ECON 201 WVU FINAL STUDY GUIDE 2026
TESTED 64 QUESTIONS WITH CORRECT
ANSWERS GRADED A+
⩥ A price-taking firm produces rubber balls. When the price of rubber
balls is below the firm's minimum
average total cost, but above the firm's minimum average variable cost,
the firm
a. will experience losses but it will continue to produce rubber balls in
the short run.
b. will shut down in the short run.
c. will be earning both economic and accounting profits.
d. should raise the price of its product. Answer: d. should raise the price
of its product.
⩥ 7. The irrelevance of sunk costs is best described by which of the
following business decisions?
a. New airlines enter the market and earn accounting profits.
b. Airlines continue to sell tickets even though they are reporting large
losses.
c. Airlines exit the market when they report losses.
d. All of the above are correct. Answer: b. Airlines continue to sell
tickets even though they are reporting large losses.
,⩥ One of the most important determinants of the success of free-market
capitalism is
a. enlightened governments selecting firms that should not be allowed to
exit a market.
b. free entry and exit in markets.
c. government regulation of market participants.
d. having a few large firms rather than thousands of small ones. Answer:
b. free entry and exit in markets.
⩥ When new firms have an incentive to enter a competitive market, their
entry will
a. increase the price of the product.
b. drive down profits of existing firms in the market.
c. shift the market supply curve to the left.
d. All of the above are correct Answer: b. drive down profits of existing
firms in the market.
⩥ Which of the following is an implicit cost of owning a business?
(i) interest expense on existing business loans
(ii) forgone savings account interest when personal money is invested in
the business
(iii) damaged or lost inventory
a. (i) only
, b. (ii) only
c. (i) and (ii)
d. All of the above are correct. Answer: b. (ii) only
⩥ Economists normally assume that the goal of a firm is to
a. maximize its total revenue. b. maximize its profit.
b. maximize its profit.
c. minimize its explicit costs.
d. minimize its total cost. Answer: b. maximize its profit.
⩥ The marginal product of labor can be defined as
a. change in profit/change in labor.
b. change in output/change in labor.
c. change in labor/change in output.
d. change in labor/change in total cost. Answer: b. change in
output/change in labor.
⩥ 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.
TESTED 64 QUESTIONS WITH CORRECT
ANSWERS GRADED A+
⩥ A price-taking firm produces rubber balls. When the price of rubber
balls is below the firm's minimum
average total cost, but above the firm's minimum average variable cost,
the firm
a. will experience losses but it will continue to produce rubber balls in
the short run.
b. will shut down in the short run.
c. will be earning both economic and accounting profits.
d. should raise the price of its product. Answer: d. should raise the price
of its product.
⩥ 7. The irrelevance of sunk costs is best described by which of the
following business decisions?
a. New airlines enter the market and earn accounting profits.
b. Airlines continue to sell tickets even though they are reporting large
losses.
c. Airlines exit the market when they report losses.
d. All of the above are correct. Answer: b. Airlines continue to sell
tickets even though they are reporting large losses.
,⩥ One of the most important determinants of the success of free-market
capitalism is
a. enlightened governments selecting firms that should not be allowed to
exit a market.
b. free entry and exit in markets.
c. government regulation of market participants.
d. having a few large firms rather than thousands of small ones. Answer:
b. free entry and exit in markets.
⩥ When new firms have an incentive to enter a competitive market, their
entry will
a. increase the price of the product.
b. drive down profits of existing firms in the market.
c. shift the market supply curve to the left.
d. All of the above are correct Answer: b. drive down profits of existing
firms in the market.
⩥ Which of the following is an implicit cost of owning a business?
(i) interest expense on existing business loans
(ii) forgone savings account interest when personal money is invested in
the business
(iii) damaged or lost inventory
a. (i) only
, b. (ii) only
c. (i) and (ii)
d. All of the above are correct. Answer: b. (ii) only
⩥ Economists normally assume that the goal of a firm is to
a. maximize its total revenue. b. maximize its profit.
b. maximize its profit.
c. minimize its explicit costs.
d. minimize its total cost. Answer: b. maximize its profit.
⩥ The marginal product of labor can be defined as
a. change in profit/change in labor.
b. change in output/change in labor.
c. change in labor/change in output.
d. change in labor/change in total cost. Answer: b. change in
output/change in labor.
⩥ 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.
