Question 1

Why does the short-run marginal-cost curve eventually increase for the typical firm?

Accepted Answer

The MC curve's shape is a consequence of...

Question 2

Suppose that, when producing 50 units of output, a firm's AVC is $30, its AFC is $8, and its MC is $40. This firm's

Accepted Answer

A)  ATC is $48.
B)  ATC is $78.
C)  total cost is $1,900.
D)  total cost is $40.E) C) and D)
F) All of the above

Question 3

Refer to the diagram. Diseconomies of scale

Accepted Answer

A)  begin at output Q₁.
B)  occur over the Q₁ Q₃ range of output.
C)  begin at output Q₃.
D)  are in evidence at all output levels.E) A) and B)
F) A) and C)

Question 4

The following is cost information for the Creamy Crisp Donut Company.Entrepreneur's potential earnings as a salaried worker = $50,000Annual lease on building = $22,000Annual revenue from operations = $380,000Payments to workers = $120,000Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Creamy Crisp's total revenues exceed its total costs, including a normal profit, by

Accepted Answer

A)  $286,000.
B)  $150,000.
C)  $230,000.
D)  $94,000.E) A) and B)
F) A) and D)

Question 5

Answer the question on the basis of the following cost data.  The marginal cost of the third unit of output is

Accepted Answer

A)  $16.67.
B)  $200.00.
C)  $40.00.
D)  $250.00.E) B) and D)
F) All of the above

Question 6

To economists, the main difference between the short run and the long run is that

Accepted Answer

A)  the law of diminishing returns applies in the long run, but not in the short run.
B)  in the long run all resources are variable, while in the short run at least one resource is fixed.
C)  fixed costs are more important to decision making in the long run than they are in the short run.
D)  in the short run all resources are fixed, while in the long run all resources are variable.E) B) and C)
F) None of the above

Question 7

Marginal cost can be defined as the

Accepted Answer

A)  change in total fixed cost resulting from one more unit of production.
B)  change in total cost resulting from one more unit of production.
C)  change in average total cost resulting from one more unit of production.
D)  change in average variable cost resulting from one more unit of production.E) B) and D)
F) C) and D)

Question 8

Which of the following best expresses the law of diminishing returns?

Accepted Answer

A)  Because large-scale production allows the realization of economies of scale, the real costs of production vary directly with the level of output.
B)  Population growth automatically adjusts to that level at which the average product per worker will be at a maximum.
C)  As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital) , beyond some point the resulting extra or marginal output will decline.
D)  Proportionate increases in the inputs of all resources will result in a less-than-proportionate increase in total output.E) A) and B)
F) A) and D)

Question 9

The short run is a period of time during which all costs are fixed costs.

Accepted Answer

A) True 
 B)False

Question 10

If the price of a variable resource increased for the typical firm, there would be

Accepted Answer

A)  a downward shift in the AVC curve.
B)  an upward shift in the AFC curve.
C)  a downward shift in the AFC curve.
D)  an upward shift in the MC curve.E) A) and B)
F) B) and D)

Question 11

The diagram shows the short-run average total cost curves for five different plant sizes of a firm. The position of these five curves in relation to one another reflects

Accepted Answer

A)  economies and diseconomies of scale.
B)  the effect of fixed costs on ATC as output increases.
C)  the law of constant costs.
D)  the law of diminishing returns.E) All of the above
F) A) and B)

Question 12

Variable costs are

Accepted Answer

A)  costs that remain to be paid even if the firm shuts down temporarily.
B)  costs that change every day or every month.
C)  costs that change with the level of production.
D)  changes in total cost due to the production of an additional unit of output.E) All of the above
F) A) and D)

Question 13

Marginal cost is the

Accepted Answer

A)  rate of change in total fixed cost that results from producing one more unit of output.
B)  change in total cost that results from producing one more unit of output.
C)  change in average variable cost that results from producing one more unit of output.
D)  change in average total cost that results from producing one more unit of output.E) A) and C)
F) A) and D)

Question 14

The following data show the relationship between total costs and output in the short run.  The firm's marginal costs are equal to average total cost somewhere between units

Accepted Answer

A)  1 and 2.
B)  2 and 3.
C)  3 and 4.
D)  4 and 5.E) A) and C)
F) A) and D)

Question 15

Answer the question on the basis of the following information.  The average product when there are six workers

Accepted Answer

A)  is 1.
B)  is 5.67.
C)  is 35.
D)  cannot be determined from the information given.E) A) and D)
F) C) and D)

Question 16

If average variable cost is $74 and total fixed cost is $100 at 5 units of output, then average total cost at this output level is

Accepted Answer

A)  $91.
B)  $94.
C)  $97.
D)  $100.E) B) and D)
F) None of the above

Question 17

As output increases, total variable cost

Accepted Answer

A)  increases more rapidly than does total cost.
B)  increases continuously at a decreasing rate.
C)  increases at a decreasing rate and then at an increasing rate.
D)  increases at a constant rate.E) A) and D)
F) A) and B)

Question 18

Suppose that you could either prepare your own tax return in 15 hours or hire a tax specialist to prepare it for you in 2 hours. You value your time at$11an hour; the tax specialist will charge you $55 an hour. The opportunity cost of preparing your own tax return is

Accepted Answer

A)  $275.
B)  $55.
C)  $110.
D)  $165.E) A) and C)
F) None of the above

Question 19

Answer the question on the basis of the following information.TFC = Total Fixed Cost Q = Quantity of OutputMC = Marginal Cost P = Product PriceTVC = Total Variable CostAverage fixed cost is _______.

Accepted Answer

A)  TVC − MC
B)  MC / Q
C)  TFC / Q
D)  TVC / QE) A) and D)
F) A) and C)

Question 20

Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10.  The profit-maximizing level of output for this firm

Accepted Answer

A)  is 3.
B)  is 4.
C)  is 5.
D)  cannot be determined from the information given.E) A) and B)
F) None of the above

Exam 9: Businesses and the Costs of Production

The diagram shows the short-run average total cost curves for five different plant sizes of a firm. The position of these five curves in relation to one another reflects

Correct Answer
verified

Refer to the diagram. Diseconomies of scale

Correct Answer
verified

Variable costs are

Correct Answer
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As output increases, total variable cost

Correct Answer
verified

If average variable cost is $74 and total fixed cost is $100 at 5 units of output, then average total cost at this output level is

Correct Answer
verified

Marginal cost is the

Correct Answer
verified

Answer the question on the basis of the following information. The average product when there are six workers

Correct Answer
verified

The short run is a period of time during which all costs are fixed costs.

Correct Answer
verified

Answer the question on the basis of the following information.TFC = Total Fixed Cost Q = Quantity of OutputMC = Marginal Cost P = Product PriceTVC = Total Variable CostAverage fixed cost is _______.

Correct Answer
verified

If the price of a variable resource increased for the typical firm, there would be

Correct Answer
verified

Why does the short-run marginal-cost curve eventually increase for the typical firm?

Correct Answer
verified
The MC curve's shape is a consequence of...
View Answer

Suppose that, when producing 50 units of output, a firm's AVC is $30, its AFC is $8, and its MC is $40. This firm's

Correct Answer
verified

Answer the question on the basis of the following cost data. The marginal cost of the third unit of output is

Correct Answer
verified

To economists, the main difference between the short run and the long run is that

Correct Answer
verified

The following data show the relationship between total costs and output in the short run. The firm's marginal costs are equal to average total cost somewhere between units

Correct Answer
verified

Correct Answer
verified

Which of the following best expresses the law of diminishing returns?

Correct Answer
verified

Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10. The profit-maximizing level of output for this firm

Correct Answer
verified

Marginal cost can be defined as the

Correct Answer
verified

Suppose that you could either prepare your own tax return in 15 hours or hire a tax specialist to prepare it for you in 2 hours. You value your time at$11an hour; the tax specialist will charge you $55 an hour. The opportunity cost of preparing your own tax return is

Correct Answer
verified

Exam 9: Businesses and the Costs of Production

The diagram shows the short-run average total cost curves for five different plant sizes of a firm. The position of these five curves in relation to one another reflects

Correct AnswerverifiedShow Answer

Refer to the diagram. Diseconomies of scale

Correct AnswerverifiedShow Answer

Variable costs are

Correct AnswerverifiedShow Answer

As output increases, total variable cost

Correct AnswerverifiedShow Answer

If average variable cost is $74 and total fixed cost is $100 at 5 units of output, then average total cost at this output level is

Correct AnswerverifiedShow Answer

Marginal cost is the

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following information. The average product when there are six workers

Correct AnswerverifiedShow Answer

The short run is a period of time during which all costs are fixed costs.

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following information.TFC = Total Fixed Cost Q = Quantity of OutputMC = Marginal Cost P = Product PriceTVC = Total Variable CostAverage fixed cost is _______.

Correct AnswerverifiedShow Answer

If the price of a variable resource increased for the typical firm, there would be

Correct AnswerverifiedShow Answer

Why does the short-run marginal-cost curve eventually increase for the typical firm?

Correct AnswerverifiedThe MC curve's shape is a consequence of...View AnswerShow Answer

Suppose that, when producing 50 units of output, a firm's AVC is $30, its AFC is $8, and its MC is $40. This firm's

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following cost data. The marginal cost of the third unit of output is

Correct AnswerverifiedShow Answer

To economists, the main difference between the short run and the long run is that

Correct AnswerverifiedShow Answer

The following data show the relationship between total costs and output in the short run. The firm's marginal costs are equal to average total cost somewhere between units

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following best expresses the law of diminishing returns?

Correct AnswerverifiedShow Answer

Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10. The profit-maximizing level of output for this firm

Correct AnswerverifiedShow Answer

Marginal cost can be defined as the

Correct AnswerverifiedShow Answer

Suppose that you could either prepare your own tax return in 15 hours or hire a tax specialist to prepare it for you in 2 hours. You value your time at$11an hour; the tax specialist will charge you $55 an hour. The opportunity cost of preparing your own tax return is

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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The MC curve's shape is a consequence of...
View Answer

Correct Answer
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