Ch 13 Exam Micro – Flashcards

An entrepreneur's motivation to start a business arises from a. an innate love for the type of business that he or she starts. , b. a desire to earn a profit. c. an altruistic desire to provide the world with a good product. ) , d. (All of the above could be correct.

The amount of money that a firm receives from the sale of its output is called a. total gross profit. b. total net profit. c. total revenue. d. netrevenue.

3. Carol Anne makes candles. If she charges $20 for each candle, her total revenue will be a. $1,000 if she sells 100 candles. b. $500 if she sells 25 candles. c. $20 regardless of how many candles she sells. d. $200 if she sells 5 candles.

4. The Three Amigo's company produced and sold 500 dog beds. The average cost of production per dog bed was $50. Each dog bed sold for a price of $65. The Three Amigo's total costs are a. $7,500. b. $25,000. c. $32,500. d. $67,500.

5. Trevor's Tire Company produced and sold 500 tires. The average cost of production per tire was $50. Each tire sold for a price of $65. Trevor's Tire Company's total profits are a. $7,500. b. $25,000. c. $32,500. d. $67,500.

6. Stick Storage manufactures and sells computer flash drives. Last year it sold 2 million flash drives at a price of $10 each. For last year, the firm's a. accounting profit was $20 million. b. economic profit was $20 million. c. total revenue was $20 million. d. explicit costs was $20 million.

7. Marcus sells 300 candy bars at $0.50 each. His total costs are $125. His profits are a. $25. b. $124.50. c. $125. d. $150.

8. Billy's Bean Bag Emporium produced 300 bean bag chairs but sold only 275 of the units it produced. The average cost of production for each unit of output produced was $100. The price for each of the 275 units sold was $95. Total profit for Billy's Bean Bag Emporium would be a. -$3,875. b. $26,125. c. $28,500. d. $30,000.

9. The things that must be forgone to acquire a good are called a. implicit costs. b. opportunity costs. c. explicit costs. d. accounting costs.

10. A firm's opportunity costs of production are equal to its a. explicit costs only. b. implicit costs only. c. explicit costs + implicit costs. d. explicit costs + implicit costs + total revenue

11. Gwen has decided to start her own photography studio. To purchase the necessary equipment, Gwen withdrew $2,000 from her savings account, which was earning 3% interest, and borrowed an additional $4,000 from the bank at an interest rate of 7%. What is Gwen's annual opportunity cost of the financial capital that has been invested in the business? a. $60 b. $280 c. $340 d. $660

12. An example of an opportunity cost that is also an implicit cost is a. a lease payment. b. the cost of raw materials. c. the value of the business owner's time. d. All of the above are correct.

13. Bev is opening her own court-reporting business. She financed the business by withdrawing money from her personal savings account. When she closed the account, the bank representative mentioned that she would have earned $300 in interest next year. If Bev hadn't opened her own business, she would have earned a salary of $25,000. In her first year, Bev's revenues were $30,000. Which of the following statements is correct? a. Bev's total explicit costs are $25,300. b. Bev's total implicit costs are $300. c. Bev's accounting profits exceed her economic profits by $300. d. Bev's economic profit is $4,700.

14. Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's costs. a. Tyler says his costs are $25,900, and Greg says his costs are $66,500. b. Tyler says his costs are $25,000, and Greg says his costs are $65,000. c. Tyler says his costs are $66,500, and Greg says his costs are $66,500. d. Tyler says his costs are $75,000, and Greg says his costs are $41,500.

15. Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's profit. a. Tyler says his profit is $25,900, and Greg says his profit is $66,500. b. Tyler says his profit is $35,000, and Greg says he lost $5,900. c. Tyler says his profit is $34,100, and Greg says he lost $6,500. d. Tyler says his profit is $34,100, and Greg says his profit is $34,100.

16. Which of these assumptions is often realistic for a firm in the short run? a. The firm can vary both the size of its factory and the number of workers it employs. b. The firm can vary the size of its factory but not the number of workers it employs. c. The firm can vary the number of workers it employs but not the size of its factory. d. The firm can vary neither the size of its factory nor the number of workers it employs.

17. Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers a. both labor and capital to be fixed. b. both labor and capital to be variable. c. labor to be variable and capital to be fixed. d. capital to be variable and labor to be fixed.

22. Bubba is a shrimp fisherman who can catch 4,000 pounds of shrimp per year. Bubba is considering hiring his cousin Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per year. If Bubba hires Bobby, what will be the total output of his shrimp business? a. 7,000 pounds b. 3,500 pounds c. 3,000 pounds d. 1,000 pounds

23. Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. Together Kate and William can arrange 35 bouquets per day. What is William's marginal product? a. 55 bouquets b. 35 bouquets c. 22.5 bouquets d. 15 bouquets

24. Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 181 units of output per day when 16 workers are hired, holding other inputs fixed. The marginal product of the 16th worker is a. 10 units of output. b. 11 units of output. c. 16 units of output. d. 181 units of output.

35. As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters a. economies of scale. b. diseconomies of scale. c. increasing marginal product. d. diminishing marginal product.

43. The nature of a firm's cost (fixed or variable) depends on the a. firm's revenues. b. time horizon under consideration. c. price the firm charges for output. d. explicit but not implicit costs.

44. In the long run a company that produces and sells popcorn incurs total costs of $1,050 when output is 90 canisters and $1,200 when output is 120 canisters. The popcorn company exhibits a. diseconomies of scale because total cost is rising as output rises. b. diseconomies of scale because average total cost is rising as output rises. c. economies of scale because total cost is rising as output rises. d. economies of scale because average total cost is falling as output rises.

45. Since the 1980s, Wal-Mart stores have appeared in almost every community in America. Wal-Mart buys its goods in large quantities and, therefore, at cheaper prices. Wal-Mart also locates its stores where land prices are low, usually outside of the community business district. Many customers shop at Wal-Mart because of low prices. Local retailers, like the neighborhood drug store, often go out of business because they lose customers. This story demonstrates that a. consumers do not react to changing prices. b. there are diseconomies of scale in retail sales. c. there are economies of scale in retail sales. d. there are diminishing returns to producing and selling retail goods.

46. The Big Blue Sky jet company has long-run total costs of $20 million if it produces 5 jets and long-run total costs of $24 million if it produces 6 jets. The Big Blue Sky jet company is experiencing a. economies of scale. b. constant returns to scale. c. diseconomies of scale. d. negative profits

47. Constant returns to scale occur when the firm's longrun a. total costs are constant as output increases. b. average total costs are constant as output increases. c. average cost curve is falling as output increases. d. average cost curve is rising as output increases

48. In the long run, when marginal cost is above average total cost, the average total cost curve exhibits a. economies of scale. b. diseconomies of scale. c. constant returns to scale. d. efficient scale.

49. In the long run a company that produces and sells organic tofu incurs total costs of $1,200 when output is 1,200 units and $1,650 when output is 1,400 units. The tofu company exhibits a. diseconomies of scale because total cost is rising as output rises. b. diseconomies of scale because average total cost is rising as output rises. c. economies of scale because total cost is rising as output rises. d. economies of scale because average total cost is falling as output rises.