Answer Key - Assignment One - Chapters 1 & 2—The One Lesson of Business & Benefits, Costs, and Decisions

Answer Key - Assignment One - Chapters 1 & 2—The One Lesson of Business & Benefits, Costs, and Decisions Answer Key - Assignment One - Chapters 1 & 2—The One Lesson of Business & Benefits, Costs, and Decisions MULTIPLE CHOICE 1. One lesson of business: a. is tracing the consequences of a policy. b. promoting a policy change to eradicate inefficiencies. c. moving assets from lower to higher value uses, thereby creating wealth. d. None of the above 2. An individual’s value for a good or service is the a. The amount of money he or she used to pay for a good b. The amount of money he or she is willing to pay for it c. The amount of money he or she has to spend on goods d. None of the above 3. The difference between Capitalism and Socialism is that a. Capitalism is concerned more about how to slice up the “pie” b. Socialism is concerned with making the “pie” as large as possible c. Capitalism is concerned with making the “pie” as large as possible d. Both A and B 4. A consumer values a car at $30,000 and a producer values the same car at $20,000. If the transaction is completed at $24,000, the transaction will generate: a. No surplus b. $4,000 worth of seller surplus and unknown amount of buyer surplus c. $6,000 worth of buyer surplus and $4,000 of seller surplus d. $6,000 worth of buyer surplus and unknown amount of seller surplus 5. A consumer values a car at $30,000 and a producer values the same car at $20,000. The transaction will not take place if a tax is imposed a. equal to the seller surplus b. smaller than the total surplus c. larger than the total surplus d. smaller than the buyer surplus 6. A consumer values a car at $30,000 and a producer values the same car at $20,000. If the transaction is completed at $24,000, what level of sales tax will result in unconsummated transaction? a. 0% b. 25% c. 20% d. 40% 7. A buyer values a house at $525,000 and a seller values the same house at $485,000. If sales tax is 8% and is levied on the buyer, then, what would be the highest price that the buyer would be willing to pay? a. $525,000 b. $523,800 c. $485,000 d. $486,111 8. The difference between the maximum price the consumer is willing to pay and the price the consumer actually pays for a product is referred to as: a. market surplus. b. market shortage. c. consumer surplus. d. producer surplus. 9. Price ceilings are primarily intended to help a. No one b. Consumers c. Producers d. Government 10. Government can intervene in the market through a. Price floors b. Price ceilings c. Taxes d. All the above 11. Variable costs are a. costs that vary with output b. not important in decision making c. costs that do not vary with output d. equal to total costs 12. A business incurs the following costs per unit: Labor $125/unit; Materials $45/unit and rent $250,000/month. If the firm produces 1,000,000 units a month, the total variable costs equal a. $125Million b. $45Million c. $1Million d. $170Million 13. Jane makes 1000 items a day. Each day she spends 8 hours producing those items. If hired elsewhere she could have earned $250 an hour. The item sells for $15 each. Production occurs seven days a week. If the explicit costs total $150,000 per month, what is her accounting profit? a. $300,000 b. $60,000 c. $450,000 d. $240,000 14. A business owner makes 1000 items a day. Each day she spends 8 hours producing those items. If hired, elsewhere she could have earned $250 an hour. The item sells for $15 each. Production occurs seven days a week. If the explicit costs total $150,000 per month, what is her economic profit? a. $300,000 b. $60,000 c. $450,000 d. $240,000..................................continues