BE 301 Midterm 1 Exam Questions with Correct Answers Latest Update 2025/2026
Variable costs are
a) costs that vary with output
b) not important in decision making
c) costs that do not vary with output
d) equal to total costs - Answers a) costs that vary with output
For substitutes, cross price elasticity of demand is:
a) Negative
b) Positive
c) between zero and one only
d) zero - Answers b) Positive
At the current level of production, if the firm's MR>MC, then the firm should
a) produce more
b) the company is maximizing profit at this output
c) produce less
d) None of the above - Answers a) produce more
A business incurs the following costs per unit: Labor $5 unit; Materials $3/unit and Rent
$5000/month. IF the firm produces 1000 units a month, the total cost equals
a) $5,000
b) $8,000
c) $13,000
d) $3,000 - Answers c) $13,000
Jim is planning on attending a football game. He spent $40 on the ticket. He will have to take
the day off losing 8 hours of work. His hourly wage is $10. He estimates it will cost him around
$20 for gas and parking at the game. Jim's total economic cost of attending the game equals
a) $80
b) $40
, c) $140 - Answers c) $140
An owner of a local salon realized that by decreasing the prices that she charges for haircuts,
her revenue has increased. This implies that
a) The demand for her haircuts is elastic
b) The demand for her haircuts is inelastic
c) The demand for haircuts at all salons is elastic
d) The demand for haircuts and all salons is inelastic - Answers a) The demand for her haircuts
is elastic
The opportunity cost of an action:
a) is equal to the marginal cost of an action
b) is equal to explicit cost
c) is equal to the cost of the next best alternative forgone
d) is the total cost of an action - Answers c) is equal to the cost of the next best alternative
forgone
You go to see a movie that you believe would turn out to be amazing. The ticket costs you $20.
Once in the theatre you realize that the movie is awful. If you leave now, you can still catch your
favorite TV show. What should you do?
a) Stay and watch the movie since you paid $20 for it
b) The ticket price is now a sunk cost, you can ignore it and go home
c) Stay and watch the movie since the opportunity cost of the movie is zero
D) None of the above - Answers b) The ticket price is now a sunk cost, you can ignore it and go
home
When economists speak of "marginal", they mean
a) Opportunity
b) Scarcity
c) Incremental
d) Unimportant - Answers c) Incremental
Which of the following is FALSE?
Variable costs are
a) costs that vary with output
b) not important in decision making
c) costs that do not vary with output
d) equal to total costs - Answers a) costs that vary with output
For substitutes, cross price elasticity of demand is:
a) Negative
b) Positive
c) between zero and one only
d) zero - Answers b) Positive
At the current level of production, if the firm's MR>MC, then the firm should
a) produce more
b) the company is maximizing profit at this output
c) produce less
d) None of the above - Answers a) produce more
A business incurs the following costs per unit: Labor $5 unit; Materials $3/unit and Rent
$5000/month. IF the firm produces 1000 units a month, the total cost equals
a) $5,000
b) $8,000
c) $13,000
d) $3,000 - Answers c) $13,000
Jim is planning on attending a football game. He spent $40 on the ticket. He will have to take
the day off losing 8 hours of work. His hourly wage is $10. He estimates it will cost him around
$20 for gas and parking at the game. Jim's total economic cost of attending the game equals
a) $80
b) $40
, c) $140 - Answers c) $140
An owner of a local salon realized that by decreasing the prices that she charges for haircuts,
her revenue has increased. This implies that
a) The demand for her haircuts is elastic
b) The demand for her haircuts is inelastic
c) The demand for haircuts at all salons is elastic
d) The demand for haircuts and all salons is inelastic - Answers a) The demand for her haircuts
is elastic
The opportunity cost of an action:
a) is equal to the marginal cost of an action
b) is equal to explicit cost
c) is equal to the cost of the next best alternative forgone
d) is the total cost of an action - Answers c) is equal to the cost of the next best alternative
forgone
You go to see a movie that you believe would turn out to be amazing. The ticket costs you $20.
Once in the theatre you realize that the movie is awful. If you leave now, you can still catch your
favorite TV show. What should you do?
a) Stay and watch the movie since you paid $20 for it
b) The ticket price is now a sunk cost, you can ignore it and go home
c) Stay and watch the movie since the opportunity cost of the movie is zero
D) None of the above - Answers b) The ticket price is now a sunk cost, you can ignore it and go
home
When economists speak of "marginal", they mean
a) Opportunity
b) Scarcity
c) Incremental
d) Unimportant - Answers c) Incremental
Which of the following is FALSE?
