1. Which of the following is most likely to be an implicit cost for Company X?
A. forgone rent from the building owned and used by Company X
B. rental payments on IBM equipment
C. payments for raw materials purchased from Company Y
D. transportation costs paid to a nearby trucking firm
2. To the economist, total cost includes:
A. explicit and implicit costs, including a normal profit.
B. neither implicit nor explicit costs.
C. implicit, but not explicit, costs.
D. explicit, but not implicit, costs.
3. Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were:
A. $100,000 and its economic profits were zero.
B. $200,000 and its economic profits were zero.
C. $100,000 and its economic profits were $100,000.
D. zero and its economic loss was $200,000.
4. Which of the following is a short-run adjustment?
A. A local bakery hires two additional bakers.
B. Six new firms enter the plastics industry.
C. The number of farms in the United States declines by 5 percent.
D. BMW constructs a new assembly plant in South Carolina.
5. The short run is characterized by:
A. plenty of time for firms to either enter or leave the industry.
B. increasing, but not diminishing returns.
C. fixed plant capacity.
D. zero fixed costs.
6. The law of diminishing returns indicates that:
A. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.
B. because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped.
C. the demand for goods produced by purely competitive industries is downsloping.
D. beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.
Answer the question on the basis of the following output data for a firm. Assume that the amounts of all non-labor resources are fixed.
7. Refer to the above data. Diminishing marginal returns become evident with the addition of the:
A. sixth worker.
B. fourth worker.
C. third worker.
D. second worker.
8. Refer to the above data. The marginal product of the sixth worker is:
A. 180 units of output.
B. 30 units of output.
C. 15 units of output.
D. negative.