1. Implicit costs are:

A. "Payments" for self-employed resources that could be in alternative activities
B. Comprised entirely of variable costs
C. Equal to total fixed costs
D. Always greater in the short run than in the long run

2. Cash expenditures a firm makes to pay for resources are called:

A. Implicit costs
B. Explicit costs
C. Opportunity costs

3. Suppose one worker can produce 15 cookies, two workers can produce 35 cookies together, and three works can produce 65 cookies together. What is the marginal product of the 3rd workers?
A. 21.65 cookies
B. 30 cookies
C. 35 cookies

4. If a firm is currently producing 1,000 units of output, and Average Variable Cost (AVC) is $1.00 per unit, and Total Fixed Cost (TFC) is $500, what is the firm's Total Cost?
A. $1,500
B. $1,000
C. $501
D. $499

5. Economies and diseconomies of scale explain:
A. The profit-maximizing level of production.
B. Why the firm's long-run average total cost curve is U-shaped.
C. Why the firm's short-run marginal cost curve cuts the short-run average variable cost
curve at its minimum point.

6. When diseconomies of scale occur:
A. The long-run average total cost curve falls.
B. Marginal cost intersects average total cost.
C. The long-run average total cost curve rises.
D. Average fixed costs will rise.

7. When a firm doubles its inputs and finds that its output has more than doubled, this is known as:
A. Economies of scale
B. Constant returns to scale
C. Diseconomies of scale
D. A violation of the law of diminishing returns

8. For a purely competitive seller, price equals:
A. Consumer demand to the firm
B. Marginal revenue
C. Price of each unit produced
D. All of these

9. Refer to the graph above. When this firm produces at Q2, it has average variable costs of:
A. 0F
B. 0E
C. 0C
D. 0D

10. Refer to the graph above. At output level Q1, total variable cost is

A. 0F times Q1
B. 0D times Q2
C. 0F
D. 0F minus DF

11. The price elasticity of demand measures
A. How much the demand changes in response to a change in income
B. The consumers' sensitivity to a price change
C. The producers' sensitivity to a price change
D. How much the market price changes in response to a change in demand.

12. Six months ago, the price of wheat was $2.20 per bushel. Now the price is $2.40 per bushel. In response to this price increase, the number of bushels of wheat purchased has declined by 2 percent. Based on this information, what is the absolute price elasticity of demand for wheat.
A. 4.35
B. 1.20
C. 0.23
D. 0.10

13. If the absolute value of the price elasticity of demand for a product is greater than 1, then
A. Quantity demanded is not very sensitive to price changes
B. Demand is elastic
C. Demand is unit-elastic
D. Demand is inelastic

14. A firm could lower prices and still increase revenue if
A. Elasticity of demand is equal to zero
B. Demand is inelastic
C. Elasticity of demand is equal to unity
D. Demand is elastic

15. In the standard model of pure competition, a profit-maximizing entrepreneur will shut down in the short run if:
A. Marginal cost is greater than average revenue
B. Average cost is greater than average revenue
C. Average fixed cost is greater than average revenue
D. Total revenue is less than total variable costs

16. Marginal cost is equal to
A. Change in total cost divided by change in output
B. Total variable cost divided by quantity of output

17. Refer to the graph above. Profits will equal zero
A. When the price equals $1
B. When the price equals $2
C. When the price equals $4
D. When the price is between $1 and $2

18. Refer to the above graph. The firm's short-run shutdown price is
A. At $1
B. At $2
C. At $4
D. Above $4

19. If a perfectly competitive firm is producing at the MR = MC output level and earning
an economic profit, then:
A. The selling price for this firm is above the market equilibrium price.
B. New firms will likely enter this market.
C. Some existing firms in this market will leave.
D. There must be price fixing by the industry's firms.

20. In the above graph, what is the profit-maximizing output and price?
A. 8, $7
B. 10, $8
C. 12, $10
D. 10, $10

21. In the United States professional football players earn much higher incomes than professional soccer players. This occurs because:
A. Most football players are good soccer players while the reverse is not true.
B. Consumers have a greater demand for football games than for soccer games.
C. Football and soccer games are highly substitutable products for most consumers.
D. The marginal productivity of soccer players exceeds that of football players.

22. The high pay of superstars reflects:
A. Elastic product demand.
B. High marginal revenue productivity.
C. Blocked occupational entry
D. Warped societal values.

23. Increases in the productivity of labor result partly from:
A. The law of diminishing returns.
B. Improvements in technology.
C. Reduction in wage rates.