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| 1 | |
A firm's accounting profit is given by total revenue: |
| | A) | less implicit costs. |
| | B) | less explicit costs. |
| | C) | less economic profit. |
| | D) | less implicit and explicit costs. |
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| 2 | |
Use the table below to answer the following question.
Units of
Output | Explicit
Costs | Implicit
Costs | Total
Revenue | 200 | $2,000 | $1,000 | $ 4,000 |
The table above shows the revenue and costs for a firm at selected output levels. At 200 units, the firm's accounting profit and economic profit respectively equal: |
| | A) | $1,000 and $2,000 |
| | B) | $3,000 and $1,000 |
| | C) | $2,000 and $1,000 |
| | D) | $4,000 and $3,000 |
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| 3 | |
Adam Smith's invisible hand theory says that: |
| | A) | the government should act as an invisible hand to ensure the proper allocation of resources in society. |
| | B) | the market system channels the selfish interests of buyers and sellers so as to promote the most efficient allocation of resources. |
| | C) | there is no role for the government within market systems. |
| | D) | the government should promote greater selfishness amongst individual buyers and sellers so as to increase the level of output in society. |
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| 4 | |
When firms are suffering economic losses in a perfectly competitive industry, in the long-run firms will _________ causing industry supply to shift ________. |
| | A) | exit; rightward. |
| | B) | enter; rightward. |
| | C) | enter; leftward. |
| | D) | exit; leftward. |
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| 5 | |
Use the following diagram representing a perfectly competitive firm to answer the following question.
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The economic profit of the perfectly competitive firm depicted above equals: |
| | A) | $2,000 |
| | B) | $1,500 |
| | C) | $10,000 |
| | D) | $0 |
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| 6 | |
In the long-run in perfectly competitive industries: |
| | A) | firms cannot earn economic profit but economic rent can persist. |
| | B) | firms can earn economic profit but economic rent cannot persist. |
| | C) | firms cannot earn economic profit and economic rent cannot persist. |
| | D) | firms can earn economic profit and economic rent can persist. |
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| 7 | |
Which of the following statements is true regarding the market equilibrium? |
| | A) | The market equilibrium always results in the socially optimal allocation of resources. |
| | B) | The market equilibrium is socially optimal only when costs or benefits accrue to individuals outside of the market. |
| | C) | A market in equilibrium leaves no opportunities for gain to individual buyers or sellers in the market. |
| | D) | The market equilibrium typically does not promote the interests of society. |
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| 8 | |
Whenever a market is not in equilibrium: |
| | A) | a transaction can be made that will make buyers better off, but make sellers worse off. |
| | B) | a transaction can be made that will make sellers better off, but make buyers worse off. |
| | C) | a transaction can be made that will benefit both buyers and sellers. |
| | D) | no transaction can be made that will make either buyers or sellers better off. |
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| 9 | |
Use the diagram below to answer the following question.
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The economic surplus associated with the market equilibrium above equals: |
| | A) | $1,000. |
| | B) | $45,000. |
| | C) | $10,000. |
| | D) | $35,000. |
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| 10 | |
Price subsidies generally serve to: |
| | A) | increase economic surplus and decrease consumer surplus in a market. |
| | B) | decrease economic surplus and increase consumer surplus in a market. |
| | C) | decrease economic surplus and decrease consumer surplus in a market. |
| | D) | increase economic surplus and increase consumer surplus in a market. |
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