Principles of Microeconomics Exam 3
Chapters 13-14 (Questions and Answers)
The amount of money that a firm receives from the sale of its output is called - total revenue
Total revenue equals - total output multiplied by price per unit of output
explicit costs - 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 - 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 - 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 - 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 - (i) and (ii)
accounting profit is equal to
(i) total revenue - implicit costs
(ii) total revenue - opportunity costs
(iii) economic profit + implicit costs - (iii) only
Economic profit - will never exceed accounting profit
Economists normally assume that the goal of a firm is to - maximize its profit
a production function is a relationship between - inputs and quantity of output
the marginal product of labor is equal to the - increase in output obtained from a one unit increase in
labor
one would expect to observe diminishing marginal product of labor when - 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 - 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? - 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 -
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. - a. 8 units of output
Fixed costs can be defined as costs that - are incurred even if nothing is produced
average total cost is equal to - total cost/output
Chapters 13-14 (Questions and Answers)
The amount of money that a firm receives from the sale of its output is called - total revenue
Total revenue equals - total output multiplied by price per unit of output
explicit costs - 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 - 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 - 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 - 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 - (i) and (ii)
accounting profit is equal to
(i) total revenue - implicit costs
(ii) total revenue - opportunity costs
(iii) economic profit + implicit costs - (iii) only
Economic profit - will never exceed accounting profit
Economists normally assume that the goal of a firm is to - maximize its profit
a production function is a relationship between - inputs and quantity of output
the marginal product of labor is equal to the - increase in output obtained from a one unit increase in
labor
one would expect to observe diminishing marginal product of labor when - 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 - 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? - 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 -
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. - a. 8 units of output
Fixed costs can be defined as costs that - are incurred even if nothing is produced
average total cost is equal to - total cost/output
