1			Which type of profit guides decisions?
			A)	Accounting profit
			B)	Economic profit
			C)	Normal profit
			D)	All of the above
2			Accounting profit can be calculated as:
			A)	Total Revenue – Explicit Costs
			B)	Total Revenue – Explicit Costs – Implicit Costs
			C)	Total Revenue – Implicit Costs
			D)	Total Revenue – Normal Profit
3			Economic profit can be calculated as:
			A)	Total Revenue – Explicit Costs
			B)	Total Revenue – Explicit Costs – Implicit Costs
			C)	Total Revenue – Implicit Costs
			D)	Total Revenue – Normal Profit
4			Normal profit can be calculated as:
			A)	Total Revenue – Explicit Costs
			B)	Total Revenue – Implicit Costs
			C)	Accounting Profit – Implicit Costs
			D)	Accounting Profit – Economic Profit

Use the information below to answer questions 5 to 7:

Farah needs to decide whether to keep producing and selling cookies, or quit and take up a job at a bank instead. If Farah takes up the job at the bank, she could earn AED 144,000 per year. However, if Farah produces and sells cookies, then it would cost her AED 140,000 per year, but she would earn AED 360,000 per year in revenues.

5			What is Farah's accounting profit?
			A)	360,000
			B)	220,000
			C)	144,000
			D)	76,000
6			What is Farah's economic profit?
			A)	360,000
			B)	220,000
			C)	144,000
			D)	76,000
7			What is Farah's normal profit?
			A)	360,000
			B)	220,000
			C)	144,000
			D)	76,000
8			Which of the following statements is true?
			A)	The short run is the period of time in which all the factors of production are variable.
			B)	The long run is the period of time in which at least one of the firm's factors of production is fixed.
			C)	The short run is considered as less than one year, while long run is considered as greater than one year.
			D)	The short run is the period of time in which at least one of the firm's factors of production is fixed.
9			The reason the total product curve gets flatter as output is increased is:
			A)	Law of diminishing returns
			B)	Law of constant returns
			C)	Law of increasing returns
			D)	None of the above
10			The graph of the relationship between the output and the marginal product given fixed inputs will be:
			A)	Upward sloping
			B)	Downward sloping
			C)	Horizontal
			D)	Vertical
11			The graph of the relationship between marginal product of labor and marginal cost will be:
			A)	Horizontal
			B)	Vertical
			C)	Downward sloping
			D)	Upward sloping
12			The firm should continue to increase output as long as:
			A)	Marginal benefit is at least as great as marginal cost
			B)	Marginal cost is at least as great as marginal benefit
			C)	Total benefit is at least as great as total cost
			D)	Total cost is at least as great as total benefit
13			The rent paid on the premises of the business is considered to be:
			A)	Fixed cost
			B)	Variable cost
			C)	Average cost
			D)	Marginal cost

Use the following information to answer questions 14, 15 and 16:

Ahmad’s mobile phone shop has a fixed cost of AED 1,500. The shop also has the following variable costs:

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14			What is Ahmad's marginal cost for the 4th mobile phone?
			A)	300
			B)	400
			C)	1,000
			D)	1,200
15			What is Ahmad's average total cost of the 5th mobile phone?
			A)	340
			B)	500
			C)	640
			D)	1,700
16			Assuming that the price of each mobile phone that Ahmad sells is fixed at AED 400, then how many mobile phones should Ahmad sell?
			A)	2
			B)	3
			C)	4
			D)	5
17			When should a firm shut down in the short run?
			A)	When price is less than average variable cost
			B)	When price is less than average fixed cost
			C)	When price is less than average total cost
			D)	None of the above
18			Economies of scale occurs when:
			A)	All inputs changed by a given proportion result in output changing by the same proportion
			B)	All inputs changed by a given proportion result in output changing by more than that proportion
			C)	All inputs changed by a given proportion result in output changing by less than that proportion
			D)	None of the above

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19			Following the figure above, the portion of the long run average total cost curve representing constant returns to scale is:
			A)	A
			B)	B
			C)	C
			D)	None of the above

Use the figure below to answer questions 2 to 6:

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20			Following the graph above, what is the profit maximizing output for this firm?
			A)	6,000
			B)	7,000
			C)	9,000
			D)	11,000
21			Following the above graph, calculate the total costs incurred by this firm.
			A)	300
			B)	385
			C)	420
			D)	900
22			Following the above graph, calculate the total revenue earned by this firm
			A)	1,100
			B)	900
			C)	700
			D)	600
23			Following the above graph, calculate the profits earned by this firm.
			A)	280
			B)	315
			C)	360
			D)	440
24			Following the above graph, we can infer that this firm is in
			A)	The long run
			B)	The middle run
			C)	The short run
			D)	None of the above
25			Assume the following production function: Q = f (L; K). If a firm is facing economies of scale, tripling inputs produce a Qnew equal to
			A)	4Q
			B)	3Q
			C)	2Q
			D)	1Q

Use the figure below to answer questions 8 to 10:

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26			Following the figure above, if the market price of mowing lawns is $12 per lawn, then E–Z care lawn mowing company will earn the largest profit by mowing
			A)	3 lawns a day
			B)	5lawns a day
			C)	7 lawns a day
			D)	8 lawns a day
27			Following the figure above, if the market price of mowing lawns is $12 per lawn, then E–Z care lawn mowing company is earning
			A)	Positive profit
			B)	No profit
			C)	Negative profit
			D)	None of the above
28			Following the figure above, suppose the market price of mowing lawns falls to $6 per lawn, the E–Z care lawn mowing company will
			A)	Earn an accounting profit
			B)	Continue to mow lawns despite its losses
			C)	Shut down its operations, at least in the short run
			D)	None of the above