Econ 102 – If, As An Entrepreneur

1)If, as an entrepreneur, I am earning accounting profits of \$50,000 per year and theopportunity cost of my time is \$60,000,A. I am earning economic profits of \$10,000B. I am earning economic profits of \$50,000C. I should close my businessD. I am in a long-run equilibrium position2) If, as an entrepreneur, I am earning accounting profits of \$50,000 per year andthe opportunity cost of my time is \$60,000,A. I am earning economic profits of \$10,000B. I am earning economic profits of \$50,000C. I should close my businessD. I am in a long-run equilibrium position 3)In Table B, assume all workers get paid the same wage rate of w = \$60. Assumethat there are no costs associated with capital (TFC = 0). Which of the following istrue? Hint: You can add the MC column to the table and use MC = w/MPL to fill it in.A. The marginal cost of sandwiches made by the 6th worker is \$2.B. The sandwich with the lowest marginal cost was made by worker #4.C. The marginal cost of sandwiches increases when L increases from 3 to 4 D. The marginal cost of sandwiches increases when L increases from 6 to 7E. The marginal cost of all sandwiches is the same.F. Both [A] and [D] are true.4)In Table B, assume all workers get paid the same wage rate of w = \$60. Assume thatthere are no costs associated with capital (TFC = 0). Which of the following is true?Hint: You can add the TC and TVC columns to the table. The costs are found using thecosts associated with hiring more workers.A. The average variable cost of sandwiches will always decrease when we hire moreworkers since we are spreading overhead costsB. The average variable cost of sandwiches begins to increase with worker #3C. The average variable cost of sandwiches is minimized when L = 4D. The average variable cost of sandwiches is \$6 when 6 workers are employedE. The average variable cost of sandwiches is \$5 when 5 workers are employed5)Paul currently earns a salary of \$1,540 per week as an economics instructor. His nextbest career would have been an assistant manager at Nittany Burger, where he wouldhave earned \$24 per hour, and would have worked for 40 hours per week. What weeklyeconomic rent does Paul receive from being an economics instructor?A. A. \$960 B. B. \$1,540 C. C. \$24 D. D. \$1,516 E. E. \$580 F. F. \$0 since he is in the his first chosencareer 6) If average variable costs are increasing while average total costs are decreasing, thenA. A. marginal cost must lie between average variable andaverage total costs.B. B. marginal cost must equal average variable cost.C. C. marginal cost must equal average total cost.D. D. fixed costs must be zero. 7) FatGear Corporation has recently finished building a new factory. They movedinto the factory a month ago and found that it is the perfect size given the amountthey want to produce. FatGear is operating in theA. production timeB. corporatin timeC. long runD. short runE. profitable margin8)Suppose a firm doubles its output in the long run. At the same time the average costof production remains unchanged. We can conclude that the firm isA. exploiting the economies of scale available to it.B. facing constant returns to scale.C. facing diseconomies of scale.D. not using the available technology efficiently.9)When total product is rising,A.fixed cost must be rising.B.marginal product must be positive.C.variable cost must be declining.D.marginal product must be negative.10) If average total cost is decreasing as more and more units are produced, thenmarginal cost must beA. risingB. constantC. negativeD. below average total costE. equal to average total cost11)Which of the following statements is FALSE?A. Included in the firm’s short-run production function are both fixed and variable inputs.B. An efficient firm can obtain more output than the production function shows.C. The production function shows the technical relationship between a firm’s inputs andoutputs. D. The production function presents the technically efficient methods of combining inputs toproduce output.12) In the above figure, point B is calledA. the maximum efficient scale.B. the minimum efficient scale.C. the planning horizon.D. the point of diminishing marginal product.