Q: Economic profit is calculated as:

$$\text{Economic profit} = \text{Revenues} - (\text{Explicit costs} + \text{Implicit costs})$$

Question 1

Which of the following is NOT a typical form of business organization described in microeconomics?

Accepted Answer

A cooperative bank

Question 2

A multinational enterprise (MNE) is best defined as:

Accepted Answer

A firm that operates in more than one country

Question 3

Which statement correctly distinguishes financial capital from physical capital?

Accepted Answer

Financial capital is the money used to fund business activities, while physical capital refers to tangible assets

Question 4

Which of the following is an example of an explicit cost for a firm?

Accepted Answer

Interest paid on a bank loan

Question 5

Economic profit is calculated as:

Accepted Answer

$$	ext{Economic profit} = 	ext{Revenues} - (	ext{Explicit costs} + 	ext{Implicit costs})$$

Question 6

If a firm’s total revenue is $$5000$$, explicit costs are $$3000$$, and implicit costs are $$1000$$, what is its economic profit?

Accepted Answer

$$1000$$

Question 7

In the short run, which of the following is true about fixed and variable factors?

Accepted Answer

Fixed factors cannot be changed, while variable factors can be adjusted

Question 8

The law of diminishing marginal returns states that:

Accepted Answer

Each additional unit of a variable factor eventually adds less to total output than the previous unit

Question 9

If the marginal product (MP) of labour is greater than the average product (AP), what happens to the AP?

Accepted Answer

AP increases

Question 10

Which formula correctly expresses average product (AP) of labour?

Accepted Answer

$$AP = TP / L$$

Question 11

Marginal cost (MC) is defined as:

Accepted Answer

$$MC = \Delta TC / \Delta Q$$

Question 12

Which cost curve is typically U-shaped due to the law of diminishing returns?

Accepted Answer

Average total cost (ATC)

Question 13

A firm is producing at a level below the minimum point of its average total cost (ATC) curve. This means:

Accepted Answer

The firm is operating at excess capacity

Question 14

If the price of a variable factor increases, what happens to the firm’s cost curves in the short run?

Accepted Answer

ATC and MC both shift upward

Question 15

Which of the following is true for digital products with near zero marginal costs?

Accepted Answer

The law of diminishing marginal returns does not apply

Question 16

Suppose a firm’s total product (TP) increases from 100 to 120 when labour (L) increases from 5 to 6. What is the marginal product (MP) of the 6th worker?

Accepted Answer

$$MP = 20$$

Question 17

Which of the following is an implicit cost for a firm?

Accepted Answer

The opportunity cost of the owner’s time

Question 18

If a firm’s marginal cost (MC) curve is below its average variable cost (AVC) curve, what happens to the AVC?

Accepted Answer

AVC decreases

Question 19

Which of the following best describes the relationship between accounting profit and economic profit?

Accepted Answer

Accounting profit does not include implicit costs, while economic profit does

Question 20

A firm’s capacity is defined as:

Accepted Answer

The level of output at which average total cost is minimized

Producers in the Short Run: Organization, Financing, and Economic Principles

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