ECON 201 Final Exam Practice Test 2024 (Verified Answers)
1. Profit maximizing firms want to maximize the difference between
a. total revenue and total cost. b. marginal revenue and average cost.
c. total revenue and marginal cost. d. marginal revenue and marginal cost. - ✔️✔️-A
2. The difference between the firm's total revenues and total cost when all explicit and
implicit costs are included is the firm's
a. opportunity cost of capital. b. long run average total cost.
c. economic profit. d. accounting profit. - ✔️✔️-C
3) Which of the following is an example of something that economists would consider a
cost but accountants would not?
A) the wages paid to employees of a firm
B) the wages that the owner of a firm could have earned in some alternative job
C) rent paid to a business' landlord
D) the cost of leather used in the production of footballs - ✔️✔️-B
4) ________ is a cost that is independent of the quantity produced by the firm and is
incurred by the firm in the short run.
A) Fixed cost B) Economic cost
C) Variable cost D) Average total cost - ✔️✔️-A
5. Total variable costs
a. initially increase as output increases and then decrease.
b. initially decrease and then increase with output.
c. always decrease with output.
, d. always increase with output. - ✔️✔️-d
6. When an increase in a firm's scale of production leads to lower average costs, the
industry exhibits
a. diminishing returns. b. increasing returns to scale.
c. decreasing returns to scale. d. constant returns to scale. - ✔️✔️-b
7. When a firm becomes so large that it becomes difficult to manage in an efficient
manner, this is an example of
a. economies of scale. b. increasing returns to scale.
c .diseconomies of scale. d. constant returns to scale. - ✔️✔️-C
8. Engineers for The All-Terrain Bike Company have determined that a 10 % increase in
all inputs will cause a 10 % increase in output. Assuming that input prices remain
constant, you correctly deduce that such a change will cause ____ as output increases.
a. average costs to increase. b. average costs to decrease.
c. marginal costs to increase. d. average costs to remain constant. - ✔️✔️-D
9. Which of the following situation describes a short-run adjustment of a firm to
changing business conditions?
a. A baker works all night to prepare for a holiday rush.
b. A dentist buys more chairs in response to more patients in the waiting room.
c. A farmer buys more land.
d. All of the above. - ✔️✔️-a
10. Which of the following describes a long-run adjustment of a firm to changing
business conditions?
a. A dentist changes her hours to see more patients.
1. Profit maximizing firms want to maximize the difference between
a. total revenue and total cost. b. marginal revenue and average cost.
c. total revenue and marginal cost. d. marginal revenue and marginal cost. - ✔️✔️-A
2. The difference between the firm's total revenues and total cost when all explicit and
implicit costs are included is the firm's
a. opportunity cost of capital. b. long run average total cost.
c. economic profit. d. accounting profit. - ✔️✔️-C
3) Which of the following is an example of something that economists would consider a
cost but accountants would not?
A) the wages paid to employees of a firm
B) the wages that the owner of a firm could have earned in some alternative job
C) rent paid to a business' landlord
D) the cost of leather used in the production of footballs - ✔️✔️-B
4) ________ is a cost that is independent of the quantity produced by the firm and is
incurred by the firm in the short run.
A) Fixed cost B) Economic cost
C) Variable cost D) Average total cost - ✔️✔️-A
5. Total variable costs
a. initially increase as output increases and then decrease.
b. initially decrease and then increase with output.
c. always decrease with output.
, d. always increase with output. - ✔️✔️-d
6. When an increase in a firm's scale of production leads to lower average costs, the
industry exhibits
a. diminishing returns. b. increasing returns to scale.
c. decreasing returns to scale. d. constant returns to scale. - ✔️✔️-b
7. When a firm becomes so large that it becomes difficult to manage in an efficient
manner, this is an example of
a. economies of scale. b. increasing returns to scale.
c .diseconomies of scale. d. constant returns to scale. - ✔️✔️-C
8. Engineers for The All-Terrain Bike Company have determined that a 10 % increase in
all inputs will cause a 10 % increase in output. Assuming that input prices remain
constant, you correctly deduce that such a change will cause ____ as output increases.
a. average costs to increase. b. average costs to decrease.
c. marginal costs to increase. d. average costs to remain constant. - ✔️✔️-D
9. Which of the following situation describes a short-run adjustment of a firm to
changing business conditions?
a. A baker works all night to prepare for a holiday rush.
b. A dentist buys more chairs in response to more patients in the waiting room.
c. A farmer buys more land.
d. All of the above. - ✔️✔️-a
10. Which of the following describes a long-run adjustment of a firm to changing
business conditions?
a. A dentist changes her hours to see more patients.
