chapter 1-6 - • • • • • • Question 1 • 0.3...

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Unformatted text preview: • • • • • • Question 1 • 0.3 out of 0.3 points During a year of operation, a firm collects $450,000 in revenue and spends $100,000 on labor expense, raw materials, rent, and utilities. The firm's owner has provided $750,000 of her own money instead of investing the money and earning a 10% annual rate of return. What is the explicit opportunity cost of using market- supplied resources? Selected Answer: Correct Answer: Question 2 0.3 out of 0.3 points Using the same facts as Question 1: What is the implicit opportunity costs of using owner-supplied resources? Selected Answer: Correct Answer: Feedback : Implicit Costs = Opportunity Cost of Owner-Supplied Resource Implicit Costs = Owners Capital * Potential Return on Investment Implicit Costs = $750,000 * 10% Implicit Costs = $75,000 Question 3 0.3 out of 0.3 points Using the same facts as Question 1: What is the total economic cost? Selected Answer: Correct Answer: Feedback : Economic Cost = Explicit Costs + Implicit Costs Economic Cost = $100,000 + $75,000 Economic Cost = $175,000 Question 4 0.3 out of 0.3 points Using the same facts as Question 1: What is the firm's economic profit? Selected Answer: Correct Answer: Feedback : Economic Profit = Total Revenue - Total Economic Cost Economic Profit = $450,000 - $175,000 Economic Profit = $275,000 Question 5 0.3 out of 0.3 points Using the same facts as Question 1: What is the firm's accounting profit? Selected Answer: Correct Answer: Feedback : Accounting Profit = Total Revenue - Explicit Costs Accounting Profit = $450,000 - $100,000 Accounting Profit = $350,000 Question 6 0.3 out of 0.3 points Using the same facts as Question 1, except assume the owner could earn 15% annually on the money she has invested in the firm: What is the economic profit of the firm? (When revenue is $450,000) Selected Answer: Correct Answer: Feedback: Implicit Costs = $750,000 * 15% Implicit Costs = $112,500 Economic Profit = Total Revenue - Explicit Costs - Implicit Costs Economic Profit = $450,000 - $100,000 - $112,500 Economic Profit = $237,500 Question 7 3.2 out of 3.2 points Select the correct term to fill in the blanks. Question When a firm earns zero economic profit, ________ equals total economic cost. When a firm earns zero economic profit, ________ profit is positive. ________ profit best measures the performance of a firm because it considers all the costs to a firm of using resources. The value of a firm is ________ the higher is the risk premium used to compute the firm's value. In markets characterized by monopolistic competition, a large number of relatively small firms sell a ________ product. The value of a firm is ________ the lower is the risk premium used to compute the firm's value....
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chapter 1-6 - • • • • • • Question 1 • 0.3...

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