Question 1. Business profit is:

04 Jun Question 1. Business profit is:

Question
1. Business profit is:

a. a normal rate of return.

b. the residual of sales revenue minus the explicit accounting costs of doing business.

c. economic profit.

d. the return on stockholders’ equity.

2. Government regulation is important because government:

a. uses scarce resources.

b. produces most of society’s services output.

c. produces most of society’s material output.

d. regulation reduces public-sector employment.

3. Warren Buffett looks for “wonderful businesses” that feature:

a. ongoing innovation.

b. consistent earnings growth.

c. large capital investment.

d. complicated business strategies.

4. Profit maximization is narrower than value maximization because it does not consider:

a. total revenues.

b. interest rates.

c. real-world constraints.

d. total costs.

5. The return to owner-provided inputs is an:

a. economic rent.

b. implicit cost.

c. entrepreneurial profit.

d. explicit cost.

6. Economic profit equals:

a. normal profits plus opportunity costs.

b. business profits plus implicit costs.

c. business profits minus implicit costs.

d. normal profits minus opportunity costs.

7. The value of a firm is equal to:

a. the present value of all future revenues.

b. the present value of all future cash flows.

c. the present value of tangible assets.

d. current revenues less current costs.

8. Holding all else equal, the value of the firm rises with a decrease in:

a. interest rates.

b. product prices.

c. certainty.

d. total revenue.

9. The optimal decision:

a. is most consistent with managerial objectives.

b. minimizes the marginal cost of production.

c. minimizes production costs.

d. minimizes the average cost of production.

10. An equation is:

a. an analytical expressions of functional relationships.

b. a visual representation of data.

c. a table of electronically stored data.

d. a list of economic data.

11. Marginal cost is:

a. the change in output following a one-dollar change in cost.

b. the change in cost following a one-unit change in input.

c. the change in average cost following a one-unit change in output.

d. the change in cost following a one-unit change in output.

12.The breakeven level of output occurs where:

a. marginal cost equals average cost.

b. marginal profit equals zero.

c. total profit equals zero.

d. marginal cost equals marginal revenue.

Table 1. Output (Q), Marginal Revenue (MR), and Marginal Cost (MC) data.

Output (Q) Marginal Revenue (MR) Marginal Cost (MC)

0 – 7

1 30 8

2 20 9

3 10 10

4 0 11

13. Refer to Table 1, revenue is maximized when output level is

a. 1

b. 2

c. 3

d. 4

14. Refer to Table 1, profit is maximized when output level is

a. 1

b. 2