Grand Canyon COURSE FIN & ACC 450, Winter 2014

| August 14, 2017

1. A point on a nation’s
production-possibilities curve represents:
A) Combinations of production that are
unattainable, given current technology and resources
B) The full employment of resources to
achieve a particular combination of goods and services
C) Levels of production that will cause
both unemployment and inflation
D) An undesirable combination of goods and

Opportunity cost may be defined as the:
A) Dollar cost of producing a particular
B) Dollar prices paid for final goods and
C) Difference between wholesale and retail
D) Goods or services that are forgone in
order to obtain something else

Factors of production are:
A) Unlimited in quantity
B) Scarce only in United States
C) Scarce only in the poorest countries of
the world
D) Scarce in every society

Given that resources are scarce:
A) Poor countries must make choices but
rich countries with abundant resources do not have to make choices.
B) Opportunity costs are experienced
whenever choices are made.
C) Some choices involve opportunity costs
while other choices do not.
D) A “free lunch” is possible,
but only for a limited number of people.

5. A
consequence of the economic problem of scarcity is that:
A) There is never too much of any good or
service produced.
B) The production-possibilities curve is
bowed outward.
C) The production of goods and services
must be controlled by the government.
D) Choices have to be made about how
resources are used.

If an economy experiences increasing opportunity costs with respect to two
goods, then the production-possibilities curve between the two goods will be:
A) A straight, downward-sloping line
B) Bowed inward
C) Bowed outward until the two goods are
equal, and then bowed inward
D) Bowed outward

An increase in the capacity to produce can be represented by a movement from

A) A to point C
B) A to point B
C) D to point E
D) C to point E

8. Which of the following is true about the
combination of plasma televisions and MP3 players represented by point F?

A) This economy will never be able to reach
point F.C) Point F is attainable if this economy reduces its unemployment rate.
D) Point F will be more easily attainable
if the government takes control of all privately-run factories.

9. A
movement from point C to point A results in:

A) More efficient production
B) A reallocation of resources from MP3
player production to plasma television production
C) A reallocation of resources from plasma
television production to MP3 player production
D) Permanent unemployment of workers
producing plasma televisions

A shift of the production-possibilities curve from PP1 to PP2 could be caused

A) An increase in the unemployment rate
C) Tougher pollution controls for the
producers of plasma televisions and MP3 players
D) Better use of existing technology

A market is said to be in equilibrium when:
A) The buying intentions of all consumers
are realized.
B) The supply intentions of all sellers are
C) The quantity demanded equals the quantity
D) Demand is fully satisfied at all
alternative prices.

12. the most desirable rate of output for a
firm is the output that:
A) Minimizes marginal costs.
B) Maximizes total profit
C) Maximizes total revenue.
D) Minimizes total costs

Accounting costs and economic costs differ because:
A) Economic costs include implicit costs
and accounting costs do not.
B) Economic costs include explicit costs
and accounting costs do not.
C) Accounting costs include implicit costs
and economic costs do not.
D) Accounting costs include explicit costs
and economic costs do not.

14. Which of the following determinants of demand is most directly an
indication of a consumer’s utility for a good?
A) Income
B) Expectations of future prices
C) Tastes
D) Other goods (availability and prices)

A U-shaped average total cost curve implies:
A) A linear total cost curve
B) First, diminishing returns, and then,
increasing returns
C) That total costs are at a minimum at the
minimum of the average cost curve
D) First, marginal cost below average total
cost, and then marginal cost above average total cost

In the short run, when a firm produces zero output, variable cost equals:
A) Total cost
B) Fixed cost
C) Zero
D) Marginal cost

17. If there is a surplus at a given price,
A) The price is zero.
B) That price is lower than the equilibrium
C) That price is greater than the
equilibrium price.
D) The market is in equilibrium at that

Economies of scale:
A) Exist in both the short run and the long
B) Explain why average total costs decline
as output increases in the long run
C) Explain why average variable and average
total costs decline in the short run
D) Explain why average total costs increase
as output increases in the long run

If Carmen’s Coffee Company wants to increase total revenue and the price
elasticity of demand is 0.43, the company should:
A) Keep the price constant since a price
increase or decrease will cause total revenue to fall.
B) Decrease the price of coffee.
C) Advertise since this is only option that
will increase total revenue.
D) Increase the price of coffee.

When Claudia goes to the gas station she buys 10 gallons of gas no matter what
the price per gallon. What does this imply about her price elasticity of demand
for gasoline?
A) It is unitary.
B) It is perfectly elastic.
C) It is perfectly inelastic.
D) It is relatively elastic.

Total utility is maximized when:
A) Marginal utility is zero.
B) Price is less than marginal utility.
C) Price is equal to marginal utility.
D) Marginal utility is maximized.

When the size of a factory (and all its associated inputs) doubles and, as a
result, output more than doubles:
A) The law of diminishing returns must not
apply in the smaller factory.
B) The short-run ATC curve must be
C) Economies of scale must exist.
D) Marginal costs must be declining.

The additional pleasure or satisfaction from a good declines as more of it is
consumed in a given period. This is the definition of the:
A) Total revenue rule
B) Law of diminishing total utility
C) Law of diminishing marginal utility
D) Law of demand

In the short run, when a firm produces zero output, total cost equals:
A) Zero
B) Variable costs
C) Fixed costs
D) Marginal costs

Assume a series of forest fires reduces the supply of lumber, which is an input
in the production of wooden bats. Baseballs and wooden bats are complements. If
the price of wooden bats increases, we can expect the:
A) Supply of baseballs to increase
B) Supply of baseballs to decrease
C) Demand for baseballs to decrease
D) Demand for baseballs to increase

26. Suppose a university raises its tuition
by 6% and as a result the enrollment of students decreases by 3%. The absolute
value of the price elasticity of demand is:
A) 6.0
B) 0.5
C) 2.0
D) 8.0

27. Maximum total revenue occurs when:
A) Price multiplied by quantity is 1.0.
B) The absolute value of the price
elasticity of demand is 1.0.
C) Total revenue is -1.0.
D) The absolute value of the price
elasticity of demand is 100.

Marginal physical product is the:
A) Change in total input required to
produce one additional unit of output
B) Change in total output associated with
one additional unit of the variable input
C) Number of units of output obtained from
all units of input employed
D) Additional cost of an additional unit of

29. The equilibrium price in a market is
found where:
A) The market supply curve intersects the
B) The market supply curve intersects the
market demand curve.
C) The market demand curve intersects the
D) The market supply curve intersects the

30. When the percentage change in quantity demanded is less than the
percentage change in price, ceteris paribus:
A) Elasticity is impossible to calculate.
B) Demand is elastic.
C) Demand is inelastic.
D) Demand is unitary elastic.

31. Economies of scale are reductions in average:
A) Total cost that result from using
operations of larger size
B) Fixed cost that result from reducing the
firm’s scale of operations
C) Total cost that result from declining
average fixed costs
D) Fixed cost resulting from improved
technology and production efficiency

32. Which of the following is the best explanation of why the law of
diminishing returns does not apply in the long run?
A) In the long run, firms have enough time
to find the most qualified workers.
B) In the long run, firms can increase the
availability of space and equipment to keep up with the increase in variable
C) All factors of production are fixed, in
the long run.
D) The MPP does not change, in the long

The term market mechanism refers to:
A) The use of market prices and sales to
determine resource allocation
B) The establishment of a ceiling price in
a market
C) Government laws and regulations
concerning how the market should operate
D) Supply and demand curves

Assume that pencils and pens are substitutes. If the price of pencils rises,
then we will see:
A) An increase in the supply of pens
B) A decrease in the demand for pens
C) A decrease in the supply of pens
D) An increase in the demand for pens

35. Which of the following is a determinant of supply?
A) Available technology
B) Consumers’ income
C) Suppliers’ tastes for the good they
D) Consumers’ desire for the good

A lower quantity demanded of a good reflects, ceteris paribus:
A) A higher price of the good
B) Fewer units actually purchased
C) A downward shift of the supply curve
D) Lower income

37. A shift in supply is defined as a
change in:
A) Equilibrium quantity
B) Quantity supplied because of a change in
C) Price
D) Supply because of a change in a nonprice

If there is a shortage at a given price, then:
A) That price is greater than the
equilibrium price.
B) That price is less than the equilibrium
C) There is no equilibrium price in the
D) That price is the equilibrium price.

A production function shows the:
A) Minimum amount of output that can be
obtained from alternative combinations of inputs
B) Maximum quantity of inputs required to
produce a given quantity of output
C) Maximum output that can be produced with
varying combinations of factor inputs
D) Output capacity of the entire economy

If the marginal cost curve is rising, then which of the following must be true?

A) The average total cost curve must be
above the marginal cost curve.
B) Total costs must be rising.
C) The average total cost curve must be
below the marginal cost curve.
D) The average total cost curve must be

Jose goes to an all-you-can-eat buffet at a Chinese restaurant and consumes
three plates of food. He does not go back for a fourth plate of food because:
A) His total utility would increase with
the fourth plate of food.
B) He has reached the point of increasing
marginal utility.
C) The price of the fourth plate is too
D) The marginal utility of the fourth plate
would be zero or even negative.

Marginal cost:
A) Falls whenever marginal physical product
B) Rises whenever marginal revenue product
C) Falls in the short run because some
resources are fixed
D) Rises as a direct result of diminishing

43. Which determinant of demand changes in the personal computer market
as more individuals become interested in “surfing the Internet”?
A) Income
B) Expectations
C) Cost of factors of production
D) Number of buyers

44. What is the marginal cost of the 120th unit of output?

A) $1.20
B) $288.00
C) $208.00
D) $200.00

At what output level does diminishing marginal return begin?

A) 120 units
B) 100 units
C) Only the production function will indicate
when diminishing marginal returns begins.
D) 40 units

What is the total cost of 120 units?

A) $34,560
B) $24,960
C) $9,600
D) $10,560

47. At what output does this firm maximize
technical efficiency?
A) 40 units
B) 0 units
C) 120 units
D) 100 units

48. What is the total variable cost when
output is 100 units?

A) $200
B) $20,000
C) $296
D) $9,600

What is the average fixed cost when output is 120 units?
A) $208.00
B) $96.00
C) $80.00
D) $0.67

50. What is the total fixed cost?
A) $10,000
B) $9,600
C) $80
D) $29,600

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