ECN 211 ASU EXAMINATION STUDY SHEET
2026 QUESTIONS WITH DETAILED
SOLUTIONS
◉In the short run, a firm cannot change the amount of capital it
uses. Therefore the cost of capital is a. Answer: fixed cost.
◉The law of decreasing returns states that as a firm uses more of a.
Answer: variable input, with a given quantity of fixed inputs, the
marginal product of the variable input eventually decreases.
◉Normal profit is a(n) ________ cost because ________.. Answer:
implicit; it represents the cost of not running another firm
◉A firm decreases its scale of operation and discovers that its long-
run average costs decrease. Which of the following does this
indicate?. Answer: The firm's scale initially was so large that it
experienced diseconomies of scale.
◉The marginal product of labor is the change in. Answer: total
output from employing one more worker.
, ◉Moving along the total product curve, which of the following is
held constant?. Answer: tech
◉Total cost includes. Answer: The cost of both variable and fixed
resources.
◉What does the long-run average cost curve show?. Answer: the
lowest average cost to produce each output level in the long run
◉As a typical firm increases its output, its marginal cost. Answer:
decreases at first and then increases.
◉Which of the following is an implicit cost in Jim's business
venture?
i. the salary Jim could have earned at another job
ii. the interest Jim must pay on the loan he incurred to help open his
business
iii. the interest Jim lost when he used his savings to help open his
business. Answer: i and iii
◉Dr. Khan starts his own dental practice after quitting his $150,000
job at The Mall Dental Clinic. His revenues for the first year are
$500,000. He paid $90,000 in rent for the dental office, $60,000 for
2026 QUESTIONS WITH DETAILED
SOLUTIONS
◉In the short run, a firm cannot change the amount of capital it
uses. Therefore the cost of capital is a. Answer: fixed cost.
◉The law of decreasing returns states that as a firm uses more of a.
Answer: variable input, with a given quantity of fixed inputs, the
marginal product of the variable input eventually decreases.
◉Normal profit is a(n) ________ cost because ________.. Answer:
implicit; it represents the cost of not running another firm
◉A firm decreases its scale of operation and discovers that its long-
run average costs decrease. Which of the following does this
indicate?. Answer: The firm's scale initially was so large that it
experienced diseconomies of scale.
◉The marginal product of labor is the change in. Answer: total
output from employing one more worker.
, ◉Moving along the total product curve, which of the following is
held constant?. Answer: tech
◉Total cost includes. Answer: The cost of both variable and fixed
resources.
◉What does the long-run average cost curve show?. Answer: the
lowest average cost to produce each output level in the long run
◉As a typical firm increases its output, its marginal cost. Answer:
decreases at first and then increases.
◉Which of the following is an implicit cost in Jim's business
venture?
i. the salary Jim could have earned at another job
ii. the interest Jim must pay on the loan he incurred to help open his
business
iii. the interest Jim lost when he used his savings to help open his
business. Answer: i and iii
◉Dr. Khan starts his own dental practice after quitting his $150,000
job at The Mall Dental Clinic. His revenues for the first year are
$500,000. He paid $90,000 in rent for the dental office, $60,000 for
