chapter8 practice questions

chapter8 practice questions - Chapter 8 1. Which of the...

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Chapter 8 1. Which of the following is not an example of explicit costs? A) Wages paid to workers B) Personal savings of the owner invested in the firm C) Salaries paid to management D) Office space rent 2. If you were to start your own business, your implicit costs would include A) rent that you have paid in advance for use of a building. B) the opportunity cost of your time. C) profit over and above normal profit D) interest that you pay on your business loans. 3. Suppose you quit your job to start a business. In the first month, your total revenue was $6,000. You paid $1,000 in monthly rent for office space. $ 200 in monthly rent for equipment. $3,000 to your workers in wages for the month. $1,000 for the supplies you used that month. You determine that your true profit that month was negative $200. Why? A) You did the math incorrectly. B) You accounted for lost salary of $200. C) You accounted for lost salary of $1000. D) Your equipment rent is an implicit cost. 4. If a firm is earning zero economic profits A) its revenues are sufficient to pay explicit costs, but not implicit costs. B) the owner will not be able to pay himself or herself a salary. C) it will shut down in the long run, but will continue to operate in the short run. D) the owners are earning a return on their time and investment that is equal to the opportunity costs of that time and investment. Use the following to answer questions 5-10: Chris was the business manager for a real estate firm earning an annual salary of $40,000. Then Chris decided to become a consultant. Chris hired an administrative assistant at $15,000 per year and rents office space (utilities included) for $3,000 per month. Chris earned $100,000 in total revenue the first year. 1
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A) $15,000 B) $18,000 C) $36,000 D) $51,000 6. What is Chris's implicit cost? A) $15,000 B) $18,000 C) $36,000 D) $40,000 7. Chris's opportunity cost of running her own business is______ which is the_______. A) $ 15,000; implicit cost B) $ 51,000; explicit cost C) $ 40,000; implicit cost D) $ 51,000; economic cost 8. Chris's accounting profit is _______. A) $100,000 B) $64,000 C) $49,000 D) $9,000 9. Chris's economic profit is _______. A) $100,000 B) $9,000 C) $64,000 D) $49,000 10. In order for Chris to earn normal profit, her accounting profit would have to be _______. A) $51,000 B) $40,000 C) 0 D) $9,000 11. In the perfectly competitive industry, economic profits A) include only explicit costs. B) equal accounting profits plus implicit costs. C) serve to motivate entry or exit.
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This note was uploaded on 02/04/2011 for the course ECON 1 taught by Professor Tang during the Spring '08 term at UCSD.

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chapter8 practice questions - Chapter 8 1. Which of the...

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