1. The costs of production do NOT include:

A) Wages

B) The Opportunity costs forgone by producing a given product

C) Costs of Purchase Capital

D) All of the above are costs of production

2. If the cross-price elasticity between ketchup and hamburgers is ?1.5, a 2 percent decrease in the price of ketchup will lead to a:

A) 3% increase in quantity demanded of ketchup

B) 3% decrease in quantity demanded of ketchup

C) 3% increase in quantity demanded of hamburgers

D) 3% decrease in quantity demanded of ketchup

3. An excise tax of $2.00 per pound of sugar placed on the suppliers of sugar would shift the supply curve:

A) Down by 20%

B) Down by more than $2.00

C) Up by $2.00

D) Up by less than $2.00

4. Suppose the production function is given by Q = 10K + 8L. What is the average product of capital when 2 units of capital and 10 units of labor are employed?

A) 10

B) 8

C) 50

D) 18

5. Suppose market demand and supply are given by Qd = 100 – 2P and QS = –50 + 3P. The equilibrium quantity is:

A) 40

B) 20

C) 30

D) 50

6. The main reason firms may exit a market is because of:

A) The lack of economic profits

B) Decreased technology

C) Expensive labor

D) High capital costs

7. Which of the following is an implicit cost to a firm that produces shoes?

A) Wages paid to workers making the shoes

B) Costs of operating production machinery

C) Foregone profits of producing shirts

D) Cost of renting the shoe factory

8. Larger firms produce a product at larger average cost than small firms when:

A) Economies of scope exist

B) Diseconomies of scale exist

C) Economies of scale exist

D) Cost complementarities exist