ECON 528 MIDTERM EXAM QUESTIONS AND ANSWERS
According to the profit-maximization goal, the firm should attempt to maximize short-run profits since
there is too much uncertainty associated with long-run profits. - CORRECT ANSWER✅✅. False
If Melissa owns a software company that incurs no fixed costs, then - CORRECT ANSWER✅✅her total
cost equals her total variable cost
In the short run, a firm cannot change the amount of capital it uses. Therefore the cost of capital is a -
CORRECT ANSWER✅✅fixed cost.
Because the amount of labor a firm employs can be changed, the cost of labor is known as - CORRECT
ANSWER✅✅variable cost.
Marginal cost equals - CORRECT ANSWER✅✅the change in total cost that results from a one-unit
increase in output
A factor of production that can be easily changed in the relevant time period is called a: - CORRECT
ANSWER✅✅variable input.
Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio." Membership at
his fitness center is very low and at this rate, Adam needs an additional $12,000 per year to keep his
studio open. Which of the following is true?
a. The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll
need to continue operations is a marginal cost.
b. The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to
continue operations is a variable cost. Correct
c. The variable cost of running the studio is $22,000.
d. The fixed cost of running the studio is $22,000. - CORRECT ANSWER✅✅The $10,000 Adam spent on
equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable
cost.
Which of the following is the best example of a short run adjustment?
, a. Your local Wal-Mart hires two more associates.
b. Toyota builds a new assembly plant in Texas.
c. Smith University completed negotiations to acquire a large piece of land to build its new library.
d. A local bakery purchases another commercial oven as part of its capacity expansion. - CORRECT
ANSWER✅✅Your local Wal-Mart hires two more associates.
Academic book publishers hire editors, designers, and production and marketing managers who help
prepare books for publication. Because these employees work on several books simultaneously, the
number of people the company hires will not go up and down with the quantity of books the company
publishes during any particular year. The salaries and benefits of people in these job categories will be
included in - CORRECT ANSWER✅✅fixed cost and total cost but not variable cost.
If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, the
firm - CORRECT ANSWER✅✅should shut down.
the economic short run - CORRECT ANSWER✅✅It is a period during which at least one of the firm's
inputs is fixed.
A change in all of the following variables will change the market demand for a product except
a. tastes.
b. population and demographics.
c. the price of the product.
d. income. - CORRECT ANSWER✅✅the price of the product.
If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall
significantly over the long run because - CORRECT ANSWER✅✅buyers of steel are more sensitive to a
price change if they have more time to adjust to the price change
A change in which variable will change the market demand for a product?
A) the price of the product
B) population
C) technology
According to the profit-maximization goal, the firm should attempt to maximize short-run profits since
there is too much uncertainty associated with long-run profits. - CORRECT ANSWER✅✅. False
If Melissa owns a software company that incurs no fixed costs, then - CORRECT ANSWER✅✅her total
cost equals her total variable cost
In the short run, a firm cannot change the amount of capital it uses. Therefore the cost of capital is a -
CORRECT ANSWER✅✅fixed cost.
Because the amount of labor a firm employs can be changed, the cost of labor is known as - CORRECT
ANSWER✅✅variable cost.
Marginal cost equals - CORRECT ANSWER✅✅the change in total cost that results from a one-unit
increase in output
A factor of production that can be easily changed in the relevant time period is called a: - CORRECT
ANSWER✅✅variable input.
Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio." Membership at
his fitness center is very low and at this rate, Adam needs an additional $12,000 per year to keep his
studio open. Which of the following is true?
a. The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll
need to continue operations is a marginal cost.
b. The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to
continue operations is a variable cost. Correct
c. The variable cost of running the studio is $22,000.
d. The fixed cost of running the studio is $22,000. - CORRECT ANSWER✅✅The $10,000 Adam spent on
equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable
cost.
Which of the following is the best example of a short run adjustment?
, a. Your local Wal-Mart hires two more associates.
b. Toyota builds a new assembly plant in Texas.
c. Smith University completed negotiations to acquire a large piece of land to build its new library.
d. A local bakery purchases another commercial oven as part of its capacity expansion. - CORRECT
ANSWER✅✅Your local Wal-Mart hires two more associates.
Academic book publishers hire editors, designers, and production and marketing managers who help
prepare books for publication. Because these employees work on several books simultaneously, the
number of people the company hires will not go up and down with the quantity of books the company
publishes during any particular year. The salaries and benefits of people in these job categories will be
included in - CORRECT ANSWER✅✅fixed cost and total cost but not variable cost.
If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, the
firm - CORRECT ANSWER✅✅should shut down.
the economic short run - CORRECT ANSWER✅✅It is a period during which at least one of the firm's
inputs is fixed.
A change in all of the following variables will change the market demand for a product except
a. tastes.
b. population and demographics.
c. the price of the product.
d. income. - CORRECT ANSWER✅✅the price of the product.
If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall
significantly over the long run because - CORRECT ANSWER✅✅buyers of steel are more sensitive to a
price change if they have more time to adjust to the price change
A change in which variable will change the market demand for a product?
A) the price of the product
B) population
C) technology
