ECO 202 Test 2 Study Guide 2 – Questions With
Complete Solutions
Harvey quit his job at State University where he earned $45,000 a year. He
figures his entrepreneurial talent or foregone entrepreneurial income to be
$5,000 a year. To start the business, he cashed in $100,000 in bonds that
earned 10 percent interest annually to buy a software company, Extreme
Gaming. In the first year, the firm sold 11,000 units of software at $75 for each
unit. Of the $75 per unit, $55 goes for the costs of production, packaging,
marketing, employee wages and benefits, and rent on a building.Refer to the
above information. The economic profits of Harvey's firm in the first year
were:
A.
$155,000
B.
$160,000
C.
$220,000
D.
$280,000 Right Ans - $160,000
If a firm's revenues just cover all its opportunity costs, then:
A.
Normal profit is zero
B.
Economic profit is zero
C.
Total revenues equal its explicit costs
D.
Total revenues equal its implicit costs Right Ans - Economic profit is zero
, Marginal product of labor refers to the:
A.
Last unit of output produced by labor at the end of each period
B.
Increase in output resulting from employing one more unit of labor
C.
Total output divided by the number of labor employed
D.
Smallest unit of the output produced by labor Right Ans - Increase in
output resulting from employing one more unit of labor
28.
Suppose a firm sells its product at a price lower than the opportunity cost of
the inputs used to produce it. Which of the following statements is definitely
true?
A.
The firm will earn positive accounting and economic profits
B.
The firm will face accounting and economic losses
C.
The firm will face an accounting loss, but earn positive economic profits
D.
The firm may earn positive accounting profits, but will face economic losses
Right Ans - The firm may earn positive accounting profits, but will face
economic losses
The law of diminishing returns in a manufacturing plant of a fixed capacity
implies that, eventually, employing one:
A.
More worker will increase the average amount of output per worker
B.
More worker will decrease the average amount of output per worker
C.
Complete Solutions
Harvey quit his job at State University where he earned $45,000 a year. He
figures his entrepreneurial talent or foregone entrepreneurial income to be
$5,000 a year. To start the business, he cashed in $100,000 in bonds that
earned 10 percent interest annually to buy a software company, Extreme
Gaming. In the first year, the firm sold 11,000 units of software at $75 for each
unit. Of the $75 per unit, $55 goes for the costs of production, packaging,
marketing, employee wages and benefits, and rent on a building.Refer to the
above information. The economic profits of Harvey's firm in the first year
were:
A.
$155,000
B.
$160,000
C.
$220,000
D.
$280,000 Right Ans - $160,000
If a firm's revenues just cover all its opportunity costs, then:
A.
Normal profit is zero
B.
Economic profit is zero
C.
Total revenues equal its explicit costs
D.
Total revenues equal its implicit costs Right Ans - Economic profit is zero
, Marginal product of labor refers to the:
A.
Last unit of output produced by labor at the end of each period
B.
Increase in output resulting from employing one more unit of labor
C.
Total output divided by the number of labor employed
D.
Smallest unit of the output produced by labor Right Ans - Increase in
output resulting from employing one more unit of labor
28.
Suppose a firm sells its product at a price lower than the opportunity cost of
the inputs used to produce it. Which of the following statements is definitely
true?
A.
The firm will earn positive accounting and economic profits
B.
The firm will face accounting and economic losses
C.
The firm will face an accounting loss, but earn positive economic profits
D.
The firm may earn positive accounting profits, but will face economic losses
Right Ans - The firm may earn positive accounting profits, but will face
economic losses
The law of diminishing returns in a manufacturing plant of a fixed capacity
implies that, eventually, employing one:
A.
More worker will increase the average amount of output per worker
B.
More worker will decrease the average amount of output per worker
C.
