Practice Test-1 on Costs of Production

Question 1: If a firm produces nothing, which of the following costs will be zero ............
  1. fixed cost
  2. total cost
  3. variable cost
  4. opportunity cost
  5. none of the above
Question 2: Total cost is the ................
  1. quantity of output minus the quantity of inputs used to make a good.
  2. market value of the inputs a firm uses in production.
  3. fixed cost less variable cost.
  4. amount a firm receives for the sale of its output. .
Question 3: Profit is defined as ........
  1. total revenue minus total cost.
  2. average revenue minus average total cost.
  3. marginal revenue minus marginal cost.
  4. net revenue minus depreciation.
Question 4: If you sell 100 sandwiches at $4 each. Your total revenues are ........
  1. $500
  2. $200
  3. $300
  4. $400
Question 5: Mary used to work as a waitress, earning $10,000 per year. She gave up that job to open a new coffe shop in her city. In calculating the economic profit of her cafeshop, the $10,000 income that she gave up is counted as part of the coffe shop's ...............
  1. explicit costs.
  2. marginal costs.
  3. opportunity costs
  4. total revenue
Question 6: The value of a business owner's time is an example of ..............
  1. explicit costs.
  2. marginal costs.
  3. total revenue
  4. fixed costs
  5. opportunity costs
Question 7: Which of the following statements is correct?.
  1. Economists consider opportunity costs to be included in a firm's total revenues.
  2. Economists consider opportunity costs to be included in a firm's costs of production.
  3. Opportunity costs equal explicit minus implicit costs.
  4. All of the above are correct.
Question 8: Explicit costs .................
  1. enter into the accountant's measurement of a firm's profit.
  2. enter into the economist's measurement of a firm's profit.
  3. do not require an outlay of money by the firm.
  4. Both a and b are correct.
  5. Both b and c are correct.
Question 9: A difference between explicit and implicit costs is that
  1. implicit costs are greater than explicit costs.
  2. implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.
  3. explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do.
  4. explicit costs are greater than implicit costs
Question 10: Joe gives Mathematics lessons for $10 per hour. He also grows seeds of strawberries plants, which he arranges and sells at the local farmer's market. One day he spends 6 hours planting $65 worth of seeds in his garden. Once the seeds have grown into flowers, he can sell them for $170 at the farmer's market. Which of the following statements is correct regarding Joe's profits from selling strawberries?
  1. Joe's accounting profits are $120, and his economic profits are $50
  2. Joe's accounting profits are $110, and his economic profits are $45
  3. Joe's accounting profits are $105, and his economic profits are $45
  4. Joe's accounting profits are $115, and his economic profits are $55
  5. none of the above


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Date of last modification: 2019