Principles of Microeconomics
EXAM QUESTIONS AND CORRECT
DETAILED ANSWERS 100% PASS
The amount of money that a firm receives from the sale of its output is called -
CORRECT ANSWER-total revenue
Total revenue equals - CORRECT ANSWER-total output multiplied by price per
unit of output
explicit costs - CORRECT ANSWER-require an outlay of money by the firm
Which of the following is an implicit cost?
(i) the owner of a firm forgoing an opportunity to earn a large salary working for a
Wall Street brokerage firm
(ii) interest paid on the firm's debt
(iii) rent paid by the firm to lease office space
a. (ii) and (iii)
,b. (i) and (iii)
c. (i) only
d. all of the above are correct - CORRECT ANSWER-c. (i) only
John owns a shoe-shine business. His accountant most likely includes which of the
following costs on his financial statements?
a. wages John could earn washing windows
b. dividends John's money was earning in the stock market before John sold his
stock and bought a shoe-shine booth
c. the cost of shoe polish
d. all of the above are correct - CORRECT ANSWER-c. the cost of shoe polish
The amount of money that a wheat farmer could have earned if he had planted
barley instead of wheat is - CORRECT ANSWER-an implicit cost
Economic profit is equal to
(i) total revenue - (explicit costs + implicit costs)
(ii) total revenue - opportunity costs
(iii) accounting profit + implicit costs - CORRECT ANSWER-(i) and (ii)
accounting profit is equal to
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,(i) total revenue - implicit costs
(ii) total revenue - opportunity costs
(iii) economic profit + implicit costs - CORRECT ANSWER-(iii) only
Economic profit - CORRECT ANSWER-will never exceed accounting profit
Economists normally assume that the goal of a firm is to - CORRECT ANSWER-
maximize its profit
a production function is a relationship between - CORRECT ANSWER-inputs
and quantity of output
the marginal product of labor is equal to the - CORRECT ANSWER-increase in
output obtained from a one unit increase in labor
one would expect to observe diminishing marginal product of labor when -
CORRECT ANSWER-crowded office space reduces the productivity of new
workers
Which of these assumption is often realistic for s 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 not the number of workers it
employs - CORRECT ANSWER-c. the firm can vary the number of workers it
employs, but not the size of its factory
For a certain firm, the number of workers hired is the only variable input. When
this firm's production function is illustrated on a graph? - CORRECT ANSWER-
the number of workers is measured on the horizontal axis and the quantity of
output is measured on the vertical axis
When a firm's only variable input is labor, then the slope of the production
function measures the - CORRECT ANSWER-marginal product of labor
Let L represent the number of workers hired by a firm, and let Q represent that
firm's quantity of output. Assume two points on the firm's production function are
(L = 12, Q = 122) and (L = 13, Q = 132). Then the marginal product of the 13th
worker is
a. 8 units of output.
b. 10 units of output.
c. 122 units of output.
d. 132 units of output. - CORRECT ANSWER-a. 8 units of output
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protected by copyright law
EXAM QUESTIONS AND CORRECT
DETAILED ANSWERS 100% PASS
The amount of money that a firm receives from the sale of its output is called -
CORRECT ANSWER-total revenue
Total revenue equals - CORRECT ANSWER-total output multiplied by price per
unit of output
explicit costs - CORRECT ANSWER-require an outlay of money by the firm
Which of the following is an implicit cost?
(i) the owner of a firm forgoing an opportunity to earn a large salary working for a
Wall Street brokerage firm
(ii) interest paid on the firm's debt
(iii) rent paid by the firm to lease office space
a. (ii) and (iii)
,b. (i) and (iii)
c. (i) only
d. all of the above are correct - CORRECT ANSWER-c. (i) only
John owns a shoe-shine business. His accountant most likely includes which of the
following costs on his financial statements?
a. wages John could earn washing windows
b. dividends John's money was earning in the stock market before John sold his
stock and bought a shoe-shine booth
c. the cost of shoe polish
d. all of the above are correct - CORRECT ANSWER-c. the cost of shoe polish
The amount of money that a wheat farmer could have earned if he had planted
barley instead of wheat is - CORRECT ANSWER-an implicit cost
Economic profit is equal to
(i) total revenue - (explicit costs + implicit costs)
(ii) total revenue - opportunity costs
(iii) accounting profit + implicit costs - CORRECT ANSWER-(i) and (ii)
accounting profit is equal to
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law
,(i) total revenue - implicit costs
(ii) total revenue - opportunity costs
(iii) economic profit + implicit costs - CORRECT ANSWER-(iii) only
Economic profit - CORRECT ANSWER-will never exceed accounting profit
Economists normally assume that the goal of a firm is to - CORRECT ANSWER-
maximize its profit
a production function is a relationship between - CORRECT ANSWER-inputs
and quantity of output
the marginal product of labor is equal to the - CORRECT ANSWER-increase in
output obtained from a one unit increase in labor
one would expect to observe diminishing marginal product of labor when -
CORRECT ANSWER-crowded office space reduces the productivity of new
workers
Which of these assumption is often realistic for s 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 not the number of workers it
employs - CORRECT ANSWER-c. the firm can vary the number of workers it
employs, but not the size of its factory
For a certain firm, the number of workers hired is the only variable input. When
this firm's production function is illustrated on a graph? - CORRECT ANSWER-
the number of workers is measured on the horizontal axis and the quantity of
output is measured on the vertical axis
When a firm's only variable input is labor, then the slope of the production
function measures the - CORRECT ANSWER-marginal product of labor
Let L represent the number of workers hired by a firm, and let Q represent that
firm's quantity of output. Assume two points on the firm's production function are
(L = 12, Q = 122) and (L = 13, Q = 132). Then the marginal product of the 13th
worker is
a. 8 units of output.
b. 10 units of output.
c. 122 units of output.
d. 132 units of output. - CORRECT ANSWER-a. 8 units of output
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law
