WVU ECON 201 EXAM 3 QUESTIONS
& ACTUAL CORRECT ANSWERS
RATE 100% CORRECT
Business Firm Owners - Correct Answer ✔✔ -produce what consumers want
-keep their costs as low as possible
-create value with resources they use
Economic Profit - Correct Answer ✔✔ total revenue - total explicit & implicit costs
Normal Rate of Return - Correct Answer ✔✔ opportunity cost of using the firm's capital
in its business
Short-Run - Correct Answer ✔✔ -assumption that some productive input (usually
capital) cannot be changed
-costs are fixed
Long-Run - Correct Answer ✔✔ -assuming that the firm can adjust the levels of all
productive inputs
-no costs are fixed
Total Cost - Correct Answer ✔✔ total fixed cost + total variable cost
Average Total Cost - Correct Answer ✔✔ average fixed cost + average variable cost
Law of Diminishing Returns - Correct Answer ✔✔ -adding more of one variable input to
the same fixed input will cause marginal product of the variable input to decline
-only applies to short run costs
What makes cost curves shift? - Correct Answer ✔✔ -input prices
-taxes
-regulations
-technology
Sunk Costs - Correct Answer ✔✔ historical costs that cannot be undone
ex. train tracks
Pure Competition - Correct Answer ✔✔ -flat demand curve
-no firm is large enough to have a noticeable impact on market price
Price Searchers - Correct Answer ✔✔ -downward sloping demand curve
-do not take the market price as given
& ACTUAL CORRECT ANSWERS
RATE 100% CORRECT
Business Firm Owners - Correct Answer ✔✔ -produce what consumers want
-keep their costs as low as possible
-create value with resources they use
Economic Profit - Correct Answer ✔✔ total revenue - total explicit & implicit costs
Normal Rate of Return - Correct Answer ✔✔ opportunity cost of using the firm's capital
in its business
Short-Run - Correct Answer ✔✔ -assumption that some productive input (usually
capital) cannot be changed
-costs are fixed
Long-Run - Correct Answer ✔✔ -assuming that the firm can adjust the levels of all
productive inputs
-no costs are fixed
Total Cost - Correct Answer ✔✔ total fixed cost + total variable cost
Average Total Cost - Correct Answer ✔✔ average fixed cost + average variable cost
Law of Diminishing Returns - Correct Answer ✔✔ -adding more of one variable input to
the same fixed input will cause marginal product of the variable input to decline
-only applies to short run costs
What makes cost curves shift? - Correct Answer ✔✔ -input prices
-taxes
-regulations
-technology
Sunk Costs - Correct Answer ✔✔ historical costs that cannot be undone
ex. train tracks
Pure Competition - Correct Answer ✔✔ -flat demand curve
-no firm is large enough to have a noticeable impact on market price
Price Searchers - Correct Answer ✔✔ -downward sloping demand curve
-do not take the market price as given
