Economics 101 -

Question 1

Total costs to the accountant

Answer 1

sum of all the explicit fixed and variable costs of production

Question 2

To the accountant, profits equal:

Answer 2

total revenue minus total cost

Question 3

To the economist, total cost is equal to:

Answer 3

all of the explicit fixed and variable costs plus opportunity cost

Question 4

Opportunity cost

Answer 4

the cost of the next best use of your time or money when you choose to do one thing rather than another

Question 5

To the economist, profits are equal to:

Answer 5

total revenue minus total cost including opportunity cost

Question 6

Revenue

Answer 6

all of the income a business earns

Question 7

all of the income a business earns

Answer 7

revenue

Question 8

the quantity sold multiplied by the price

Answer 8

revenue

Question 9

How to calculate revenue

Answer 9

revenue is equal to the quantity sold multiplied by the price

Question 10

Profit =

Answer 10

Revenue - Cost

Question 11

draw resources to their most efficient use

Answer 11

economic profits

Question 12

when economic profits are equal to zero,

Answer 12

industry is most efficient

Question 13

what do economic profits do?

Answer 13

-they are important because they provide firms in other industries with an incentive to employ their land, labor, capital, and entrepreneurial ability in the economically profitable industry

-they draw resources to their most efficient use

Question 14

When is industry most efficient?

Answer 14

When economic profits are equal to zero

Question 15

Short-run

Answer 15

the period of time in which firms are able to vary only one of the inputs to production, usually labor

Question 16

the period of time in which firms are able to vary only one of the inputs to production, usually labor

Answer 16

short run

Question 17

long run

Answer 17

the period in which firms are able to vary all the inputs in the production process

Question 18

the period in which firms are able to vary all the inputs in the production process

Answer 18

long run

Question 19

What are a firm’s short-run production decisions based on?

Answer 19

They are based on the firm’s production function.

Question 20

What does a production function show?

Answer 20

It shows how a firm’s output changes as it makes changes to a single input, like labor.

Question 21

marginal product

Answer 21

the additional contribution to output from each worker

Question 22

the additional contribution to output from each worker

Answer 22

marginal product

Question 23

diminishing returns

Answer 23

the additional contribution of each worker decreases, but the output still increases

Question 24

the additional contribution of each worker decreases

Answer 24

diminishing returns

Question 25

increasing returns

Answer 25

when a firm adds workers and each additional worker contributes more to output than the previous worker

Question 26

when a firm adds workers and each additional worker contributes more to output than the previous worker

Answer 26

increasing returns

Question 27

negative returns

Answer 27

as firms add workers, both output and marginal product decrease

Question 28

as firms add workers, both output and marginal product decrease

Answer 28

negative returns