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| 1 | |
One disadvantage of the corporate form of organization is that |
| | A) | it has more difficulty in raising financial capital than other forms of organization |
| | B) | it does not allow for specialization in management |
| | C) | it can create a principal – agent problem. |
| | D) | the personal assets of owners are at stake |
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| 2 | |
Accountants tend to be most concerned about |
| | A) | implicit cost |
| | B) | opportunity costs |
| | C) | explicit costs |
| | D) | double taxation |
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| 3 | |
Suppose that a firm produces 100,000 units a year and sells them all for $5 each. The explicit costs of production are $350,000 and the implicit costs of production are $100,000. The firm has |
| | A) | accounting profit of $400,000 and economic profit of $50,000 |
| | B) | accounting profit of $150,000 and economic profit of $50,000 |
| | C) | accounting profit of $125,000 and economic profit of $75,000 |
| | D) | accounting profit of $100,000 and economic profit of $50,000 |
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| 4 | |
Which would best describe the short run for a firm as defined by economists? |
| | A) | the plant capacity is completely variable |
| | B) | the plant can change some but not all of the resources they employ. |
| | C) | there are diseconomies of scale. |
| | D) | there are economies of scale. |
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| 5 | |
The law of diminishing returns states that |
| | A) | as more units of a variable factor are added to a fixed factor, the marginal product of the variable factor will eventually decrease |
| | B) | as more units of a variable factor are added to a fixed factor, the marginal product of the fixed factor will eventually decrease |
| | C) | as more units of a variable factor are added to a fixed factor, the marginal product of the variable factor will eventually increase |
| | D) | as more units of a variable factor are added to a fixed factor, the marginal product of the fixed factor will eventually increase |
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| 6 | |
At an output of 10,000 units per year, a firm's total variable costs are $50,000 and its average fixed costs are $2. The total costs per year for the firm are |
| | A) | $50,000 |
| | B) | $60,000 |
| | C) | $70,000 |
| | D) | $80,000 |
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| 7 | |
If you know that total fixed cost is $100, total variable cost is $300, and total product is 4 units, then |
| | A) | marginal cost is $50 |
| | B) | average fixed cost is $45 |
| | C) | average total cost is $125 |
| | D) | average variable cost is $75 |
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| 8 | |
A firm has total fixed costs of $4,000 a year. The average variable cost is $3.00 for 2,000 units of output. At this level of output, its average total costs are |
| | A) | $2.50 |
| | B) | $3.00 |
| | C) | $4.50 |
| | D) | $5.00 |
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| 9 | |
If the short-run average variable costs of production for a firm are falling, then |
| | A) | average variable costs are above average fixed costs |
| | B) | marginal costs are below average variable costs |
| | C) | marginal costs are above average variable costs |
| | D) | total costs are falling |
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| 10 | |
One assumption underlying the law of diminishing returns is that |
| | A) | variable inputs are fixed |
| | B) | technology is fixed |
| | C) | fixed inputs are variable |
| | D) | all inputs are variable |
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| 11 | |
In the above table, the marginal product of the fourth unit of labour is
| Amount of labour | Amount of output | | 1 | 3 | | 2 | 8 | | 3 | 12 | | 4 | 15 | | 5 | 17 | | 6 | 18 |
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| | A) | 2 units of output |
| | B) | 3 units of output |
| | C) | 4 units of output |
| | D) | 15 units of output |
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| 12 | |
Marginal product is zero when |
| | A) | the slope of the total product curve is zero |
| | B) | total product is increasing |
| | C) | total product is increasing, but at a diminishing rate |
| | D) | total product is decreasing |
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| 13 | |
If a firm increases its resources by 5%, and its output increases by 20%, then |
| | A) | the firm exhibits constant returns to scale |
| | B) | the firm exhibits decreasing returns to scale |
| | C) | the firm exhibits economies of scale |
| | D) | the firm is at a minimum efficient scale. |
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| 14 | |
Which of the following is not a result in economies of scale? |
| | A) | more efficient utilization of the firm's plant |
| | B) | increased specialization in the use of labour |
| | C) | greater specialization in the management of the firm |
| | D) | utilization of more efficient equipment |
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| 15 | |
A firm is encountering constant returns to scale when it increases all of its inputs by 20% and its output increases by |
| | A) | 10% |
| | B) | 15% |
| | C) | 20% |
| | D) | 25% |
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