Question 1

The fixed cost of the firm is $500. The firm's total variable cost is indicated in the table.  The average variable cost of the firm when 5 units of output are produced is

Accepted Answer

A)   $100.
B)   $200.
C)   $300.
D)   $400.E) All of the above
F) None of the above

Question 2

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.   Output  ATC 1$40227329431538\begin{array}{|c|c|}\hline 	ext { Output } & 	ext { ATC } \\hline 1 & \$ 40 \\hline 2 & 27 \\hline 3 & 29 \\hline 4 & 31 \\hline 5 & 38 \\hline\end{array} Output 12345​ ATC $4027293138​​  The average variable cost of 4 units of output is

Accepted Answer

A)   $33.50.
B)   $28.50.
C)   $19.00.
D)   $21.00. E) None of the above
F) A) and B)

Question 3

Economic costs are equal to

Accepted Answer

A)   the opportunity costs of all resources owned by the firm.
B)   actual expenses paid by the firm for all of its inputs.
C)   the sum of all explicit costs and implicit costs.
D)   accounting costs.E) B) and C)
F) A) and B)

Question 4

Daily newspapers have been rising in price in recent years because

Accepted Answer

A)   wages in the newspaper industry have risen dramatically.
B)   the overhead costs have recently been spread over a shrinking number of buyers.
C)   capital has replaced virtually all labor used to produce a newspaper.
D)   long-standing government subsidies have been removed in most major cities.E) B) and C)
F) A) and D)

Question 5

At zero units of output, a firm's variable costs are zero.

Accepted Answer

A) True 
 B)False

Question 6

Answer the question on the basis of the following information. TFC = Total Fixed Cost Q = Quantity of Output
MC = Marginal Cost P = Product Price TVC = Total Variable Cost
Average fixed cost is _.

Accepted Answer

A)    TVC−MCT V C - M C TVC−MC 
B)    =MCQ= \frac { MC } { Q }=QMC​ 
C)    =TFCQ= \frac { TFC } { Q }=QTFC​ 
D)    =TVCQ= \frac { TVC } { Q }=QTVC​E) All of the above
F) B) and D)

Question 7

A firm doubles the quantity of all resources it employs and, as a result, output doubles. Which of the following is correct?

Accepted Answer

A)   There are increasing returns to scale.
B)   The long-run average total cost curve is flat.
C)   The law of diminishing returns is proven wrong.
D)   The example is for the short-run rather than the long-run.E) A) and D)
F) A) and B)

Question 8

If marginal cost is

Accepted Answer

A)   falling, then average total cost must also be falling.
B)   rising, then average total cost must also be rising.
C)   rising, then average total cost could be either falling or rising.
D)   falling, then average total cost could be either falling or rising.E) None of the above
F) B) and C)

Question 9

Implicit costs are

Accepted Answer

A)   the same as economic costs.
B)   comprised entirely of actual expenses paid by the firm for its inputs.
C)   opportunity costs of self-employed resources.
D)   always greater than accounting costs.E) A) and C)
F) A) and B)

Question 10

Diminishing marginal returns occurs as a firm adds more variable inputs to at least one fixed input because

Accepted Answer

A)   the ability or quality of the variable inputs hired decreases as more of them are hired.
B)   the firm must lower the price of its product when it produces more units of output.
C)   the per unit cost it must pay for variable inputs increases as more inputs are hired.
D)   as more variable inputs are hired, the amount of the fixed input per unit of variable input decreases.E) A) and B)
F) A) and C)

Question 11

Answer the question on the basis of the following cost data.   Output  Average Fixed Cost  Average Variable Cost 1$50.00$100.00225.0080.00316.6766.67412.5065.00510.0068.0068.3773.3377.1480.0086.2587.50\begin{array} { | c | c | c | } \hline 	ext { Output } & 	ext { Average Fixed Cost } & 	ext { Average Variable Cost } \\hline 1 & \$ 50.00 & \$ 100.00 \\hline 2 & 25.00 & 80.00 \\hline 3 & 16.67 & 66.67 \\hline 4 & 12.50 & 65.00 \\hline 5 & 10.00 & 68.00 \\hline 6 & 8.37 & 73.33 \\hline 7 & 7.14 & 80.00 \\hline 8 & 6.25 & 87.50 \\hline\end{array} Output 12345678​ Average Fixed Cost $50.0025.0016.6712.5010.008.377.146.25​ Average Variable Cost $100.0080.0066.6765.0068.0073.3380.0087.50​​  Total fixed cost is

Accepted Answer

A)   $6.25.
B)   $100.00.
C)   $150.00.
D)   $50.00. E) B) and C)
F) A) and B)

Question 12

Variable costs are costs that change directly with output.

Accepted Answer

A) True 
 B)False

Question 13

Suppose a firm sells its product at a price lower than the per-unit implicit costs of producing it. Which of the following statements is definitely true?

Accepted Answer

A)   The firm will earn positive accounting and economic profits.
B)   The firm will face accounting and economic losses.
C)   The firm will face an accounting loss but earn positive economic profits.
D)   The firm may earn positive accounting profits but will face economic losses.E) B) and C)
F) C) and D)

Question 14

Answer the question on the basis of the following cost data.   Output  Average Fixed Cost  Average Variable Cost 1$50.00$100.00225.0080.00316.6766.67412.5065.00510.0068.0068.3773.3377.1480.0086.2587.50\begin{array} { | c | c | c | } \hline 	ext { Output } & 	ext { Average Fixed Cost } & 	ext { Average Variable Cost } \\hline 1 & \$ 50.00 & \$ 100.00 \\hline 2 & 25.00 & 80.00 \\hline 3 & 16.67 & 66.67 \\hline 4 & 12.50 & 65.00 \\hline 5 & 10.00 & 68.00 \\hline 6 & 8.37 & 73.33 \\hline 7 & 7.14 & 80.00 \\hline 8 & 6.25 & 87.50 \\hline\end{array} Output 12345678​ Average Fixed Cost $50.0025.0016.6712.5010.008.377.146.25​ Average Variable Cost $100.0080.0066.6765.0068.0073.3380.0087.50​​  The marginal cost curve would intersect the average variable cost curve at about

Accepted Answer

A)   2 units of output.
B)   4 units of output.
C)   6 units of output.
D)   7 units of output. E) A) and B)
F) A) and C)

Question 15

A major factor explaining economies of scale is increased specialization of labor.

Accepted Answer

A) True 
 B)False

Question 16

(Last Word)  The development of additive manufacturing technology (3-D printers)  is expected to lower prices by doing which of the following?

Accepted Answer

A)   reducing the cost of producing blueprints for manufactured goods
B)   promoting greater economies of scale in manufacturing
C)   reducing the demand for manufactured goods
D)   reducing both large fixed set-up costs and transportation costsE) A) and C)
F) None of the above

Question 17

In the short run it is impossible for an expansion of output to increase

Accepted Answer

A)   average total cost.
B)   average fixed cost.
C)   marginal cost.
D)   average variable cost.E) C) and D)
F) A) and B)

Question 18

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

Accepted Answer

A)   $286,000.
B)   $150,000.
C)   $94,000.
D)   $156,000.E) None of the above
F) A) and D)

Question 19

3-D printers can reduce the cost of producing items because they

Accepted Answer

A)   eliminate massive factory costs.
B)   reduce transportation costs significantly.
C)   make use of low-cost materials and low-energy requirements.
D)   exploit huge economies of scale in production.E) A) and D)
F) B) and C)

Question 20

If the total variable cost of 9 units of output is $90 and the total variable cost of 10 units of output is $120, then

Accepted Answer

A)   the average variable cost of 10 units is $10.
B)   the average variable cost of 9 units is $10.
C)   the marginal cost of the tenth unit is $90.
D)   the firm is operating in the range of increasing marginal returns.E) A) and B)
F) None of the above

Exam 9: Businesses and the Costs of Production

If marginal cost is

Correct Answer
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At zero units of output, a firm's variable costs are zero.

Correct Answer
verified

Suppose a firm sells its product at a price lower than the per-unit implicit costs of producing it. Which of the following statements is definitely true?

Correct Answer
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3-D printers can reduce the cost of producing items because they

Correct Answer
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Correct Answer
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The fixed cost of the firm is $500. The firm's total variable cost is indicated in the table. The average variable cost of the firm when 5 units of output are produced is

Correct Answer
verified

Correct Answer
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If the total variable cost of 9 units of output is $90 and the total variable cost of 10 units of output is $120, then

Correct Answer
verified

(Last Word) The development of additive manufacturing technology (3-D printers) is expected to lower prices by doing which of the following?

Correct Answer
verified

Economic costs are equal to

Correct Answer
verified

Daily newspapers have been rising in price in recent years because

Correct Answer
verified

In the short run it is impossible for an expansion of output to increase

Correct Answer
verified

Correct Answer
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Variable costs are costs that change directly with output.

Correct Answer
verified

Answer the question on the basis of the following information. TFC = Total Fixed Cost Q = Quantity of Output MC = Marginal Cost P = Product Price TVC = Total Variable Cost Average fixed cost is _.

Correct Answer
verified

Correct Answer
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A firm doubles the quantity of all resources it employs and, as a result, output doubles. Which of the following is correct?

Correct Answer
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A major factor explaining economies of scale is increased specialization of labor.

Correct Answer
verified

Diminishing marginal returns occurs as a firm adds more variable inputs to at least one fixed input because

Correct Answer
verified

Implicit costs are

Correct Answer
verified

Exam 9: Businesses and the Costs of Production

If marginal cost is

Correct AnswerverifiedShow Answer

At zero units of output, a firm's variable costs are zero.

Correct AnswerverifiedShow Answer

Suppose a firm sells its product at a price lower than the per-unit implicit costs of producing it. Which of the following statements is definitely true?

Correct AnswerverifiedShow Answer

3-D printers can reduce the cost of producing items because they

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The fixed cost of the firm is $500. The firm's total variable cost is indicated in the table. The average variable cost of the firm when 5 units of output are produced is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the total variable cost of 9 units of output is $90 and the total variable cost of 10 units of output is $120, then

Correct AnswerverifiedShow Answer

(Last Word) The development of additive manufacturing technology (3-D printers) is expected to lower prices by doing which of the following?

Correct AnswerverifiedShow Answer

Economic costs are equal to

Correct AnswerverifiedShow Answer

Daily newspapers have been rising in price in recent years because

Correct AnswerverifiedShow Answer

In the short run it is impossible for an expansion of output to increase

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Variable costs are costs that change directly with output.

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following information. TFC = Total Fixed Cost Q = Quantity of Output MC = Marginal Cost P = Product Price TVC = Total Variable Cost Average fixed cost is _.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A firm doubles the quantity of all resources it employs and, as a result, output doubles. Which of the following is correct?

Correct AnswerverifiedShow Answer

A major factor explaining economies of scale is increased specialization of labor.

Correct AnswerverifiedShow Answer

Diminishing marginal returns occurs as a firm adds more variable inputs to at least one fixed input because

Correct AnswerverifiedShow Answer

Implicit costs are

Correct AnswerverifiedShow Answer

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