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2. (TCO 3) The main difference between 'economic profit' and 'accounting profit' is that (Points: 3) economic profit considers economic costs that are out of pocket costs firms pay, but not opportunity costs. economic profit considers economic costs that are out of pocket costs firms pay as well as opportunity costs. economics profits are only paid in leap years. accounting profit is what's left over from sales after the firm has paid all its economic costs 3. (TCO 3) The 'addition' to a business firm's 'total revenue' that comes from selling 'one more' output is (Points: 3) normal profit [break-even]. marginal costs. marginal revenue. total revenue. 4. (TCO 3) When output is zero, variable cost is: (Points: 3) zero more than zero unknown 5. (TCO 3) Which is most clearly a fixed cost? (Points: 3) insurance premiums wages of factory workers advertising expenses costs of raw materials 6. (TCO 3). The 'law of diminishing marginal returns' implies (Points: 3) the more hours you spend studying economics the less you will know. your understanding of economics will be increased by decreasing your marginal study time. after a certain point, the more hours you spend studying economics per day, the less you will learn with each added hour. the more hours you spend studying economics per day, the more you will learn with each added hour. 7. (TCO 3) The 'law of diminishing returns' may also be called the law of (Points: 3) diminishing marginal output diminishing positive returns negative returns increasing returns 8. (TCO 3) If a firm's 'total cost' equals 'total revenue,' then 'economic profit' (Points: 3) exceeds normal profit [break-even]. is zero. equals fixed costs. equals variable costs. equals accounting costs. 9. (TCO 3) Suppose that a firm incurs a total cost of $950 when it produces 10 units and a total cost of $1,060 when it produces 11 units. It can be concluded that the marginal cost of producing the eleventh unit is (Points: 3) 95 110 106 201 10. (TCO 3) When 'diminishing marginal returns' set in, (Points: 3) the total variable cost starts to rise. the total cost starts to rise. the average total cost starts to rise. the average variable cost starts to rise. the marginal output starts to fall. 11. (TCO 3) Which statement is correct? (Points: 3) Accounting profits are greater than economic profits Economic profits are greater than accounting profits Accounting profits are always equal to economic profits Accounting profits can not be compared to economic profits 12. (TCO 3) The thing that permits monopolistic competitors to advertise in order to increase demand or to make the demand curve more inelastic is: (Points: 3) Product differentiation Control over price Large numbers of sellers Perfectly elastic demand curve 13. (TCO 3) Price is "given" to the individual firm in a 'Perfectly Competitive' industry because: (Points: 3) Consumers have no good substitutes for the output of this industry. Demand for the firm's output is perfectly elastic. Price discrimination is very great among firms in this industry. Market demand for the firm's output changes as the firm's output changes. 14. (TCO 3) Local gas and electric companies are: (Points: 3) Oligopolies Natural Monopolies Monopolistic Competitors Perfect Competitors 15. (TCO 3) The monopolistically competitive firm faces:
(Points: 3) a horizontal demand curve a downward sloping demand curve a vertical demand curve none of the above 16. (TCO 3) Oligopoly refers to: (Points: 3) an industry with a large number of sellers, none of which has any influence on the price of its product a group of firms that have decided to act as a single firm to control the industry an industry with few firms, each producing a large proportion of the total industry none of the above 17. (TCO 3) The kinked demand curve under fierce competition explains: (Points: 3) rapid price fluctuations in monopoly markets price rigidity in purely competitive markets price rigidity in oligopolistic industries none of the above 18. (TCO 3) Which is a tactic that has been used by the 'price leader' in the price leadership model of 'oligopoly'? (Points: 3) Prime rate set by big banks Constant price changes Expanding a fierce price war with competitors Giving no announcement of a price change 19. (TCO 3) A monopolist will maximize profits or minimize losses by producing at that point which (Points: 3) Marginal revenue equal price Average cost equals price Marginal cost equals price Marginal revenue equals marginal cost 20. (TCO 3) If both a 'perfectly competitive' producer and a 'monopolist' have the same identical costs, the 'monopolist' will: (Points: 3) Produce a larger output and charge a higher price than the perfect competitor. Produce a larger output and charge a lower price than the perfect competitor. Produce a smaller output and charge a lower price than the perfect competitor. Produce a smaller output and charge a higher price than the perfect competitor.