Econ+20A+F09+-+Midterm+2+Sample+Questions 09f

Econ+20A+F09+-+Midterm+2+Sample+Questions 09f - Name Class...

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Name: ________________________ Class: ___________________ Date: __________ ID: A 1 ECON 20A - Midterm 2 Sample Questions Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Economists normally assume that the goal of a firm is to earn (i) profits as large as possible, even if it means reducing output. (ii) profits as large as possible, even if it means incurring a higher total cost. (iii) revenues as large as possible, even if it reduces profits. a. (i) and (ii) are true. b. (i) and (iii) are true. c. (ii) and (iii) are true. d. (i), (ii), and (iii) are true. ____ 2. An entrepreneur’s motivation to start a business arises from a. an innate love for the type of business that he or she starts. b. a desire to earn a profit. c. an altruistic desire to provide the world with a good product. d. All of the above could be correct. ____ 3. When a firm is making a profit-maximizing production decision, which of the following principles of economics is likely to be most important to the firm's decision? a. The cost of something is what you give up to get it. b. A country's standard of living depends on its ability to produce goods and services. c. Prices rise when the government prints too much money. d. Governments can sometimes improve market outcomes. ____ 4. Gordon is a senior majoring in computer network development at Smart State University. While he has been attending college, Gordon started a computer consulting business to help senior citizens set up their network connections and teach them how to use e-mail. Gordon charges $25 per hour for his consulting services. Gordon also works 5 hours a week for the Economics Department to maintain that department's Web page. The Economics Department pays Gordon $20 per hour. From this information we can conclude: a. Gordon should increase the number of hours he works for the Economics Department to make it comparable to his consulting business income. b. Gordon is obviously not maximizing his well-being if he continues to work for the Economics Department. c. If Gordon chooses one hour at the beach with his friends rather than spend one more hour with a consulting client, the forgone income of $25 is considered a cost of the choice to go to the beach. d. Both b and c are correct
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Name: ________________________ ID: A 2 ____ 5. Bev is opening her own court-reporting business. She financed the business by withdrawing money from her personal savings account. When she closed the account, the bank representative mentioned that she would have earned $300 in interest next year. If Bev hadn’t opened her own business, she would have earned a salary of $25,000. In her first year, Bev’s revenues were $30,000. Which of the following statements is correct? a. Bev’s total explicit costs are $25,300. b. Bev’s total implicit costs are $300. c. Bev’s accounting profits exceed her economic profits by $300. d. Bev’s economic profit is $4,700.
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This note was uploaded on 03/11/2012 for the course ECON 20A 45206 taught by Professor Chen during the Spring '12 term at UC Irvine.

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Econ+20A+F09+-+Midterm+2+Sample+Questions 09f - Name Class...

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