ECON 2102 Exam #2 Questions and Answers Already Passed Latest Update 2025-2026
A production function shows - Answers How a firm's production changes as quantity of labor
and other inputs changes.
A production function shows the - Answers Maximum output that can be produced with varying
combinations of factor inputs.
The period in which at least one input is fixed in quantity is the - Answers Short run.
The short-run production function shows how output changes when - Answers The quantity of
labor changes.
The marginal physical product is the - Answers Change in total output associated with one
additional unit of the variable input.
If a firm could hire all the workers it wanted at a zero wage (i.e., the workers are volunteers), the
firm should hire - Answers Enough workers to produce where the MPP equals zero.
The change in total output associated with one additional unit of input is the - Answers Marginal
physical product.
Diminishing returns occur because - Answers A firm increases the amount of a variable input
without changing a fixed input.
In the short run, the law of diminishing returns - Answers Can be observed in every production
process.
Which of the following is the best explanation of why the law of diminishing returns does not
apply in the long run? - Answers In the long run, firms can increase the availability of space and
equipment to keep up with the increase in variable inputs.
If an additional unit of labor costs $20 and has a MPP of 15 units of output, the marginal cost is
- Answers $1.33.
If the marginal physical product (MPP) is falling, then the - Answers Marginal cost of each unit
of output is rising.
Marginal cost - Answers Rises as a direct result of diminishing returns.
Which of the following costs do not change when output changes in the short run?
In the short run, when a firm produces zero output, total cost equals - Answers Fixed costs.
Marginal cost is equal to - Answers The change in total costs divided by the change in quantity
produced.
At any given rate of output, the difference between total cost and fixed cost is
, Changes in short-run total costs result from changes in - Answers Variable cost.
The marginal cost curve intersects the minimum of the curve representing - Answers ATC.
Average total cost is important to a business because - Answers It tells the firm what the profit
per unit produced is.
If the marginal cost curve is rising, which of the following must be true? - Answers Total costs
must be rising.
A U-shaped average total cost curve implies - Answers First marginal cost below average total
cost, and then marginal cost above average total cost.
The average fixed cost (AFC) curve - Answers Declines as long as output increases.
Accounting costs and economic costs differ because - Answers Economic costs include
implicit costs and accounting costs do not.
Economic costs include the opportunity costs of all resources used, while accounting costs
include actual dollar outlays.
Economic cost - Answers Includes both implicit and explicit costs.
Which of the following statements about the relationship between economic costs and
accounting costs is true? - Answers Accounting costs are always less than or equal to
economic costs.
The most desirable rate of output for a firm is the output that - Answers Maximizes total profit.
A firm that makes zero economic profits - Answers Covers all its costs, including a provision for
normal profit.
Normal profit - Answers Covers the full opportunity cost of the resources used by the firm.
Normal profit implies that - Answers The factors employed are earning as much as they could in
the best alternative employment.
Which of the following should not be included when calculating accounting profit? - Answers
The return on the next best alternative investment opportunity.
Suppose a firm has an annual budget of $200,000 in wages and salaries, $75,000 in materials,
$30,000 in new equipment, $20,000 in rented property, and $35,000 in interest costs on capital.
The owner/manager does not choose to pay himself, but he could receive income of $90,000 by
working elsewhere. The firm earns revenues of $360,000 per year. What is the accounting profit
for the firm described above? - Answers $0.
Suppose a firm has an annual budget of $200,000 in wages and salaries, $75,000 in materials,
A production function shows - Answers How a firm's production changes as quantity of labor
and other inputs changes.
A production function shows the - Answers Maximum output that can be produced with varying
combinations of factor inputs.
The period in which at least one input is fixed in quantity is the - Answers Short run.
The short-run production function shows how output changes when - Answers The quantity of
labor changes.
The marginal physical product is the - Answers Change in total output associated with one
additional unit of the variable input.
If a firm could hire all the workers it wanted at a zero wage (i.e., the workers are volunteers), the
firm should hire - Answers Enough workers to produce where the MPP equals zero.
The change in total output associated with one additional unit of input is the - Answers Marginal
physical product.
Diminishing returns occur because - Answers A firm increases the amount of a variable input
without changing a fixed input.
In the short run, the law of diminishing returns - Answers Can be observed in every production
process.
Which of the following is the best explanation of why the law of diminishing returns does not
apply in the long run? - Answers In the long run, firms can increase the availability of space and
equipment to keep up with the increase in variable inputs.
If an additional unit of labor costs $20 and has a MPP of 15 units of output, the marginal cost is
- Answers $1.33.
If the marginal physical product (MPP) is falling, then the - Answers Marginal cost of each unit
of output is rising.
Marginal cost - Answers Rises as a direct result of diminishing returns.
Which of the following costs do not change when output changes in the short run?
In the short run, when a firm produces zero output, total cost equals - Answers Fixed costs.
Marginal cost is equal to - Answers The change in total costs divided by the change in quantity
produced.
At any given rate of output, the difference between total cost and fixed cost is
, Changes in short-run total costs result from changes in - Answers Variable cost.
The marginal cost curve intersects the minimum of the curve representing - Answers ATC.
Average total cost is important to a business because - Answers It tells the firm what the profit
per unit produced is.
If the marginal cost curve is rising, which of the following must be true? - Answers Total costs
must be rising.
A U-shaped average total cost curve implies - Answers First marginal cost below average total
cost, and then marginal cost above average total cost.
The average fixed cost (AFC) curve - Answers Declines as long as output increases.
Accounting costs and economic costs differ because - Answers Economic costs include
implicit costs and accounting costs do not.
Economic costs include the opportunity costs of all resources used, while accounting costs
include actual dollar outlays.
Economic cost - Answers Includes both implicit and explicit costs.
Which of the following statements about the relationship between economic costs and
accounting costs is true? - Answers Accounting costs are always less than or equal to
economic costs.
The most desirable rate of output for a firm is the output that - Answers Maximizes total profit.
A firm that makes zero economic profits - Answers Covers all its costs, including a provision for
normal profit.
Normal profit - Answers Covers the full opportunity cost of the resources used by the firm.
Normal profit implies that - Answers The factors employed are earning as much as they could in
the best alternative employment.
Which of the following should not be included when calculating accounting profit? - Answers
The return on the next best alternative investment opportunity.
Suppose a firm has an annual budget of $200,000 in wages and salaries, $75,000 in materials,
$30,000 in new equipment, $20,000 in rented property, and $35,000 in interest costs on capital.
The owner/manager does not choose to pay himself, but he could receive income of $90,000 by
working elsewhere. The firm earns revenues of $360,000 per year. What is the accounting profit
for the firm described above? - Answers $0.
Suppose a firm has an annual budget of $200,000 in wages and salaries, $75,000 in materials,
