ECON 306 Final Exam
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1.
Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?
a. Payments of wages to its office workers.
b. Rent paid for the use of equipment owned by the Schultz Machinery Company.
c. Use of savings to pay operating expenses instead of generating interest income.
d. Economic profits resulting from current production.
2.
Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting:
a. profits were $100,000 and its economic profits were zero.
b. losses were $500,000 and its economic losses were zero.
c. profits were $500,000 and its economic profits were $1 million.
d. profits were zero and its economic losses were $500,000.
3.
Which of the following is a short-run adjustment?
a. A local bakery hires two additional bakers.
b. Six new firms enter the plastics industry.
c. The number of farms in the United States declines by 5 percent.
d. BMW constructs a new assembly plant in South Carolina.
4.
The first, second, and third workers employed by a firm add 24, 18, and 9 units to total product respectively. Therefore, we can conclude that:
a. marginal product of the third worker is 9.
b. the third worker has to work with poorer-quality tools and raw materials.
c. the firm will not want to hire more than three workers.
d. the first worker puts forth more effort than the second and third workers.
5.
In the diagram, the range of diminishing marginal returns is:
a. 0Q3.
b. 0Q2.
c. Q1Q2.
D . Q1Q3.
6.
If you operated a small bakery, which of the following would be a variable cost in the short run?
a. Baking ovens.
b. Interest on business loans.
c. Annual lease payment for use of the building.
d. Baking supplies (flour, salt, etc.).
7.
Economists would describe the...