Use the following information to answer Questions 11 and 12: Suppose a dentist is organized as a sole proprietorship. Last year the dentist’s total revenue was $320,000 and total costs were $250,000. The dentist left a job paying $112,00 a year to start the business 1. According to the information in the above scenario, how much accounting profit did the dentist make last year? a. $112,000 b. $70,000 c. -$42,000 d. -$28,000 e. $128,000 2. According to the information in the scenario above, how much economic profit did the dentist make last year? a. $112,00 b. $70,000 c. -$42,000 d. -$28,000 e. $182,000
Use the following information to answer Questions 11 and 12: Suppose a dentist is organized as a sole proprietorship. Last year the dentist’s total revenue was $320,000 and total costs were $250,000. The dentist left a job paying $112,00 a year to start the business
1. According to the information in the above scenario, how much accounting profit did the dentist make last year?
a. $112,000
b. $70,000
c. -$42,000
d. -$28,000
e. $128,000
2. According to the information in the scenario above, how much economic profit did the dentist make last year?
a. $112,00
b. $70,000
c. -$42,000
d. -$28,000
e. $182,000
3. According to the text, economic profit serves as a beacon to entrepreneurs. This means
a. A positive economic profit sends a warning to investors not to invest more.
b. A negative economic profit sends a signal to investors that it is time to invest more.
c. A zero economic profit sends a warning to investors not to invest more.
d. A positive economic profit attracts resources while a negative economic profit sends resources away.
e. None of the above.
4. Steve is about to start up a business in a
a. easy; very large; nondifferentiated
b. difficult; very large; differentiated
c. easy; relatively few; differentiated
d. impossible; relatively few; differentiated
e. easy; very large; differentiated
5. If a firm is currently producing zero output in the short run, total cost equals
a. Zero.
b. Marginal cost.
c. Total Variable Cost
d. Total Fixed Cost
e.
6. The difference between economic profit and accounting profit is
a. Average costs
b. Direct costs
c. Economic costs
d. Variable costs
e. Marginal costs
7. Every firm will have a U-shaped cost curve in the short-run because
a. Every firm faces resource limitations
b. Every firm faces rising capital costs during an economic recession
c. Of the law of diminishing marginal returns
d. Of labor unions
8. Assume that one laborer can produce 8 units of output, 2 laborers 19 units, three laborers 24 units, and four laborers 28 units. If the cost is $20 per unit of labor and total costs for producing 8 units are $360, what are total fixed costs?
a. $20
b. $160
c. $340
d. $45
e. Total fixed costs cannot be determined from the information given.
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