Question 1. Accounting profits are typically

1. Accounting profits are typically
a. Greater than economic profits, as accounting profits do not include explicit costs
b. smaller than economic profits, as accounting profits do not include explicit costs
c. Greater than economic profits, as accounting profits do not include implicit costs
d. Equal to economic profits in the long-run
2. Which of the following equations is correct?
a. Economic profit = Accounting profit – explicit costs
b. Accounting profit = Total Revenue = (explicit costs + implicit costs)
c. Economic Profit = Accounting profit – implicit costs
d. Normal profit = Accounting profit + economic Profit
3. Suppose that the implicit cost for a business was $1,000 and the explicit cost was $5,000 and that the firm sold 1,000 units of its products at $5 per item. We can conclude that the firm’s
a. Accounting profit was $5,000 and its economic profit was $0
b. Accounting and economic profit were both $0
c. Accounting profit was 0 and economic loss was $1,000
d. Accounting profit was $0 and economic profit was $1,000
4. An example of an implicit cost is
a. A payment to a resource owner
b. A business using a building owned by the owner of the business without paying any rent
c. The payment of interest on a bond
d. Payment of a salary to a CEO of a company
5. If the interest rate is 10%, and a business pays $100,000 for a lease on a factory, the explicit costs are
a. $10,000
b. $110,000
c. $100,000
d. $90,000
6. If the interest rate is 10%, and a business pays $100,000 for a lease on a factory, the implicit costs are
a. $10,000
b. $110,000
c. $90,000
d. $100,000
7. Accounting profits are
a. Total revenue minus normal costs
b. Total revenue minus explicit and implicit costs
c. Total revenue minus explicit costs
d. Total revenue minus implicit costs
8. Owner provided capital or owner provided labor are examples of
a. Implicit costs
b. Accounting costs
c. Explicit costs
d. Normal rate of return
9. Economic profits are
a. Total revenue minus explicit costs
b. Total revenue minus explicit and implicit costs
c. Total revenue minus implicit costs
d. Total revenue minus accounting costs
10. For an economists the short-run means a time period
a. That does not allow the firm to change its plant size
b. That prohibits firms to change the amount of imported resources it uses
c. That prohibits new firms from entering the industry
d. That s between one and five years
11. When E1 Torito is deciding how many waiters to hire for a holiday weekend it is making a _________ decision
a. Long run
b. Fixed input
c. Short run
d. Plant size
12. If a firm can vary all of the factors of production it is operating in
a. The long run
b. The short run
c. Equilibrium
d. The immediate run
13. Which of the following is a long-run adjustment?
a. A company hires ten new management trainees
b. A restaurant hires a new chef
c. A company builds a new manufacturing plant
d. A bank hires a new CEO
14. The change in output caused by a one-unit change in labor is refered to as the
a. Average physical product
b. Total physical product
c. Marginal physical product
d. Compounded physical product
15. Phil found that as he continued to crowd laborers into his hot dog stand that the extra output he was receiving from each additional laborer was beginning to fall off. This is an example of the
a. Law of diminishing marginal utility
b. Law of diminishing returns
c. Law of increasing opportunities
d. Law of demand
16. In the short run total costs
a. Equal to the sum of total fixed costs and total explicit costs
b. Equal the sum of total fixed costs and total variable costs
c. Equal to the sum of total fixed costs and total implicit costs
d. Equal to the sum of total variable costs and total implicit costs
17. As long as output increases
a. Average variable costs will decrease
b. Average total costs will decrease
c. Average fixed costs decrease
d. Marginal costs will decrease

Table 22.4
Total Output Total Costs
0 10
1 18
2 21
3 23
4 24
5 26
6 29
7 33
8 38
9 44
10 51

18. Using Table 22.4. we see that when output is 4 units that average total cost equals
a. 6.0
b. 24
c. 3.5
d. 14
19. In Table 22.4, total fixed costs are

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