ZIRLOTT EC 110 EXAM 3 QUESTIONS
WITH CORRECT ANSWERS 2026/2027
Profit - CORRECT ANSWER -Total Revenue - Total Cost
Explicit Cost - CORRECT ANSWER -require an outlay of money
(paying wages to worker's)
Implicit Cost - CORRECT ANSWER -do not require a cash outlay
(opportunity cost of the owner's time)
Accounting Profit - CORRECT ANSWER -total revenue - total explicit costs *{higher than
economic profit}+
Economic Profit - CORRECT ANSWER -total revenue - total costs *(explicit + implicit)*
Production Function - CORRECT ANSWER -shows the relationship b/w the quantity of inputs
used to produce a good and the quantity of output of that good (table, graph, equation).
Marginal Product - CORRECT ANSWER -the increase in output that arises from an additional unit
of input
Calculating Marginal Product of Labor *(MPL)* - CORRECT ANSWER -MPL = ΔQ/ΔL
What is *diminishing* Marginal Product of Labor? (MPL) and why does it occur? - CORRECT
ANSWER -*The marginal product of an input declines as the quantity of the input increases*
MPL diminishes as L rises whether the fixed input is land or capital (equipment, machines, etc.)
, FIXED COSTS (FC) - CORRECT ANSWER -do not vary with the quantity of output produced
VARIABLE COSTS (VC) - CORRECT ANSWER -vary with the quantity produced
TOTAL COST (TC): - CORRECT ANSWER -TC = FC + VC
AVERAGE FIXED COST (AFC) - CORRECT ANSWER -AFC = FC / Q (AFC falls as Q rises: firms spread
fixed costs over a larger and larger number of units)
AVERAGE VARIABLE COST (AVC): - CORRECT ANSWER -AVC = VC / Q (As Q rises, AVC may fall
initially. In most cases, AVC will eventually rise)
AVERAGE TOTAL COST (ATC) - CORRECT ANSWER -*ATC = TC / Q ; ATC = AFC + AVC*
total cost divided by the quantity of output.
It represents the cost of a typical unit of output if total cost is divided evenly over all the units
produced.
Whenever marginal cost is less than average total cost, average total cost is falling. Whenever
marginal cost is greater than average total cost, average total cost is rising.
MARGINAL COST (MC) - CORRECT ANSWER -MC = ΔTC / ΔQ
the amount that total cost rises when the firm increases production by 1 unit of output
*study how FC, VC, TC, AFC, AVC, ATC and MC appear on a graph* - CORRECT ANSWER -
Relationship between Marginal Cost and Average Total Cost and the Efficient Scale. - CORRECT
ANSWER -MC is less than ATC = ATC is falling
WITH CORRECT ANSWERS 2026/2027
Profit - CORRECT ANSWER -Total Revenue - Total Cost
Explicit Cost - CORRECT ANSWER -require an outlay of money
(paying wages to worker's)
Implicit Cost - CORRECT ANSWER -do not require a cash outlay
(opportunity cost of the owner's time)
Accounting Profit - CORRECT ANSWER -total revenue - total explicit costs *{higher than
economic profit}+
Economic Profit - CORRECT ANSWER -total revenue - total costs *(explicit + implicit)*
Production Function - CORRECT ANSWER -shows the relationship b/w the quantity of inputs
used to produce a good and the quantity of output of that good (table, graph, equation).
Marginal Product - CORRECT ANSWER -the increase in output that arises from an additional unit
of input
Calculating Marginal Product of Labor *(MPL)* - CORRECT ANSWER -MPL = ΔQ/ΔL
What is *diminishing* Marginal Product of Labor? (MPL) and why does it occur? - CORRECT
ANSWER -*The marginal product of an input declines as the quantity of the input increases*
MPL diminishes as L rises whether the fixed input is land or capital (equipment, machines, etc.)
, FIXED COSTS (FC) - CORRECT ANSWER -do not vary with the quantity of output produced
VARIABLE COSTS (VC) - CORRECT ANSWER -vary with the quantity produced
TOTAL COST (TC): - CORRECT ANSWER -TC = FC + VC
AVERAGE FIXED COST (AFC) - CORRECT ANSWER -AFC = FC / Q (AFC falls as Q rises: firms spread
fixed costs over a larger and larger number of units)
AVERAGE VARIABLE COST (AVC): - CORRECT ANSWER -AVC = VC / Q (As Q rises, AVC may fall
initially. In most cases, AVC will eventually rise)
AVERAGE TOTAL COST (ATC) - CORRECT ANSWER -*ATC = TC / Q ; ATC = AFC + AVC*
total cost divided by the quantity of output.
It represents the cost of a typical unit of output if total cost is divided evenly over all the units
produced.
Whenever marginal cost is less than average total cost, average total cost is falling. Whenever
marginal cost is greater than average total cost, average total cost is rising.
MARGINAL COST (MC) - CORRECT ANSWER -MC = ΔTC / ΔQ
the amount that total cost rises when the firm increases production by 1 unit of output
*study how FC, VC, TC, AFC, AVC, ATC and MC appear on a graph* - CORRECT ANSWER -
Relationship between Marginal Cost and Average Total Cost and the Efficient Scale. - CORRECT
ANSWER -MC is less than ATC = ATC is falling
