Quiz No.

3 F
Question 1
Economic profit can be computed by deducting from the total revenue the total explicit
and implicit cost.
Response: True
Correct answer: True
Score: 1 out of 1
Yes
Question 2
Total fixed cost do vary with the number of quantity produced.
Response: True
Correct answer: False
Score: 0 out of 1
No
Question 3
Accounting profit can be computed by deducting from the total revenue the total explicit
and implicit cost.
Response: False
Correct answer: False
Score: 1 out of 1
Yes
Question 4
D's Barbeque of Pickwick, TN, produces 10,000 dry-rubbed rib slabs per year. Annually
Mr. D's fixed costs are $50,000. The average variable cost per slab is a constant $2.
The average total cost per slab then is
Response: 7
Correct answer: 7
Score: 1 out of 1
Yes
Question 5
After graduating from college, Jim had the following choices: (1) Move to Florida from
Philadelphia to work or (2) play soccer for a minor league in Philadelphia. His
opportunity cost of moving to Florida includes
Response: All of the given choices
Correct answer: The benefits he could have received from playing soccer
Score: 0 out of 1
No
Question 6
When deciding between two alternatives, never choose the one that returns the highest
profit
Response: False
Correct answer: False
Score: 1 out of 1
Yes
Question 7
When a firm ignores the opportunity cost of capital when making investment or
shutdown decisions, this is a case of
Response: hidden cost fallacy
Correct answer: hidden cost fallacy
Score: 1 out of 1
Yes
Question 8
Firm's goal is to maximize cost.
Response: True
Correct answer: False
Score: 0 out of 1
No
Question 9
Total cost is the total of the variable and fixed costs.
Response: True
Correct answer: True
Question 10
When making decisions, you ignore relevant costs when making a decision you are
committing hidden cost fallacy.
Response: False
Correct answer: True

Question 11
A business owner makes 1000 items a day. Each day she contributes eight hours to
produce those items. If hired elsewhere, she could have earned $250 an hour. The item
sells for $15 each. Production does not stop during weekends. If the explicit costs total
$150,000 for 30 days, the firm’s economic profit for the month equals:
Response: 300,000
Correct answer: 240,000

Question 12
Explicit cost requires monetary direct payment or an outlay of money
Response: True
Correct answer: True

Question 13
Total variable cost vary with the number of quantity produced.
Response: True
Correct answer: True

Question 14
Accounting profit can be computed by deducting from the total revenue the total explicit
cost.
Response: True
Correct answer: True

Question 15
The fixed-cost fallacy occurs when
Response: a firm considers irrelevant costs
Correct answer: a firm considers irrelevant costs

Quiz No. 5 F
Question 1
Willingness to invest in projects with a low rate of return, indicates a willingness to trade
current dollars for future dollars at a relatively low rate.
Response: True
Correct answer: True

Question 2
Compounding is the process of determining whether the future benefits are more than
the current costs
Response: False
Correct answer: False

Question 3
You expect to sell 500 cell phones a month, which have an MC of $50. If your fixed
costs are $5,000 per month, what is the break-even price?
Response: 60
Correct answer: 60

Question 4
Discounting
Response: Process of determining whether the future benefits are more than the current
cost
Correct answer: Process of determining whether the future benefits are more than the
current cost

Question 5
 What is the total present value of a project that requires a $100 investment today and
returns $50 at the end of the first year and $80 at the end of the second year? Assume
a discount rate of 10%.
Response: 18.18
Correct answer: 111.57

Question 6
Assume a firm has the following cost and revenue characteristics at its current level of
output: price=$10.00, average variable cost=$8.00 and average fixed cost =$4.00. This
firm is
Response: incurring a loss of $2.00 per unit and should shut down.
Correct answer: incurring a loss per unit of $2.00 but should continue to operate in the
short run.

Question 7
Discounting is done before investing
Response: True
Correct answer: True

Question 8
In the long run, only marginal cost are avoidable while fixed costs are unavoidable
Response: False
Correct answer: False

Question 9
Which of the following will increase the break-even quantity?
Response: A decrease in the marginal costs
Correct answer: A decrease in the price level

Question 10
An investment with a positive NPV will be profitable
Response: True
Correct answer: True

Quiz No. 4 F

Question 1
Marginal revenue is the additional cost to make and sell one additional unit of output.
Response: False
Correct answer: False

Question 2
A firm produces 500 units per week. It hires 20 full-time workers (40 hours/week) at an
hourly wage of $15. Raw materials are ordered weekly and they costs $10 for every unit
produced. The weekly cost of the rent payment for the factory is $2,250. How much is
the total variable cost?
Response: 19,250
Correct answer: 17,000

Question 3
Marginal cost is the additional cost to make and sell one additional unit of output.
Response: True
Correct answer: True

Question 4
A firm produces 500 units per week. It hires 20 full-time workers (40 hours/week) at an
hourly wage of $15. Raw materials are ordered weekly and they costs $10 for every unit
produced. The weekly cost of the rent payment for the factory is $2,250. How much is
the total cost?
Response: 19,250
Correct answer: 19,250

Question 5
Marginal costs do not matter in extent decisions.
Response: False
Correct answer: False

Question 6
Marginal costs do not matter in extent decisions.
Response: False
Correct answer: False

Question 7
Managers undertake an investment only if
Response: Marginal costs are greater than marginal benefits
Correct answer: Marginal benefits are greater than marginal costs

Question 8
Opportunity costs arise due abundance of resources.
Response: True
Correct answer: False

Question 9
A manager of a clothing firm is deciding whether to add another factory in addition to
one already in production. The manager would compare
Response: the total benefits gained from the two factories to the total costs of running
the two factories.
Correct answer: the incremental benefit expected from the second factory to the cost of
the second factory

Question 10
A firm produces 500 units per week. It hires 20 full-time workers (40 hours/week) at an
hourly wage of $15. Raw materials are ordered weekly and they costs $10 for every unit
produced. The weekly cost of the rent payment for the factory is $2,250. How much is
the total fixed cost?
Response: 19,250
Correct answer: 2,250

Quiz No. 1
Question 1
The rational-actor paradigm assumes that people do not
Response: use rules of thumb
Correct answer: use rules of thumb

Question 2
Why might welfare for low income households reduce the propensity to work?
Response: It reduces the incentive to work.
Correct answer: It reduces the incentive to work.

Question 3
Which of the following is not one of the three problem solving principles?
Response: Under whose jurisdiction is the problem?
Correct answer: Under whose jurisdiction is the problem?

Question 4
Which of the following are examples of a price floor?
Response: Minimum wages
Correct answer: Minimum wages

Question 5
An individual'value for a good or service is
Response: the amount of money he or she is willing to pay for it.
Correct answer: the amount of money he or she is willing to pay for it.

Question 6
 What might happen if dealership is awarded a bonus by the manufacturer for selling a
ceratin number of its cars monthly ,but the dealership is just short of that quota near the
end of the month?
Response: It may sell the remaining cars huge discounts tp hit the qouta.
Correct answer: It may sell the remaining cars huge discounts tp hit the qouta.

Question 7
The problem solving framework analyzes firm problems
Response: from the organization's point of view
Correct answer: from the organization's point of view

Question 8
Why might performance compensation caps be bad?
Response: Compensation caps can discourage employees from being productive after
the cap
Correct answer: Compensation caps can discourage employees from being productive
after the cap

Question 9
Why might a bonus cap for executive be a bad policy for the company?
Response: The cap could be set too high ,so executives may work too hard and not
reach it.
Correct answer: It would encourage shirking after the executives reached the cap.

Question 10
The biggest advantage of capitalism is that
Response: All of the choices given
Correct answer: All of the choices given

Question 11
A consumer values a car at 525,000 and a seller values the same car at 485,000 .If
sale tax 8% and is levied on the seller,s then the seller's bottom -line price is
(rounded to the nearest thousand)
Response: 527,000
Correct answer: 527,000

Question 12
A price ceiling
Response: is an implicit tax on producer and an implicit subsidy to consumers.
Correct answer: is a goverment-set maximum price

Question 13
Voluntary transactions
Response: always produce gains for both parties
Correct answer: always produce gains for both parties

Question 14
Why it might be a bad decision for hotels to not charge higher prices when rooms are in
higher demand?
Response: Arbitrageurs or opportunists might establish a black market by reserving
rooms and then selling the reservations to customers.
Correct answer: All of the choices given

Question 15
Why might a supermarket advertise low prices on certain high-profile items and sell
them at a loss?
Response: The store will sell other groceries to the same customers, often at a markup .
Correct answer: It is way for companies to be charitbale.

Question 16
Which of these actions creates value?
Response: All of the above
Correct answer: All of the above
Question 17
A consumer values a car at 20,000 and it costs a producer 15,000 to make the same
car.If the transaction is completed at 18,000 the transaction will generate
Response: 2,000 of buyer surplus and 3,000 of seller surplus
Correct answer: 2,000 of buyer surplus and 3,000 of seller surplus
Score: 1 out of 1
Yes
Question 18
Wealth creating transactions are more likely to occur
Response: All of the choices given
Correct answer: All of the choices given

Question 19
Taxes
Response: decrease the number of wealth-creating transactions
Correct answer: all of the above

Question 20
What is the possible consequence of a performance compensation reward scheme?
Response: It creates both harmful and productive incentives
Correct answer: It creates both harmful and productive incentives