
A) shows the maximum level of output produced for a given set of inputs
B) is an economic relationship between revenue and cost
C) shows the relationship between input prices and amount of input used
D) shows the demand for the product that the firm produces

10. Total product divided by the amount of an input used is
A) average total cost
B) marginal cost
C) average product
D) marginal product

11. Marginal product of labor and average product of labor are measured in
A) dollars
B) number of workers
C) units of output
D) profit gains and losses

12. For these next five problems, use the above table. Look at Lessons > Supplements > Cost and Product Math Practice for some great practice in doing this type of problem! Recall that we also did an additional sample problem in class. In Table B, what is the average product of labor when 3 workers are hired?
A) 24 sandwiches
B) 28 sandwiches
C) 72 sandwiches
D) 136 sandwiches

13. In Table B, what is the marginal product of labor for the 4th worker?
A) 72 sandwiches
B) 116 sandwiches
C) 44 sandwiches
D) 29 sandwiches

14. In Table B, diminishing MPL begins with which worker? In other words, which is the first worker who adds less output than the previous worker?
A) first worker
B) second worker
C) third worker
D) fourth worker
E) fifth worker
F) sixth worker
G) seventh worker
H) eighth worker
I) we do not see diminishing MPL in the table yet.

15. In Table B, assume all workers get paid the same wage rate of w = $200. Assume that there are no costs associated with capital (TFC = 0).Which of the following is true?
A) The marginal cost of sandwiches made by the 2nd worker is approximately $7.14.
B) The sandwich with the lowest marginal cost was made by worker #5.
C) The marginal cost of sandwiches will decrease when L increases from 3 to 4
D) The marginal cost of sandwiches made by the 6th worker is approximately $5.55.
E) The marginal cost of all sandwiches is the same.
F) Both [A] and [D] are true.

16. In Table B, assume all workers get paid the same wage rate of w = $200. Assume that there are no costs associated with capital (TFC = 0).Which of the following is true?
A) The average cost of sandwiches will always decrease when we hire more workers since we are spreading overhead costs
B) The average cost of sandwiches begins to increase with worker #4
C) The average cost of sandwiches is minimized when L = 6
D) The average cost of sandwiches is $7 when 7 workers are employed
E) The average cost of sandwiches is $5 when 5 workers are employed

17. The amount of calendar time associated with the long run
A) is less than five years.
B) is greater than one year.
C) is between one and five years.
D) varies by industry.

18. If Microsoft is determining whether to build a new plant in Southern California or in New Mexico, it is making a(n) ________ decision.
A) immediate-run
B) long-run
C) short-run
D) variable-input

19. Use the above figure. The ATC at output 10 is
A) $30.00
B) $10.00
C) $2.00
D) $3.00

20. Use the above figure. The AFC at output level 10 is
A) $3
B) $2
C) $1
D) $10

21. Fred's Franks originally sold hotdogs and soft drinks from a cart located in front of City Hall. Then Fred purchased another hotdog cart and hired someone to sell hotdogs and soft drinks near the high school. Both locations have been successful. When Fred's Franks expanded to two locations, which of the following did NOT occur?
A) Fred's production function changed.
B) Production increased.
C) The company increased the inputs it employs.
D) The firm employed additional capital.

22. At an output at which MC is greater than ATC
A) the ATC curve is downward sloping.
B) the ATC curve is upward sloping.
C) the AFC curve is upward sloping.
D) the AVC curve is downward sloping.

23. Marginal cost is equal to average variable cost
A) when average variable cost is at its minimum value.
B) when marginal cost is at its minimum value.
C) when average variable cost is getting smaller.
D) when average variable cost is getting larger.

24. Which of the following is NOT correct?
A) MC = change in TC/change in Q
B) ATC = TC/Q
C) AVC = TVC/Q
D) ATC + AVC = AFC

25. As long as marginal product of labor exceeds the average product of labor, then average product of labor
A) must fall.
B) must rise.
C) will stay unchanged.
D) will be at its maximum value.

26. Which of the following is a long-run adjustment?
A) A restaurant hires a new chef.
B) A company builds a new manufacturing plant.
C) A bank hires a new CEO.
D) A company hires ten new management trainees.

27. All of the following are reasons for economies of scale EXCEPT
A) increasing marginal product in the short run
B) specialization of labor and capital inputs
C) firms taking advantage of larger volume equipment

28. Which of the following statements is true?
A) Total costs remain constant with output growth if the firm is experiencing constant returns to scale
B) No firm would ever operate at a level of output for which it experiences diseconomies of scale
C) A firm can experience diminishing marginal product of labor with a given amount of capital but increase capital to experience economies of scale
D) Diseconomies of scale is a short-run concept, while economies of scale is a long-run concept

29. Minimum efficient scale
A) is the point at which economies of scale begin for a particular firm.
B) is the lowest rate of output per unit of time at which long-run average costs reach a minimum for a particular firm.
C) applies only to firms with U-shaped long-run average cost curves.
D) is the point at which diseconomies of scale begin for a particular firm.

30. When the minimum efficient scale occurs at a high level of industry output
A) the firms in the industry will be producing in the diseconomies of scale portion of the curve.
B) there will be a lot firms in the industry.
C) the government will have to take over the production of the good since it will be unprofitable for firms.
D) there will only be a small number of firms in the industry

31. Regarding consumption of health care in the United States, which of the following is true?
A) The amount of smoking, obesity, and sedentary lifestyles have all decreased in the couple of decades
B) People generally consume health care in the same way whether or not they have insurance
C) Our country's average age is increasing, and older people consume more health care
D) Doctors are required by law to charge the lowest price to consumers who don't have insurance
E) all of the above