EKN 110 chapter 6 exam questions
and answers
Average product (AP) - ANSWERS -Output per unit of input. AP= TP/input
Law of diminishing returns - ANSWERS -As successive units of a variable resource are added to a
fixed resource, beyond some point the extra, or marginal, product that can be attributed to
each additional unit of the variable resource decline.
Economic cost / opportunity cost - ANSWERS -- Costs exit because resources are scarce,
productive and have alternative uses.
- When society uses a combination of resources to produce a particular product, it forgoes all
alternative opportunities to use those resources for other purposes.
Explicit costs - ANSWERS -The monetary payments (or cash expenditures) it makes to those who
supply labour services, materials, fuel, transportation services etc. Such money payments are
for the use of resources by others.
Implicit costs - ANSWERS -Opportunity costs of using its self-owned, self- employed resources.
To the firm, implicit costs are the money payments that self-employed resources could have
earned in their best alternative use
Normal profit - ANSWERS -The payment made by a firm to obtain and retain entrepreneurial
ability or the minimum income entrepreneurial ability must receive to induce it to perform
entrepreneurial functions for a firm.
Economic or pure profit - ANSWERS -Total revenue minus total costs (both explicit and implicit,
the latter including normal profit to the entrepreneur)
and answers
Average product (AP) - ANSWERS -Output per unit of input. AP= TP/input
Law of diminishing returns - ANSWERS -As successive units of a variable resource are added to a
fixed resource, beyond some point the extra, or marginal, product that can be attributed to
each additional unit of the variable resource decline.
Economic cost / opportunity cost - ANSWERS -- Costs exit because resources are scarce,
productive and have alternative uses.
- When society uses a combination of resources to produce a particular product, it forgoes all
alternative opportunities to use those resources for other purposes.
Explicit costs - ANSWERS -The monetary payments (or cash expenditures) it makes to those who
supply labour services, materials, fuel, transportation services etc. Such money payments are
for the use of resources by others.
Implicit costs - ANSWERS -Opportunity costs of using its self-owned, self- employed resources.
To the firm, implicit costs are the money payments that self-employed resources could have
earned in their best alternative use
Normal profit - ANSWERS -The payment made by a firm to obtain and retain entrepreneurial
ability or the minimum income entrepreneurial ability must receive to induce it to perform
entrepreneurial functions for a firm.
Economic or pure profit - ANSWERS -Total revenue minus total costs (both explicit and implicit,
the latter including normal profit to the entrepreneur)
