include the opportunity costs of time and capital that the entrepreneur has invested in the firm.

The opportunity
cost of the funds an owner has invested in a business is the:

a. risk-free rate of return

b. rate of return on U.S. Treasury Bills

c. prime rate banks charge their most credit-worthy
customers

d. a and b

e. none of the above

11. ______________ are
defined as costs which are incurred regardless of the alternative
action chosen in a decision-making problem.

a. Opportunity costs

b. Marginal costs

c. Relevant costs

d. Sunk costs

e. None of the above

12. ______________
include the opportunity costs of time and capital that the
entrepreneur has invested in the firm.

a. Implicit costs

b. Explicit costs

c. a and b

d. None of the above

13. If TC = 321 + 55Q – 5Q2, then average total cost at Q = 10
is:

10.2

102

37.1

371

321

14. Suppose we estimate that the demand elasticity for fine
leather jackets is ‑.7 at their current prices. Then we know
that:

a 1% increase in price reduces quantity sold by .7%.

no one wants to buy leather jackets.

demand for leather jackets is elastic.

a cut in the prices will increase total revenue.

leather jackets are luxury items.

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