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Economics Assessment 1
Economics Assessment 1
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3. Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a
specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were:
A. $100,000 and its economic profits were zero.
B. $200,000 and its economic profits were zero.
C. $100,000 and its economic profits were $100,000.
D. zero and its economic loss was $200,000.
Answer the question on the basis of the following output data for a firm. Assume that the amounts of
all non-labor resources are fixed.
7. Refer to the above data. Diminishing marginal returns become evident with the addition of the:
A. sixth worker.
B. fourth worker.
C. third worker.
D. second worker.
8. Refer to the above data. The marginal product of the sixth worker is:
A. 180 units of output.
B. 30 units of output.
C. 15 units of output.
D. negative.
Refer to the above data. The total variable cost of producing 5 units is
11. Refer to the above data. The total variable cost of producing 5 units is:
A. $61.
B. $48.
C. $37.
D. $24.
12. Refer to the above data. The average total cost of producing 3 units of output is:
A. $14.
B. $12.
C. $13.50.
D. $16.
13. Refer to the above data. The marginal cost of producing the sixth unit of output is:
A. $24.
B. $12.
C. $16.
D. $8.
MC, ATC, AVC and AFC Curves
14. In the above figure, curves 1, 2, 3, and 4 represent the:
A. ATC, MC, AFC, and AVC curves respectively.
B. MC, AFC, AVC, and ATC curves respectively.
C. MC, ATC, AVC, and AFC curves respectively.
D. ATC, AVC, AFC, and MC curves respectively.
16. In which of the following market structures is there clear-cut mutual interdependence with
respect to price-output policies?
A. pure monopoly
B. oligopoly
C. monopolistic competition
D. pure competition
17. Which of the following industries most closely approximates pure competition?
A. agriculture
B. farm implements
C. clothing
D. steel
20. Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely
competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3
at 20 units of output. This corporation:
A. should close down in the short run.
B. is maximizing its profits.
C. is realizing a loss of $60.
D. is realizing an economic profit of $40.
Answer the question on the basis of the following data confronting a firm:
21. Refer to the above data. This firm is selling its output in a(n):
A. monopolistically competitive market.
B. monopolistic market.
C. purely competitive market.
D. oligopolistic market.
22. Refer to the above data. If the firm’s minimum average variable cost is $10, the firm’s profit-
maximizing level of output would be:
A. 2.
B. 3.
C. 4.
D. 5.
The Lowest Price a Purely Competitive Firm Should Produce at is where MC = ATC
23. Refer to the above diagram for a purely competitive producer. The lowest price at which the firm
should produce (as opposed to shutting down) is:
A. P1.
B. P2.
C. P3.
D. P4.
Answer the question on the basis of the following cost data for a firm that is selling in a purely
competitive market:
If the market price for the firm’s product is $12, the competitive firm will produce:
25. Refer to the above data. If the market price for the firm’s product is $12, the competitive firm will
produce:
A. 4 units at a loss of $109.
B. 4 units at an economic profit of $31.75.
C. 8 units at a loss of $48.80.
D. zero units at a loss of $100.
26. Refer to the above data. If the market price for the firm’s product is $32, the competitive firm will
produce:
A. 8 units at an economic profit of $16.
B. 6 units at an economic profit of $7.98.
C. 10 units at an economic profit of $4.
D. 7 units at an economic profit of $41.50.
28. Refer to the above diagram. At P1, this firm will produce:
A. 47 units and break even.
B. 47 units and realize an economic profit.
C. 66 units and earn only a normal profit.
D. 24 units and earn only a normal profit.