Q&A Hero

Q: If there are gains from specialization in a workplace, hiring another employee means that the marginal product of labor willa. decrease. b. remain the same. c. increase.d. be zero.e. be negative.

Q: When a firm hires another employee and, as a result, total output increases, this change in total output is also known asa. total output. b. marginal employment. c. marginal product.d. labor contribution.e. marginal benefit.

Q: Marginal product is the change in a. total output divided by the change in input. b. total output plus the change in input. c. total output minus the change in input. d. total output times the change in input. e. input divided by the change in total output.

Q: The change in total output divided by the change in input is known asa. marginal product. b. marginal cost. c. specialization.d. total product.e. marginal profit.

Q: If workers are unable to specialize and become more productive as more labor is hired, the amount of total output produceda. increases at an increasing rate. b. increases at a constant rate. c. increases at a decreasing rate.d. decreases at an increasing rate.e. decreases at a constant rate.

Q: The production function for bookshelves includes a. yeast, flour, pans, ovens, and bakers. b. electric guitars, drums, microphones, musicians, and a stage. c. foam cushions, fabric, wood, nails, and furniture makers. d. wood, nails, carpenters, saws, and hammers. e. wool fabric, buttons, a zipper, a sewing machine, and a tailor.

Q: The production function for automobiles includes a. farmland, seeds, rain, and tractors. b. an aircraft carrier, planes, helicopters, sailors, and pilots. c. a mall, racks and shelves, mannequins, and sales clerks. d. lumber, shingles, windows, doors, and carpenters. e. a factory, an assembly line, workers, and robots.

Q: If all workers are able to specialize and become more productive as more labor is hired, the amount of total output produceda. increases at a decreasing rate. b. increases at a constant rate. c. increases at an increasing rate.d. decreases at an increasing rate.e. decreases at a constant rate.

Q: The production function of a restaurant includes items such as labor (i.e., cooks, waiters, and a manager), capital (i.e., ovens, counters, tables, chairs, and a building), and land. In the short run, the owner of the restaurant will optimize production by employing a variable amount of ________ given a fixed amount of ________.a. capital; labor and land b. land; capital and labor c. labor; capital and landd. labor; capital and raw materialse. land; labor and raw materials

Q: A firms production function is similar to a recipe used to make a cake in the sense that the production function shows us the combination of ________ used to produce ________.a. inputs; output b. outputs; input c. costs; profitd. expenses; revenuee. taxes; deductions

Q: As a firm hires more labor and each worker is able to specialize, what happens to each additional workers marginal productivity? a. It increases at first, then decreases. b. It increases continuously. c. It decreases continuously. d. It decreases at first, then increases. e. It remains constant, no matter how much labor is hired.

Q: A firm has a certain amount of capital and land. As it hires more labor, each worker is able toa. earn a higher wage. b. specialize. c. work more overtime.d. purchase more capital.e. purchase more land.

Q: The three primary inputs area. revenue, profits, and costs. b. price, quantity, and profits. c. land, labor, and capital.d. labor, wages, and training.e. capital, interest, and savings.

Q: The three primary factors of production area. revenue, profits, and costs. b. price, quantity, and profits.c. capital, interest, and savings.d. labor, wages, and training.e. land, labor, and capital.

Q: Another term for factors of production isa. outputs. b. inputs. c. profits.d. revenues.e. costs.

Q: What happens when a firm adopts a new technology? a. The firm must increase its losses. b. The firm must increase its profit. c. The firm will have a new production function. d. The firm must have higher costs. e. The firm must have higher revenue.

Q: What would cause a firms production function to change? a. expanding the size of the factories b. increasing the quantity of labor and capital c. increasing the quantity of capital d. increasing the quantity of labor e. the adoption of new technology

Q: A decade ago, Nino decided to open a used car lot. This car lot required her to hire some sales agents and buy some computers to track the sales of the vehicles. After a few years, Nino opened up a second location and hired more sales agents and purchased more computers. When this expansion occurred, which of the following statements is FALSE? a. More inputs were used. b. Total possible output increased. c. The production function changed. d. Fewer inputs and outputs were used. e. The business became inefficient during the expansion.

Q: Which of the following statements is true? a. The production function shows the trade-off in inputs that produce the same amount of output. b. The production function shows the trade-off between producing different kinds of outputs. c. An inefficient firm is unable to achieve as much output as the production function shows. d. The short-run production function includes both fixed and variable inputs. e. The short-run production function includes both fixed and variable costs.

Q: According to the concept of the production function, if a firm is inefficient then it must mean a. for the same amount of inputs, the output is less than the production function would have calculated. b. for the same amount of output, the number of inputs required is less than the production function would have calculated. c. the achieved level of output is exactly the same as the production function would have calculated. d. the firm is producing too many outputs. e. the inputs are being overused.

Q: The production function shows the relationship between the a. costs of inputs and the price of the output. b. quantity of inputs and the quantity of outputs. c. quantity of total outputs and total costs. d. quantity of the labor input needed for each unit of capital to minimize costs. e. level of outputs that maximize revenue.

Q: A firms inputs are also known as itsa. outputs. .b. profits. c. factors of production.d. revenuese. costs.

Q: Belinda is the owner of a department store. Last year, her total revenue was $525,000 and her total labor costs were $200,000. Her overhead expenses, including insurance and legal fees, were $175,000. The rent on the building was $45,000. Belinda could earn $105,000 per year working at a nearby department store. If her total revenue increases to $600,000 this year and all of her other expenses are held constant, we know that her economic profit is nowa. $75,000. b. $600,000. c. $0.00.d. $105,000.e. $200,000.

Q: Hannah is the owner of a party store. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. If she could earn $53,000 working for another party store nearby, we know that her economic profit wasa. $145,000. b. $53,000. c. $12,000.d. $0.00.e. $15,000.

Q: Karolina owns a small diner, where she works full-time in the kitchen. Her total revenue last year was $100,000, and her rent was $3,000 per month. She pays her one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Karolina could earn $35,000 per year as the manager of a competing diner nearby. Her total economic profit last year wasa. $34,000. b. -$1,000. c. $20,000.d. $65,000.e. -$35,000.

Q: If we were told that a firm earns positive accounting profit and nothing else, what would we know is true about its economic profit? a. It is positive because whenever accounting profit is positive, so is economic profit. b. It cannot be determined without knowing the firms implicit costs. c. It is zero because all firms earn zero economic profit regardless of the industry. d. It is equal to its accounting profit. e. It is negative because its accounting profit is probably not high enough to earn positive economic profit.

Q: A firms economic profit is always less than its accounting profit because a. accounting profit considers explicit costs, which economic profit does not. b. economic profit considers implicit costs, which accounting profit does not. c. economic profit is always zero, no matter what kind of firm it is. d. accounting profit considers implicit costs, which economic profit does not. e. accounting profit is always positive, no matter what kind of firm it is.

Q: Economic profit is equal to a. total revenue minus explicit costs. b. total revenue minus implicit costs. c. explicit costs plus implicit costs. d. total revenue minus implicit costs and explicit costs. e. explicit costs minus implicit costs.

Q: Kumar owns a small seafood restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Kumar could earn $35,000 per year as the manager of a competing seafood restaurant nearby. His total accounting profit last year wasa. -$1,000. b. $100,000. c. $72,000.d. $34,000.e. $35,000.

Q: Jackie is the owner of a furniture store. Last year, her total revenue was $525,000 and her total labor costs were $200,000. Her overhead expenses, including insurance and legal fees, were $175,000. The rent on the building was $45,000. Jackie could earn $105,000 per year working at a nearby furniture distributor. From this information, we know that her accounting profit wasa. $525,000. b. $375,000. c. $150,000.d. $175,000.e. $105,000.

Q: Luciana is the owner of a nail salon. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her accounting profit wasa. $145,000. b. $53,000. c. $65,000.d. $15,000.e. $27,000.

Q: A firms accounting profit is always greater than its economic profit because a. economic profit considers implicit costs, which accounting profit does not. b. accounting profit considers explicit costs, which economic profit does not. c. economic profit is always zero, no matter what kind of firm it is. d. accounting profit considers implicit costs, which economic profit does not. e. accounting profit is always positive, no matter what kind of firm it is.

Q: Accounting profit ignores which of the following?a. implicit costs b. labor costs c. capital costsd. taxes paide. explicit costs

Q: Accounting profit is equal to a. total revenue minus explicit costs. b. total revenue minus implicit costs. c. explicit costs plus implicit costs. d. explicit costs minus implicit costs. e. total revenue minus implicit costs and explicit costs.

Q: Accountants consider only explicit costs when measuring accounting profit. The reason they ignore implicit costs is that a. implicit costs are typically very small. b. explicit costs are always greater than implicit costs. c. implicit costs are not out-of-pocket expenses. d. implicit costs are tax deductible. e. implicit costs cannot be measured in terms of dollars.

Q: Economists consider both explicit costs and implicit costs when measuring economic profit. The reason they consider implicit costs is that a. they are more conservative than accountants, who consider only accounting costs. b. most businesses forget to pay their implicit costs. c. a business must cover its opportunity costs as well as its out-of-pocket expenses to be truly profitable. d. implicit costs are typically far larger than explicit costs. e. implicit costs include expenses like taxes and fees to the government.

Q: Jeremy is the owner of a makeup parlor that earns zero economic profit. Last year, his total revenue was $145,000, his rent was $12,000, his labor costs were $65,000, and his overhead expenses were $15,000. From this information, we know that his total implicit costs werea. $145,000. b. $53,000. c. $92,000.d. $65.000.e. $15,000.

Q: Ramona owns a small coffee shop, where she works full-time. Her total revenue last year was $100,000, and her rent was $3,000 per month. She pays her one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ramona could earn $35,000 per year as the manager of a competing coffee shop nearby. Her total implicit costs last year werea. $100,000. b. $35,000. c. $60,000.d. $66,000.e. $72,000.

Q: If a firm generates $240,000 in revenue, earns $120,000 in economic profit, and its explicit costs are $80,000, how much are its implicit costs?a. $160,000 xb. $80,000 c. $40,000d. $60,000e. $120,000

Q: Implicit costs can be difficult to measure because a. business owners cannot always observe them directly. b. they are not measured in dollars. c. they are always very expensive. d. they are always greater than explicit costs. e. they include expenses like taxes.

Q: Implicit costs are a. the opportunity cost of the means of production. b. always paid out of pocket. c. never greater than explicit costs. d. always greater than explicit costs. e. not measured in terms of dollars.

Q: Lisette is the owner of a bakery that earns zero economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total explicit costs werea. $80,000. b. $92,000. c. $15,000.d. $77,000.e. $53,000.

Q: Remi owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Remi could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total explicit costs last year werea. $24,000. b. $6,000. c. $60,000.d. $66,000.e. $72,000.

Q: If a firm has total costs of $535,000 and its implicit costs are $165,000, how much are its explicit costs?a. $3,242 b. $120,000 c. $370,000d. $700,000e. $308

Q: An explicit cost for a business that manufactures bicycles would be the a. value of the products that the firms employees could produce at another company. b. salary that the owner of the business could earn elsewhere. c. goods and services provided by the government with the taxes the firm pays. d. wages paid to employees. e. various products that could be made with the steel used to make bicycles.

Q: Which of the following is true about explicit costs? a. They are the opportunity costs of production. b. They are out-of-pocket expenses. c. They are not measured in terms of dollars. d. They are not included when measuring economic profit. e. They are not included when measuring accounting profit.

Q: The out-of-pocket expenses incurred in producing a good are also known asa. implicit costs. b. fiduciary costs. c. explicit costs.d. capital costs.e. wages and prices.

Q: Explicit costs are a. the opportunity cost of the means of production. b. always paid out of pocket. c. always greater than implicit costs. d. never greater than implicit costs. e. what a business sacrifices in order to produce a good.

Q: Which of the following statements is true? a. An implicit cost is monetary. b. An explicit cost is an opportunity cost. c. Economists consider all costs to be explicit costs. d. Implicit and explicit costs are always equal. e. Economists consider only some costs to be implicit costs.

Q: Which of the following statements is FALSE? a. Implicit costs are unique to the individual firm. b. Explicit costs are easy to measure. c. Implicit costs are opportunity costs. d. An explicit cost is a nonmonetary opportunity cost. e. An implicit cost is nonmonetary.

Q: Total revenue minus total cost is equal toa. producer surplus. b. dividends. c. consumer surplus.d. profit.e. retained earnings.

Q: A restaurant owner just found out that his pizza bistro is losing money. What is one possible explanation for this loss? a. The revenue isnt being maximized. b. The costs arent being maximized. c. The revenue isnt being minimized. d. The costs and the revenue arent both being maximized. e. The costs and the revenue arent both being minimized.

Q: CHAPTER 8: Business Costs and ProductionWhat needs to be done to ensure that a company is profitable?a. The company needs to maximize revenue.b. The company needs to minimize costs.c. The company needs to both minimize costs and maximize revenue.d. The company needs to both maximize costs and minimize revenue.e. The company needs only to provide products that customers want.

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Q: Common-resource goods are a. nonrival, like public goods, and excludable, like private goods. b. nonrival, like private goods, and excludable, like club goods. c. nonrival, like club goods, and excludable, like public goods. d. rival, like private goods, and nonexcludable, like public goods. e. rival, like club goods, and nonexcludable, like private goods.

Q: Common resources area. overused. b. underused. c. optimally used.d. always owned by the government.e. never owned by anyone.

Q: A good that is rival and nonexcludable is defined as a ________ good.a. private b. public c. common-resourced. clube. government

Q: Which of the following characteristics best defines a common-resource good? a. rival and excludable b. rival and nonexcludable c. nonrival and nonexcludable d. nonrival and excludable e. a good that is never produced by the government

Q: Club goods tend to be offered at ________ market price and at ________ quantity compared to what society desires.a. a lower; a lower b. a higher; a higher c. a higher; a lowerd. a lower; a highere. the same; a lower

Q: Club goods are a. nonrival, like public goods, and excludable, like private goods. b. nonrival, like private goods, and excludable, like common-resource goods. c. nonrival, like common-resource goods, and excludable, like public goods. d. rival, like private goods, and nonexcludable, like public goods. e. rival, like common-resource goods, and nonexcludable, like private goods.

Q: A good that is nonrival and excludable is defined as a ________ good. a. private d. club b. public e. government c. common-resource

Q: Which of the following characteristics best defines a club good? a. rival and excludable b. rival and nonexcludable c. nonrival and nonexcludable d. nonrival and excludable e. a good that is never produced by the government

Q: The city decides to offer a subsidy to each homeowners association that plants more flowers in their common areas. In the market for flowers, this will cause the a. supply curve to shift to the left. b. supply curve to shift to the right. c. demand curve to shift to the left. d. demand curve to shift to the right. e. the supply curve to shift to the left and the demand curve to shift to the right.

Q: Which of the following is a common-resource good? a. baseball tickets b. GPS service c. pay-per-view television d. free public parking spaces e. paramedic emergency medical service

Q: Which of the following is NOT a club good?a. satellite TV b. a timeshare condo c. a subscribers-only websited. educatione. toll roads

Q: Which of the following is NOT a public good?a. entertainment television b. interstate highwaysc. public-health researchd. open source softwaree. national defense

Q: Which of the factors listed contributes to making street performances a public good? a. Music and live theater are art, not science. b. Performances do not follow a set schedule. c. Not everyone enjoys street theater. d. No qualifications are required to perform. e. Any passerby can enjoy the show.

Q: A major reason why public goods are NOT supplied by the market is the a. free-rider problem. b. existence of negative externalities. c. fact that no one is willing to pay for them. d. fact that public goods are rival. e. fact that no firm would be able to earn a profit by producing them.

Q: The market works efficiently in the absence of externalities if the good is a. rival and excludable. b. nonrival and nonexcludable. c. rival and nonexcludable. d. nonrival and excludable. e. rival and either excludable or nonexcludable.

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