Crash Course Economics Quiz

What is the main difference between accounting profit and economic profit?

• Economic profit is always higher than accounting profit.

• Accounting profit is always higher than economic profit.

• Economic profit includes implicit costs, accounting profit does not.

• Accounting profit includes implicit costs, economic profit does not.

What is an example of a fixed cost for a pizza restaurant?

• Ingredients like wheat and cheese

• The cost of delivery

• Wages paid to workers

• The cost of an oven

What is the Law of Diminishing Marginal Returns?

• Adding more fixed resources to variable resources increases total output.

• Adding more variable resources to fixed resources eventually decreases additional output.

• The more you produce, the lower the total cost.

• The more you produce, the higher the total revenue.

What is a sunk cost?

• A cost that varies with production levels

• A cost that will be incurred in the future

• A cost that has already been paid and cannot be recovered

• A cost that can be recovered

What is the goal of a business in terms of production?

• To minimize fixed costs

• To maximize profit

• To produce as much as possible

• To have the lowest average cost

What does 'produce where MR equals MC' mean?

• Produce where marginal revenue is greater than marginal cost

• Produce where marginal revenue is less than marginal cost

• Produce where marginal revenue equals marginal cost

• Produce where total revenue equals total cost

What is an example of an implicit cost?

• The rent for a pizza shop

• The wages paid to workers

• The cost of ingredients for a pizza

• The income foregone by not working as a lawyer

What is economies of scale?

• The decrease in total cost as production decreases

• The increase in cost per unit as production increases

• The cost advantage of producing more units

• The cost advantage of producing fewer units

Why do companies in competitive markets make no economic profit?

• Because they have high variable costs

• Because competition lowers prices and reduces sales

• Because they have high fixed costs

• Because they do not calculate opportunity costs

What should businesses consider when making future decisions?

• Future benefits and costs

• Only implicit costs

• Only explicit costs

• Sunk costs