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Section 10 Module 52-54 Student

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33 views

Section 10 Module 52-54 Student

Uploaded by

jundongluke
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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AP Micro Section 10 Module 52-54

1. Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?
A. payments of wages to its office workers
B. rent paid for the use of equipment owned by the Schultz Machinery Company
C. use of savings to pay operating expenses instead of generating interest income
D. economic profits resulting from current production

2. Which of the following is most likely to be an implicit cost for Company X?


A. forgone rent from the building owned and used by Company X
B. rental payments on IBM equipment
C. payments for raw materials purchased from Company Y
D. transportation costs paid to a nearby trucking firm

3. Production costs to an economist:


A. consist only of explicit costs.
B. reflect opportunity costs.
C. never reflect monetary outlays.
D. always reflect monetary outlays.

4. Implicit and explicit costs are different in that:


A. explicit costs are opportunity costs; implicit costs are not.
B. implicit costs are opportunity costs; explicit costs are not.
C. the latter refer to non-expenditure costs and the former to monetary payments.
D. the former refer to non-expenditure costs and the latter to monetary payments.

5. Accounting profits equal total revenue minus:


A. total explicit costs.
B. total implicit costs.
C. total economic costs.
D. economic profits.

6. Accounting profits are typically:


A. greater than economic profits because the former do not take explicit costs into account.
B. equal to economic profits because accounting costs include all opportunity costs.
C. smaller than economic profits because the former do not take implicit costs into account.
D. greater than economic profits because the former do not take implicit costs into account.

7. Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm
sold 4,000 units of its output at $300 per unit, its accounting profits were:
A. $100,000 and its economic profits were zero.
B. $200,000 and its economic profits were zero.
C. $100,000 and its economic profits were $100,000.
D. zero and its economic loss was $200,000.
8. Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the
firm sold 100,000 units of its output at $50 per unit, its accounting:
A. profits were $100,000 and its economic profits were zero.
B. losses were $500,000 and its economic losses were zero.
C. profits were $500,000 and its economic profits were $1 million.
D. profits were zero and its economic losses were $500,000.

The following is cost information for the Creamy Crisp Donut Company:

Entrepreneur's potential earnings as a salaried worker = $50,000


Annual lease on building = $22,000
Annual revenue from operations = $380,000
Payments to workers = $120,000
Utilities (electricity, water, disposal) costs = $8,000
Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000
Entrepreneur's forgone interest on personal funds used to finance the business = $6,000

9. Refer to the above data. Creamy Crisp's explicit costs are:


A. $286,000. B. $150,000. C. $94,000. D. $156,000.

10. Refer to the above data. Creamy Crisp's implicit costs, including a normal profit, are:
A. $136,000. B. $150,000. C. $94,000. D. $156,000.

11. Refer to the above data. Creamy Crisp's total economic costs are:
A. $286,000. B. $150,000. C. $94,000. D. $156,000.

12. Refer to the above data. Creamy Crisp's accounting profit is:
A. $150,000. B. $380,000. C. $230,000. D. $294,000.

13. Refer to the above data. Creamy Crisp's economic profit is:
A. $150,000. B. $80,000. C. $230,000. D. $94,000.

14. Refer to the above data. Creamy Crisp:


A. has higher implicit costs, including a normal profit, than its explicit costs.
B. is earning a normal profit but not an economic profit.
C. is earning an economic profit.
D. is suffering an economic loss, when implicit costs are considered.

15. To economists, the main difference between the short run and the long run is that:
A. the law of diminishing returns applies in the long run, but not in the short run.
B. in the long run all resources are variable, while in the short run at least one resource is fixed.
C. fixed costs are more important to decision making in the long run than they are in the short run.
D. in the short run all resources are fixed, while in the long run all resources are variable.
16. The law of diminishing returns indicates that:
A. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.
B. because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-
shaped.
C. the demand for goods produced by purely competitive industries is downsloping.
D. beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and
smaller extra amounts of satisfaction.

17. Which of the following statements concerning the relationships between total product (TP), average product (AP),
and marginal product (MP) is not correct?
A. AP continues to rise so long as TP is rising.
B. AP reaches a maximum before TP reaches a maximum.
C. TP reaches a maximum when the MP of the variable input becomes zero.
D. MP cuts AP at the maximum AP.

Answer the next question(s) on the basis of the following output data for a firm. Assume that the amounts of all non-
labor resources are fixed.

18. Refer to the above data. Diminishing marginal returns become evident with the addition of the:
A. sixth worker. B. fourth worker. C. third worker. D. second worker.

19. The above diagram suggests that:


A. when marginal product is zero, total product is at a minimum.
B. when marginal product lies above average product, average product is rising.
C. when marginal product lies below average product, average product is rising.
D. when total product is at a maximum, so is marginal product and average product.
20. In the above diagram the range of diminishing marginal returns is:
A. 0Q3.
B. 0Q2.
C. Q1Q2.
D. Q1Q3.

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