Question 1

Firm A can produce a unit of output with 10 hours of labor and 5 units of material. Firm B can produce a unit of output with 5 hours of labor and 10 units of material. Firm C can produce a unit of output with 10 hours of labor and 10 units of material. If the prices of labor and material are $10 per hour and $5 per unit, respectively, which of these firms is the most technologically efficient?
A) firm A only
B) firm B only
C) firm C only
D) Firms A and B could both be technologically efficient.

Accepted Answer

The answer of Firm A can produce a unit of...

Question 2

A firm has achieved technological efficiency whenever it has
A) fully depreciated all its assets.
B) produced the given output using the fewest inputs.
C) produced the given output at the lowest cost.
D) all of the above.

Accepted Answer

Technological efficiency refers to the ability of a firm to produce the given output using the fewest inputs, making it the most efficient in terms of technology. Fully depreciating assets or producing the output at the lowest cost are not necessarily indicators of technological efficiency, but rather financial or cost efficiency.

Question 3

A company does not need to know the price of each resource it employs if it wants to determine whether or not it is achieving
A) technological efficiency.
B) economic efficiency.
C) accounting efficiency.
D) managerial efficiency.

Accepted Answer

Technological efficiency refers to producing the maximum output with the given set of inputs, without considering the cost of those inputs. Therefore, knowing the price of each resource is not necessary to determine technological efficiency.

Question 4

Mr. Sweet opened a candy store. He rented a building for $30,000 a year. During the first year of operation, Sweet paid $40,000 to his employees, $10,000 for utilities, and $20,000 for goods he bought from other firms. His total revenue was $135,000. Sweet's best alternative to running this candy store is to work for Wal-Mart as a sales associate for $15,000 a year. What is Sweet's total opportunity cost?
A) $15,000
B) $100,000
C) $135,000
D) $115,000

Accepted Answer

The opportunity cost is the value of the next best alternative forgone to make a particular choice. In this case, Sweet's opportunity cost is the income he would have earned working for Wal-Mart, which is $15,000. However, since he actually paid $30,000 to rent the building, even after covering all his expenses, his profit ($135,000 - $40,000 - $10,000 - $20,000 = $65,000) is less than that alternative, his total opportunity cost is his forgone income plus the cost of running the store, which is $115,000 (i.e., $15,000 + $30,000). Therefore, the best choice is D.

Question 5

Which of the following is TRUE?
A) Technological efficiency occurs if the maximum feasible amount of output is achieved from a given quantity of inputs.
B) Technological efficiency depends on the relative cost of the resources used in production.
C) If production is technologically efficient, then it must be economically efficient.
D) All of the above answers are correct.

Accepted Answer

Technological efficiency refers to achieving the maximum feasible output from a given quantity of inputs. The other options are not necessarily true; the relative cost of resources and economic efficiency do not necessarily equate to technological efficiency.

Question 6

Sheila's Sports Shop is a very popular sporting goods store, which has a yearly revenue of $600,000. Sheila runs the business herself. Her alternative employment options are to be a college swimming coach for $50,000 per year or a construction worker for $40,000 per year. Sheila spends $230,000 purchasing goods for resale to her customers. She also has four employees, who each earn $25,000 per year. Sheila owns the building that her Sports Shop is housed in and she could have rented it out for $20,000 per year. Sheila's economic profit is equal to
A) $160,000 per year.
B) $200,000 per year.
C) $250,000 per year.
D) $270,000 per year.

Accepted Answer

The answer of Sheila's Sports Shop is a very popular...

Question 7

An economic profit is
A) an opportunity cost of the company.
B) a cost that is always measured by the accountant.
C) the amount of profit an accountant calculates for a company.
D) not the same as the company's normal profit.

Accepted Answer

An economic profit is the difference between total revenue and economic cost (which includes both explicit and implicit costs), and it is not the same as the company's normal profit as it takes into account all costs, including opportunity costs.

Question 8

Technological efficiency necessarily means producing
A) at minimum cost.
B) with the highest level technology available.
C) without using more inputs than necessary.
D) technology itself.

Accepted Answer

Technological efficiency refers to using technology in the most efficient way to minimize the amount of inputs (such as resources, time, or labor) needed to produce a given output. This means using technology to reduce waste, increase productivity, and optimize resource allocation. It is not necessarily about producing at minimum cost or with the highest level of technology available. The goal of technological efficiency is to maximize output with the fewest possible inputs, thus minimizing costs and increasing profits.

Question 9

A firm uses labor and capital. To tell if the firm is technologically efficient, you
A) do not need to know the cost of labor or the cost of capital.
B) need to know the cost of capital but not the cost of labor.
C) need to know the cost of labor and the cost of capital.
D) need to know the cost of labor but not the cost of capital.

Accepted Answer

The answer of A firm uses labor and capital. To...

Question 10

Emma owns a firm that produces umbrellas. Currently, Emma produces 2,500 umbrellas a day. Emma cannot produce more umbrellas in a day unless she purchases another machine or else hires more workers. Emma is ________ efficient.
A) cost
B) technologically
C) economically
D) capital and labor

Accepted Answer

Emma's production is limited by her technology, as she cannot produce more umbrellas without investing in new machines or hiring more workers.

Question 11

Bud opened a flower shop. He rented a building for $9,000 a year. To buy equipment for the store, he withdrew $10,000 from his savings account, which earned an annual interest rate of 3 percent. During the first year of operation, Bud paid $4,000 for utilities and $12,000 to his suppliers. The store's total annual revenue was $55,000. The market value of the store's equipment at the end of the year was $8,000. If Bud had not started this business, he would have continued to work as an employee at another flower shop for $30,000 a year. What was Bud's opportunity cost of running his business?
A) $57,300
B) $67,000
C) $67,300
D) $27,000

Accepted Answer

The answer of Bud opened a flower shop. He rented...

Question 12

Technological efficiency occurs when the firm produces a given output
A) by using the least amount of inputs.
B) by using the maximum amount of inputs.
C) at the least cost.
D) at the greatest cost.

Accepted Answer

Technological efficiency means producing a given output using the least amount of inputs. It is about maximizing output while minimizing input. Therefore, the best choice is A, which states that production is achieved using the least amount of inputs.

Question 13

Mr. Sweet opened a candy store. He rented a building for $30,000 a year. During the first year of operation, Sweet paid $40,000 to his employees, $10,000 for utilities, and $20,000 for goods he bought from other firms. His total revenue was $135,000. Sweet's best alternative to running this candy store is to work for Wal-Mart as a sales associate for $15,000 a year. What is Sweet's economic profit?
A) $20,000
B) -$20,000
C) zero
D) $35,000

Accepted Answer

The answer of Mr. Sweet opened a candy store. He...

Question 14

Which of the following is a CORRECT statement?
A) Economic efficiency definitely occurs when a firm cannot increase production without using more resources.
B) Technological efficiency depends on the costs of resources while economic efficiency depends on only production methods.
C) Technological efficiency depends only on production methods, while economic efficiency depends on the costs of resources.
D) all of the above

Accepted Answer

Technological efficiency is achieved when a firm produces a given output by using the lowest possible amount of resources, regardless of their costs. Economic efficiency, on the other hand, considers both production methods and the costs of resources. Therefore, option C is the correct statement as it correctly identifies the factors affecting technological and economic efficiency. Option A is incorrect because economic efficiency might still occur even if a firm cannot increase production without using more resources, as long as the additional output is still profitable. Option B is incorrect because technological efficiency does not depend on resource costs, while option D is incorrect because option A and B are not correct.

Question 15

Greg, a landscaper, is planning on opening his own landscaping company. He currently earns $40,000 per year working for his uncle but he will need to quit that job. He plans to use $10,000 in savings to pay for the equipment he needs, though even after use he could sell the equipment for what he paid, $10,000. The current interest rate on savings is 5 percent. What is the total opportunity cost incurred by Greg in running his own business?
A) $10,000
B) $40,500
C) $40,000
D) $50,000

Accepted Answer

The opportunity cost is the value of the next best alternative that Greg is giving up by starting his own business.

In this case, the next best alternative is to continue working for his uncle and earning his current salary of $40,000 per year. Since Greg will no longer earn this salary by quitting his job, the opportunity cost of starting his own business is $40,000 per year.

In addition, Greg is also giving up the opportunity to earn interest on his savings of $10,000 by investing it in his business instead of in a savings account. At an interest rate of 5 percent, the annual opportunity cost of using his savings is $500.

Therefore, the total opportunity cost of running his own business is:
$40,000 (salary given up) + $500 (interest given up) = $40,500.

Therefore, the best answer is B, $40,500.

Question 16

Which of the following constrain (that is, limit) a firm's profits? I. its technology
II) its information
III) the market in which it operates
A) I only
B) I and II
C) II and III
D) I, II and III

Accepted Answer

All three factors can constrain a firm's profits. The technology a firm uses can limit its productive capacity and efficiency, while the information it has access to can impact its ability to make informed decisions. Additionally, the market the firm operates in can restrict its ability to set prices and earn profits due to factors such as competition or consumer demand. Thus, all three factors can limit a firm's profitability.

Question 17

Tara, a pharmacist, is planning on opening her own pharmacy. Tara currently earns $50,000 a year at her job. She has calculated that it will cost her $6,000 in rent and utilities and $25,000 for an assistant per year to run her pharmacy. What is the amount of opportunity cost that Tara incurs in running her own pharmacy?
A) $31,000
B) $25,000
C) $50,000
D) $81,000

Accepted Answer

Opportunity cost is the potential benefit that an individual gives up by choosing one option over another. In this case, Tara is giving up her current salary of $50,000 to run her own pharmacy. Additionally, she incurs expenses of $6,000 in rent and utilities and $25,000 for an assistant, totaling $31,000 in expenses. Therefore, the total opportunity cost for Tara is $50,000 (current salary) + $31,000 (expenses) = $81,000. Thus, option D is the correct answer.

Question 18

Bud opened a flower shop. He rented a building for $9,000 a year. To buy equipment for the store, he withdrew $10,000 from his savings account, which earned an annual interest rate of 3 percent. During the first year of operation, Bud paid $4,000 for utilities and $12,000 to his suppliers. The store's total annual revenue was $55,000. The market value of the store's equipment at the end of the year was $8,000. If Bud had not started this business, he would have continued to work as an employee at another flower shop for $30,000 a year. During the first year of operation, Bud
A) received an economic profit of $30,000.
B) received an economic profit of $20,000.
C) incurred an economic loss of $2,300
D) incurred an economic loss of $12,300

Accepted Answer

The answer of Bud opened a flower shop. He rented...

Question 19

Any method of producing a good or service is ________. It ________ the maximum profit that a firm can make.
A) an information constraint; always increases
B) a technology; always increases
C) a technology; limits
D) an information constraint; limits

Accepted Answer

Any method of producing a good or service is a technology, which can limit the maximum profit that a firm can make. This is because every technology has its own limitations and costs associated with it. Thus, the answer is option C. Option A is incorrect because not every method of producing a good or service is an information constraint. Option B is incorrect because not every method of production always increases the maximum profit that a firm can make. Option D is also incorrect because not every method of production is an information constraint that limits the maximum profit a firm can make.

Question 20

A firm's market constraints include the conditions under which it can
A) convert inputs into outputs.
B) buy its inputs and sell its outputs.
C) issue stock.
D) produce the inputs to production.

Accepted Answer

Market constraints involve the buying and selling conditions for a firm's inputs and outputs. The other options (A, C, and D) are not related to market constraints, but rather to production capabilities, financing, and input sourcing.

Quiz 10: Organizing Production

A firm has achieved technological efficiency whenever it has

A company does not need to know the price of each resource it employs if it wants to determine whether or not it is achieving

Which of the following is TRUE?

An economic profit is

Technological efficiency necessarily means producing

A firm uses labor and capital. To tell if the firm is technologically efficient, you

Emma owns a firm that produces umbrellas. Currently, Emma produces 2,500 umbrellas a day. Emma cannot produce more umbrellas in a day unless she purchases another machine or else hires more workers. Emma is ________ efficient.

Technological efficiency occurs when the firm produces a given output

Which of the following is a CORRECT statement?

Which of the following constrain (that is, limit) a firm's profits? I. its technology II) its information III) the market in which it operates

Any method of producing a good or service is . It the maximum profit that a firm can make.

A firm's market constraints include the conditions under which it can