Ch 9 & 10 JTCC Review

Economic cost can best be defined as

• any contractual obligation that results in a flow of money expenditures from an enterprise to resource suppliers.

• any contractual obligation to labor or material suppliers

• a payment that must be made to obtain and retain the services of a resource.

• all costs exclusive of payments to fixed factors of production.

An explicit cost is

• omitted when accounting profits are calculated.

• a money payment made for resources not owned by the firm itself.

• an implicit cost to the resource owner who receives that payment.

• always in excess of a resource's opportunity cost.

Which of the following is a short-run adjustment?

• A local bakery hires two additional bakers.

• Six new firms enter the plastics industry.

• The number of farms in the United States declines by 5 percent.

• BMW constructs a new assembly plant in South Carolina.

Accounting profits equal total revenue minus

• total explicit costs.

• total implicit costs.

• total economic costs.

• economic profits.

Maria’s Mexican Cantina is a restaurant that has been around for 30 years. In that time they have remained in the same building and only changed inputs such as staff and the menu. Based on this, we can conclude that Maria’s

• has only ever operated in the short run.

• experienced a long run change whenever it changed personnel.

• has operated in the long run, even though it chose to keep the building input fixed.

• only operated in the long run if other firms entered or left the industry at this time.

Implicit costs are

• the same as economic costs.

• comprised entirely of actual expenses paid by the firm for its inputs.

• opportunity costs of self-employed resources.

• always greater than accounting costs.

The basic characteristic of the short run is that

• barriers to entry prevent new firms from entering the industry.

• the firm does not have sufficient time to change the size of its plant.

• the firm does not have sufficient time to cut its rate of output to zero.

• a firm does not have sufficient time to change the amounts of any of the resources it employs.

The amount of calendar time associated with the long run

• is less than that associated with the immediate market period.

• varies from industry to industry.

• is the same for all firms.

• is, by definition, any length of time greater than one year.

In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies?

• pure monopoly

• oligopoly

• monopolistic competition

• pure competition

An industry comprising 40 firms, each with about 2-3 percent of the total market for a differentiated product, is an example of

• monopolistic competition.

• oligopoly.

• pure monopoly.

• pure competition.