2. Which of the following is least likely to be considered “economic capital” (K

Question

2. Which of the following is least likely to be considered “economic capital” (K in most of our examples)?
    A. a blast furnace at a steel mill                              C. a tractor on a farm.
    B. a computer at Purdue Calumet.                          D. a ten dollar bill.

6. Decreasing returns to scale may occur as increasing the amount of inputs used:
     A. increases specialization.                        C. always increases the amount of output produced.

     B. may cause coordination difficulties.      D. increases efficiency.

14. A small business owner earns $60,000 in revenue annually. The explicit annual costs equal $40,000. The
      owner could work for someone else and earn $25,000 annually. The owner's accounting profit is ________
      and owner's economic profit is ________.
      A. $20,000, $5,000           B. $20,000, -$5,000    C. $25,000, -$5,000    D. $45,000, -$5,000

21. Assume government policy increases the demand for corn. We can say with certainty that:
      A. The consumer surplus of corn buyers will increase.
      B. The producer surplus of corn growers will decrease.
      C. The producer surplus of corn growers will increase.
      D. The producer surplus of corn growers will not change.

Explanation / Answer

2. D. a ten dollar bill.

6.B. may cause coordination difficulties.

14. B. $20,000, -$5,000

21. C. The producer surplus of corn growers will increase.

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