ECON 110 EXAM 3 QUESTIONS AND
ANSWERS 100% PASS 2026/2027
Total revenue - ANS the amount a firm receives from the sale of its output
total cost - ANS the market value of the inputs a firm uses in production
explicit costs - ANS require an outlay of money (paying a worker)
Implicit costs - ANS do not require a cash outlay (opportunity cost of the owner's time)
Accounting profit - ANS total revenue minus total explicit costs
economic profit - ANS total revenue minus total costs (including explicit and implicit costs)
production function - ANS demonstrates the relationship between the quantity of inputs
used to produce a good and the quantity of output of that good
marginal product - ANS the increase in output arising from an additional unit of that input,
holding all other inputs constant
@2026 ALLRIGHTS RESERVED 1
, diminishing marginal product - ANS the marginal product of an input declines as the quantity
of the input increases (other things equal)
marginal cost - ANS increase in total cost from producing one more unit
fixed costs - ANS do not vary with the quantity of output produced
variable costs - ANS vary with the quantity produced
average total cost - ANS total cost divided by the quantity of output
efficient scale - ANS the quantity that minimizes ATC
costs in the short run - ANS some inputs are fixed; the costs of these inputs are FC
costs in the long run - ANS all inputs are variable; ATC at any Q is cost per unit using the most
efficient mix of inputs for that Q
economies of scale - ANS ATC falls as Q increase
constant returns to scale - ANS ATC stays the same as Q increases
diseconomies of scale - ANS ATC rises as Q increases
sunk cost - ANS a cost that has already been committed and cannot be recovered
@2026 ALLRIGHTS RESERVED 2
ANSWERS 100% PASS 2026/2027
Total revenue - ANS the amount a firm receives from the sale of its output
total cost - ANS the market value of the inputs a firm uses in production
explicit costs - ANS require an outlay of money (paying a worker)
Implicit costs - ANS do not require a cash outlay (opportunity cost of the owner's time)
Accounting profit - ANS total revenue minus total explicit costs
economic profit - ANS total revenue minus total costs (including explicit and implicit costs)
production function - ANS demonstrates the relationship between the quantity of inputs
used to produce a good and the quantity of output of that good
marginal product - ANS the increase in output arising from an additional unit of that input,
holding all other inputs constant
@2026 ALLRIGHTS RESERVED 1
, diminishing marginal product - ANS the marginal product of an input declines as the quantity
of the input increases (other things equal)
marginal cost - ANS increase in total cost from producing one more unit
fixed costs - ANS do not vary with the quantity of output produced
variable costs - ANS vary with the quantity produced
average total cost - ANS total cost divided by the quantity of output
efficient scale - ANS the quantity that minimizes ATC
costs in the short run - ANS some inputs are fixed; the costs of these inputs are FC
costs in the long run - ANS all inputs are variable; ATC at any Q is cost per unit using the most
efficient mix of inputs for that Q
economies of scale - ANS ATC falls as Q increase
constant returns to scale - ANS ATC stays the same as Q increases
diseconomies of scale - ANS ATC rises as Q increases
sunk cost - ANS a cost that has already been committed and cannot be recovered
@2026 ALLRIGHTS RESERVED 2
