ECO111 Chapter 13

What is the primary goal of a firm in economics?

• Maximizing revenue

• Minimizing costs

• Maximizing profit

• Increasing market share

Profit is calculated as:

• Total revenue minus fixed costs

• Total revenue minus total cost

• Total revenue divided by quantity

• Total cost minus explicit costs

What is the difference between explicit and implicit costs?

• Explicit costs are not recorded in financial statements

• Implicit costs require cash payments, while explicit costs do not

• Explicit costs require a monetary outlay, while implicit costs represent opportunity costs

• Implicit costs are always larger than explicit costs

Which of the following is an example of an implicit cost?

• Rent paid for an office space

• Wages paid to employees

• Interest that could have been earned on owner's capital

• Utility bills for a factory

Accounting profit differs from economic profit because accounting profit excludes:

• Explicit costs

• Implicit costs

• Total revenue

• Variable costs

The production function shows the relationship between:

• Revenue and costs

• Inputs and output

• Fixed and variable costs

• Profit and total revenue

The marginal product of labor (MPL) is defined as:

• The total amount of output produced

• The additional output produced when one more unit of labor is added

• The ratio of fixed to variable costs

• The increase in cost when labor is hired

Diminishing marginal product occurs when:

• Total output decreases as more inputs are used

• The additional output from an extra worker declines

• Fixed costs increase with production

• The marginal cost remains constant

What is the relationship between total cost (TC), fixed cost (FC), and variable cost (VC)?

• TC = FC + VC

• TC = FC × VC

• TC = FC - VC

• TC = FC ÷ VC

A firm's short-run costs include:

• Only fixed costs

• Only variable costs

• Both fixed and variable costs

• No costs