Question 1

Tudor's Deli and Catering could have sold their delivery van on December 31, 2010 for $16,000. If they could sell the same van on December 31, 2011, for $13,000, then the economic depreciation in 2011 for this van
A) is $13,000.
B) is $16,000.
C) is $29,000.
D) is $3,000.

Accepted Answer

Economic depreciation is the decrease in the value of an asset over a period of time. In this case, the van's value decreased from $16,000 to $13,000, so the economic depreciation in 2011 is $3,000.

Question 2

Firms that survive in the long run are usually those that
A) become as large as possible.
B) remain small.
C) use more capital rather than more labor.
D) earn the largest possible profit.

Accepted Answer

D

Question 3

________ is the change in market value of capital over a given period.
A) Accounting depreciation
B) Implicit rental rate
C) Economic depreciation
D) Accounting implicit rental cost

Accepted Answer

Economic depreciation is the change in market value of capital and is based on market conditions such as technological advancements, changes in production processes, or shifts in consumer demand. Accounting depreciation, on the other hand, is the allocation of the cost of an asset over its useful life for tax and accounting purposes. Implicit rental rate and accounting implicit rental cost are related to the cost of capital but do not specifically refer to the change in market value of capital over time.

Question 4

If instead of working on his own as a consultant making $25,000, Joe takes a job at a bank, the $25,000 is
A) an opportunity cost.
B) a depreciation.
C) a loss.
D) an accounting profit.

Accepted Answer

The $25,000 Joe could have earned working as a consultant is the opportunity cost of him taking a job at a bank instead. Opportunity cost refers to the value of the next best alternative that has to be given up in order to choose an option.

Question 5

Which of the following costs are part of a firm's opportunity costs? I. costs for resources bought in markets
II) costs for resources the firm owns
III) costs for resources supplied by the owner
A) I and II
B) I and III
C) I only
D) I, II, and III

Accepted Answer

The answer of Which of the following costs are part...

Question 6

Profit maximization
A) makes a firm become as large as possible.
B) makes a firm remain small in the long run.
C) increases the likelihood that a firm will survive.
D) leads a firm to become the target of a takeover.

Accepted Answer

Profit maximization helps a firm generate higher profits, which can be utilized to invest in new and innovative projects, expand the business and improve the company's market share. These actions increase the likelihood that a firm will survive in the long run. However, becoming as large as possible (A) or remaining small (B) are not the main objectives of profit maximization. Similarly, profit maximization does not necessarily lead a firm to become a target of takeover (D).

Question 7

Costs as measured by accountants generally does not include
A) any of the opportunity costs of the firm.
B) any measure of depreciation.
C) the economic depreciation of the firm's equipment.
D) any rental rates.

Accepted Answer

The answer of Costs as measured by accountants generally does...

Question 8

The most important goal of the firm is to
A) maximize its revenues.
B) maximize its sales volume.
C) maximize its profits.
D) minimize its costs.

Accepted Answer

The ultimate goal of any firm is to maximize its profits, as this allows it to invest in its operations, pay its employees, and reward its shareholders. While revenue and sales volume are important measures of a firm's success, they do not necessarily lead to higher profits. Minimizing costs is important, but only to the extent that it allows the firm to maximize its profits.

Question 9

An electrician quits her current job, which pays $40,000 per year. She can take a job with another firm for $45,000 per year or work for herself. The opportunity cost of working for herself is
A) $5,000.
B) $40,000.
C) $45,000.
D) $85,000.

Accepted Answer

The answer of An electrician quits her current job, which...

Question 10

The implicit rental rate for capital is
A) an accounting cost.
B) part of the firm's normal profit.
C) an opportunity cost.
D) a cost that is irrelevant to the business.

Accepted Answer

The implicit rental rate for capital is the opportunity cost of using capital that is owned rather than renting it out to someone else. It represents the forgone income that could have been earned by renting out the capital. Therefore, it is an opportunity cost.

Question 11

Wanda takes $3,000 from her savings account that pays 5 percent interest per year and uses the funds to purchase a computer for $3,000 for her business. At the end of the year the computer is worth $2,000. Wanda pays an implicit rental rate of ________ a year.
A) $1,150
B) $4,000
C) $3,150
D) zero

Accepted Answer

The answer of Wanda takes $3,000 from her savings account...

Question 12

The implicit rental rate for capital includes the
A) total value of a piece of capital equipment.
B) interest income forgone by purchasing the piece of capital equipment.
C) firm's normal profit.
D) amount paid for the use of a piece of capital equipment owned by someone else.

Accepted Answer

The implicit rental rate for capital refers to the opportunity cost of utilizing capital equipment instead of investing the same money in a financial asset that earns interest. Therefore, it includes the interest income forgone by purchasing the piece of capital equipment.

Question 13

A firm's basic goal is best described as
A) maximizing total revenue.
B) maximizing sales.
C) maximizing profit.
D) minimizing total cost.

Accepted Answer

The ultimate goal of any firm is to make profits. Maximizing revenue or sales does not necessarily mean maximizing profits, as it is important to also consider the costs incurred in generating that revenue or sales. Minimizing total cost is also important, but it is not the primary goal of the firm as it is a means to the end goal of maximizing profits.

Question 14

Over a given period, economic depreciation is the change in capital equipment's
A) output.
B) market value.
C) rate of return.
D) cost of maintenance.

Accepted Answer

Economic depreciation is the decrease in market value of capital equipment due to wear and tear and obsolescence over time. It is not related to changes in output or rate of return, although it may impact the cost of maintenance.

Question 15

The difference between the market price of a new car used by a firm and the market price of the same car one year later is known as
A) economic depreciation.
B) physical depreciation.
C) economic deterioration.
D) physical deterioration.

Accepted Answer

The difference between the market price of a new car and the market price of the same car one year later is due to economic depreciation, which is the decrease in value of an asset over time due to factors such as wear and tear, technological advancements, and changes in market demand. Physical depreciation refers specifically to the wear and tear on the physical components of an asset, while economic deterioration is a broader term that can refer to any decrease in value due to economic factors.

Question 16

Firms use incentives to pursue their most fundamental goal, which is to maximize
A) profits.
B) sales revenue.
C) worker satisfaction.
D) worker pay.

Accepted Answer

The ultimate goal of a firm is to maximize profits, as it is necessary for the survival and growth of the company. Incentives are one way for firms to motivate employees to work towards this goal. Sales revenue, worker satisfaction, and worker pay may also be important, but they are intermediate goals that contribute to the overall objective of maximizing profits.

Question 17

A firm's opportunity costs ________.
A) equal the costs of resources it buys from others in the market
B) include the cost of using resources owned by the firm
C) increase when economies of scope exist
D) do not include any opportunity costs for resources the owner suppliers

Accepted Answer

Opportunity costs include the cost of using resources owned by the firm in addition to the costs of resources bought from others in the market. The existence of economies of scope does not necessarily affect opportunity costs. The owner supplying resources still incurs opportunity costs when using those resources.

Question 18

Economic depreciation is the
A) firm's opportunity cost of using its own capital.
B) change in the market value of capital over a given period.
C) return that an entrepreneur can expect to receive on average.
D) forgone return on the funds used to buy capital.

Accepted Answer

The answer of Economic depreciation is the
A) firm's opportunity cost...

Question 19

Which of the following is part of a firm's opportunity costs? I. wages
II) utility costs
III) interest on a bank loan
IV) interest forgone on funds used to buy capital equipment
A) I and II
B) III and IV
C) I, II and III
D) I, II, III and IV

Accepted Answer

The answer of Which of the following is part of...

Question 20

Which of the following are two components of the opportunity cost of using capital already owned by the firm?
A) economic profit and normal profit
B) implicit rental rate and economic profit
C) explicit rental rate and economic costs
D) economic depreciation and forgone interest

Accepted Answer

The answer of Which of the following are two components...

Quiz 10: Organizing Production

Tudor's Deli and Catering could have sold their delivery van on December 31, 2010 for $16,000. If they could sell the same van on December 31, 2011, for $13,000, then the economic depreciation in 2011 for this van

Firms that survive in the long run are usually those that

________ is the change in market value of capital over a given period.

If instead of working on his own as a consultant making $25,000, Joe takes a job at a bank, the $25,000 is

Which of the following costs are part of a firm's opportunity costs? I. costs for resources bought in markets II) costs for resources the firm owns III) costs for resources supplied by the owner

Profit maximization

Costs as measured by accountants generally does not include

The most important goal of the firm is to

An electrician quits her current job, which pays $40,000 per year. She can take a job with another firm for $45,000 per year or work for herself. The opportunity cost of working for herself is

The implicit rental rate for capital is

Wanda takes $3,000 from her savings account that pays 5 percent interest per year and uses the funds to purchase a computer for $3,000 for her business. At the end of the year the computer is worth $2,000. Wanda pays an implicit rental rate of ________ a year.

The implicit rental rate for capital includes the

A firm's basic goal is best described as

Over a given period, economic depreciation is the change in capital equipment's

The difference between the market price of a new car used by a firm and the market price of the same car one year later is known as

Firms use incentives to pursue their most fundamental goal, which is to maximize

A firm's opportunity costs ________.

Economic depreciation is the

Which of the following is part of a firm's opportunity costs? I. wages II) utility costs III) interest on a bank loan IV) interest forgone on funds used to buy capital equipment

Which of the following are two components of the opportunity cost of using capital already owned by the firm?