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Paul's Plumbing is a small business that employs 12 people. Which of the following is the best example of an implicit cost incurred by this firm?
 a. The tax payments on property owned by the firm.
  b. The wages paid to the 12 employees.
  c. The half of the payroll taxes on the wages of the 12 employees paid by the employers, but not the half paid by the employees.
  d. The accounting services provided free of charge to the firm by Paul's wife, who is an accountant.

QUESTION 2

In the long run, the economic profits of Hoot's Chicken 'n' Ribs, a monopolistic competitor, are:
 a. not eliminated, because competition is not perfect.
  b. not eliminated, because the demand curve slopes downward.
  c. eliminated due to firms entering the industry.
  d. eliminated due to firms leaving the industry.
  e. not eliminated, because firms cannot enter the industry.

QUESTION 3

Sam quits his job as an airline pilot and opens his own pilot training school. He was earning 40,000 as a pilot. He withdraws 10,000 from his savings where he was earning 6 percent interest and uses the money in his new business. He uses a building he owns as a hanger and could rent it out for 5,000 per year. He rents a computer for 1,200, buys office supplies for 500, rents an airplane for 6,000 . pays 1,300 for fuel and maintenance, and hires one worker for 30,000 . Sam's total revenue from pilot training classes this year equaled 90,400 . Sam's explicit costs this year equals:
 a. 84,400.
  b. 39,000.
  c. 55,000.
  d. 45,600.
  e. 40,000.

QUESTION 4

If a monopolistically competitive firm can earn a profit, it will increase production until:
 a. MR > AVC.
  b. MR = ATC.
  c. MC > MR.
  d. MR = AR.
  e. MR = MC.

QUESTION 5

Cash payments to a steel mill for steel used in production would be an example of:
 a. sunk costs.
  b. fixed costs.
  c. explicit costs.
  d. implicit costs.
  e. entrepreneurial costs.

QUESTION 6

Perfect competition and monopolistic competition are similar because under both market structures,
 a. there are zero economic profits in the long run.
  b. production takes place at the least-cost combination.
  c. there are few firms.
  d. entry is difficult.
  e. differentiated products are produced.

QUESTION 7

Which of the following is not an explicit cost?
 a. Salaries.
  b. Sales taxes.
  c. Utilities, such as gas and electricity.
  d. Insurance.
  e. The firm owner's time.

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