Question

7. If a firm’s total revenue (TR) just covers ail its opportunity costs then

a. normal profit is zero

b. none are correct

c. TR is equal to its explicit costs

d. economic profit is zero

e. it isn’t earning any type of profit

8. The metaphor “a boat with (too) many captains sails up a mountain” pertains to which of the following concepts:

a. economies and diseconomies of scale

b. the law of diminishing marginal returns

c. productive inefficiency

d. the law of diminishing marginal utility

10. What is the relationship between marginal cost and marginal product?

a. when MP increases, MC increases

b. there is none

c. when marginal product (MP) increases, marginal cost (MC) falls

d. when diminishing marginal returns set in, MCs fall

e. when MP increases, MCs are negative

11. If your overall GPA is 2.00 & you earn a 3.00 this semester, your overall GPA will increase. This demonstrates the basic rule that

a. if the marginal value is greater than average value, average value will increase

b. at a point, diminishing marginal returns to studying take place

c. if the average value is greater than marginal value, marginal value will increase

d. if the average value is greater than total value, total value will increase

12. An upward sloping marginal cost curve always intersects the minimum point of both the average variable & average total cost curves.

False

True

Answer 1

7. Option d. Economic profit includes both opportunity costs and explicit costs

8. Option b.

10. Option c. As they are inversely related

11. Option a. If marginal value increases then average value too increases

12. True. Marginal costs touch both AVC and ATC at its minimum point