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Test Bank Questions with complete Solutions for Microeconomics 100% Pass
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Test Bank Questions with complete Solutions for Microeconomics 100% Pass Which of the following statements regarding accounting profits, opportunity costs, and economic profits is true? - Answers If accounting profits are less than opportunity costs, there will be economic losses. Total revenue...

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  • October 10, 2024
  • 19
  • 2024/2025
  • Exam (elaborations)
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  • microeconomics

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  • Microeconomics

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Test Bank Questions with complete Solutions for Microeconomics 100% Pass

Which of the following statements regarding accounting profits, opportunity costs, and economic profits
is true? - Answers If accounting profits are less than opportunity costs, there will be economic losses.



Total revenue minus explicit costs equals accounting profits. Subtracting opportunity costs from
accounting profits yields economic profits. Therefore, if accounting profits are less than opportunity
costs, there will be economic losses.

Shelby is an entrepreneur who has decided to open a small advertising firm. She rents office space at a
cost of $25,000 per year, she has employed an assistant at a salary of $30,000 per year, and she incurs
annual utility and office supply expenses of $20,000. Her best alternative is to work elsewhere and to
earn a salary of $50,000 per year. How much annual revenue must her firm receive so that Shelby earns
zero economic profit? - Answers $125,000

ABC Limited, Inc., sells its product in a perfectly competitive market for a price of $15 per unit and hires
workers at a daily wage of $75. Labor is the only factor cost, and the firm is currently earning profits. If
ABC hires one more worker and output increases by 5 units per day, the firm's profits will - Answers
remain unchanged

The marginal revenue product of labor is the - Answers additional revenue a firm earns when the firm
employs and additional unit of labor

A perfectly competitive producer of steel rods and steel beams employs 100 workers with identical
skills. If steel rods and steel beams sell for the same price, which of the following rules should the
producer always follow to use the 100 workers efficiently?

I. Allocate workers so that the average cost of producing beams equals the average cost of producing
rods.

II. Allocate workers so that the marginal product of labor is the same in both rod production and beam
production.

III. Allocate half the workers to rod production and half the workers to beam production. - Answers II
only

At 100 units of output, a firm's total cost is $10,000. If the firm's total fixed cost is $4,000, its average
variable cost is equal to - Answers $60

If the marginal cost of producing the first unit of some good is $20 and the marginal cost of producing
the second unit is $30, the average variable cost of producing 2 units is - Answers $25

A firm is producing 100 units of output at a total cost of $400. The firm's average variable cost is $3 per
unit. What is the firm's total fixed cost? - Answers $100

,# workers total product

1 15

2 20

3 24

4 27

5 29

The table above shows the short-run output for a perfectly competitive firm. If the price of the product
is $10, what is the marginal revenue product of the third worker hired? - Answers $40

If labor is the only variable input and it costs $15 per hour and if the marginal product of labor is 3 units
per hour, the short-run marginal cost of 1 unit of output is approximately - Answers $5.00

Marginal resource (factor) cost can be defined as - Answers the change in total resource cost caused by
the addition of one more unit of a resource

# workers total output of coal

00

1 25

2 44

3 60

4 70

5 75

How many workers would the coal company want to hire if the price of coal were competitively priced
at $5 per ton and the wage rate were $40 per day? - Answers 4

# workers total output of coal

00

1 25

2 44

3 60

4 70

, 5 75

The marginal physical product of the second worker is - Answers 19

Short-run marginal costs eventually increase because of the effects of - Answers diminishing marginal
product

The last worker currently employed by a firm has a marginal product of 3 units per hour and is paid $20
per hour. Assuming that both the labor market and product market are perfectly competitive and that
the product's price is $5 per unit, the firm should do which of the following? - Answers employ fewer
workers

In the short run, assume diminishing marginal product of labor sets in with the hiring of the second
worker. Which of the following will remain constant as a firm produces more output? - Answers total
fixed cost



Total fixed cost will remain unchanged as output increases (or decreases) in the short run, since the firm
cannot add more capital resources in the short run.

Suppose that a firm begins to hire workers for a newly completed plant with a fixed amount of
machinery. As the firm hires additional workers, one would expect the marginal product to - Answers
rise initially, but eventually fall

A perfectly competitive profit-maximizing firm will continue to hire additional units of an input as long as
the - Answers value of the marginal product of the input exceeds the price of the input

A profit-maximizing firm should hire an input up to the point at which - Answers marginal revenue
product equals marginal factor cost

Assume that a profit-maximizing, perfectly competitive firm hires labor in a perfectly competitive labor
market. If the market wage is $12 per hour and the price of the product is $3 per unit, the firm will -
Answers hire another worker if the output per hour of the additional worker exceeds 4 units

For a firm hiring labor in a perfectly competitive labor market, the marginal revenue product curve
slopes downward after some point because as more of a factor is employed, which of the following
declines? - Answers marginal product

A profit-maximizing firm will continue to hire workers until the marginal revenue product of labor is
equal to the - Answers marginal factor cost

A firm produces 400 books and sells each book for $15. If the explicit cost of producing the books is
$4,500 and the implicit cost is $1,000, the firm's economic profit is - Answers $500

When marginal product exceeds average product, which of the following must be true? - Answers
average product is increasing

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