chapter 13 - b

Question 1

according to the law of supply firms are

Answer 1

willing to produce a greater quantity of a good when the price of the good is higher

Question 2

industrial organization is the study of ow

Answer 2

firm’s decisions regarding prices and quantities depend on the market conditions they face

Question 3

economists normally assume that the goal of a firm is to

Answer 3

maximize profits

Question 4

the amount of money that firm receives from the sale of its output is called

Answer 4

total revenue

Question 5

the amount of money that a firm pays to buy inputs is called

Answer 5

total cost

Question 6

profit is defined as

Answer 6

total revenue - total cost

Question 7

which of the following can be added to profit to obtain total revenue

a. net profit
b. captial profit
c. operational profit
d. total cost

Answer 7

total cost

Question 8

economist normally assume that the goa of a firm is to

Answer 8

make profit as large as possible even if it means reducing output and
make profit as large as possible even if it means incurring a higher total cost

Question 9

total revenue equals

Answer 9

total output x price per unit of output

Question 10

those tings that must be forgone to acquire a good are called

Answer 10

opportunity costs

Question 11

XYz corporation produces 300 units of output but sold only 275 of the units itproduced. the average cost of production for each unit of output produced was $100. each of the 275 units old was sold for a price of $95. total revenue for XYZ corporation would be

Answer 11

26,125

Question 12

explict costs

Answer 12

require an outlay of money by the firm

Question 13

which of the following would be categorized as an implicit cost

a. wages of workers
b. raw materials costs
c. forgone investment opprotunites
d. all of the above

Answer 13

d

Question 14

an example of an explict of cost of production would be

a. the cost of forgone labour earnings for an entreprenuer
b. the lost opportunity to invest in other capital markets when the money is invested in one’s buisness
c. the cost of flour for the baker
d. none of the above

Answer 14

c

Question 15

which of the following is an implicit cost

a. the owner of a firm forgoing an opportunity to earn a large salary working for a wall street brokerage firm
b. interest paid on the firm’s debt
c. rent paid by the firm to lease office space
d. all of the above

Answer 15

a

Question 16

an example of an implicit cost of production would be
a. the income an entrepreneur could have earned working for someone else
b. the cost of raw materials for producing bread in a bakery
c. the cost of delivery truck in a business that rarely makes deliveries
d all of the above

Answer 16

a

Question 17

to an economist, the field of industrial organization answers which of the following questions?

a. why are consumers subject to the law of demand
b. why do firms experience falling marginal product of labour
c. how does the difference in the number of firms affect prices and the efficiency of market outcomes
d. why do firms consider production costs when determining product supply

Answer 17

c

Question 18

accountants are primarily interested in the

a. flow of money into and out of the firms
b. stock of assets of firms
c. marginal costs of production of firms
d. taxes due on capital assets of firms

Answer 18

a

Question 19

john owns a shoe-shine business. his accountant most likely includes which of the following costs on his financial statements?
a. wages john could earn washing windows
b. dividends john[s money was earning in the stock market before john sold his stock and bought a shoe-shine booth
c the cost of shoe polish
d. all of the above

Answer 19

c

Question 20

which of the following costs would be regarded as an implicit cost

a. the cost of accounting services
b. the opportunity cost of financial capital that has been invested in the business
c. the cost of compliance with government regulation
d. all costs that involve outlays of money by the firm

Answer 20

b

Question 21

which of the following is an implicit cost of owing a business?

a. interest expense on existing business loans
b. forgone savings account interest when personal money is invested in the business
c. damage or loss inventory

Answer 21

b

Question 22

The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is what type of cost

Answer 22

an implicit cost

Question 23

joe wants to start his own business. the business he wants to start will require that he purchase a factory that costs $300,000. to finance this purchase, he will use $100,000 of his own money, on which he has been earning 10% interest. in addition, he will borrow $200,000 and he will pay 12% interest on that loan

for the first year of operation, what is the explicit cost of purchasing the factory

Answer 23

24,000

Question 24

joe wants to start his own business. the business he wants to start will require that he purchase a factory that costs $300,000. to finance this purchase, he will use $100,000 of his own money, on which he has been earning 10% interest. in addition, he will borrow $200,000 and he will pay 12% interest on that loan

for the first year of operation, what is the opportunity cost of purchasing the factory?

Answer 24

34,000

Question 25

economic profit is equal to

Answer 25

total revenue - the opportunity cost of producing goods and services

Question 26

accounting profit is equal to

Answer 26

total revenue - the explicit cost of producing goods and services

Question 27

economic profit is equal to

i. total revenue - (explicit costs + implicit costs)
ii. total revenue - opportunity costs
iii. accounting profit + implicit costs

Answer 27

i and ii

Question 28

accounting profit is equal to

a. total revenue - implicit cost s
b. total revenue - opportunity costs
c. economic profit + implicit costs

Answer 28

economic profit _ implicit costs ??