Question 1

Total cost minus total variable cost equals:

Accepted Answer

A)   average fixed cost.
B)   total fixed cost.
C)   average variable cost.
D)   marginal cost.E) A) and B)
F) All of the above

Question 2

Marginal cost:

Accepted Answer

A)   equals both average variable cost and average total cost at their respective minimums.
B)   is the difference between total cost and total variable cost.
C)   rises for a time but then begins to decline when diminishing returns set in.
D)   declines continuously as output increases.E) B) and C)
F) A) and C)

Question 3

Which of the following is not correct?

Accepted Answer

A)   Where marginal product is greater than average product,average product is rising.
B)   Where total product is at a maximum,average product is also at a maximum.
C)   Where marginal product is zero,total product is at a maximum.
D)   Marginal product becomes negative before average product becomes negative.E) A) and C)
F) All of the above

Question 4

When diseconomies of scale occur:

Accepted Answer

A)   the long-run average total cost curve falls.
B)   marginal cost intersects average total cost.
C)   the long-run average total cost curve rises.
D)   average fixed costs will rise.E) None of the above
F) All of the above

Question 5

As the firm in the above diagram expands from plant size #1 to plant size #3,it experiences:

Accepted Answer

A)   diminishing returns.
B)   economies of scale.
C)   diseconomies of scale.
D)   constant costs.E) None of the above
F) B) and C)

Question 6

Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

Accepted Answer

A)   Payments of wages to its office workers
B)   Rent paid for the use of equipment owned by the Schultz Machinery Company
C)   Depreciation charges on company-owned equipment
D)   Economic profits resulting from current productionE) A) and D)
F) B) and C)

Question 7

Diseconomies of scale mean that:

Accepted Answer

A)   a firm's long-run average total cost curve is declining.
B)   a firm's long-run average total cost curve is rising.
C)   the advantages of specialization are being more fully realized.
D)   a given increase in inputs results in a more-than-proportionate increase in output.E) B) and C)
F) A) and D)

Question 8

Refer to the above data.The average total cost of producing 3 units of output is:

Accepted Answer

A)   $14.
B)   $12.
C)   $13.50.
D)   $16.Average total cost at 3 units of output is $48/3 = $16.E) A) and B)
F) A) and C)

Question 9

The legal concept of limited liability is important in which of the following types of business organizations?

Accepted Answer

A)   Monopolies
B)   Corporations
C)   Partnerships
D)   Sole proprietorshipsE) C) and D)
F) B) and C)

Question 10

The Sunshine Corporation finds its costs are $40 when it produces no output.Its total variable costs (TVC) change with output as shown in the accompanying table.  Refer to the above information.The total cost of producing 3 units of output is:

Accepted Answer

A)   $65.
B)   $105.
C)   $145.
D)   $185.Total costs are the sum of fixed costs and variable costs.At 3 units of output,fixed costs are $40 and variable costs are $65,so total costs are $105.E) A) and D)
F) A) and B)

Question 11

The above diagram shows the short-run average total cost curves for five different plant sizes of a firm.The shape of each individual curve reflects:

Accepted Answer

A)   increasing returns,followed by diminishing returns.
B)   economies of scale,followed by diseconomies of scale.
C)   constant costs.
D)   increasing costs,followed by decreasing costs.E) A) and B)
F) None of the above

Question 12

Economies of scale are indicated by:

Accepted Answer

A)   the rising segment of the average variable cost curve.
B)   the declining segment of the long-run average total cost curve.
C)   the difference between total revenue and total cost.
D)   a rising marginal cost curve.E) None of the above
F) A) and D)

Question 13

Other things equal,if the fixed costs of a firm were to increase by $100,000 per year,which of the following would happen?

Accepted Answer

A)   Marginal costs and average variable costs would both rise.
B)   Average fixed costs and average variable costs would rise.
C)   Average fixed costs and average total costs would rise.
D)   Average fixed costs would rise,but marginal costs would fall.E) B) and C)
F) A) and B)

Question 14

When total product is increasing at an increasing rate,marginal product is:

Accepted Answer

A)   positive and increasing.
B)   positive and decreasing.
C)   constant.
D)   negative.E) B) and C)
F) A) and B)

Question 15

A conglomerate is a(n) :

Accepted Answer

A)   firm with monopoly power.
B)   industry in which there is only one firm.
C)   firm that owns plants in different markets and industries.
D)   firm that owns plants at various stages of the production process.E) A) and D)
F) C) and D)

Question 16

Assume that in the short run a firm is producing 100 units of output,has average total costs of $200,and has average variable costs of $150.The firm's total fixed costs are:

Accepted Answer

A)   $5,000.
B)   $500.
C)   $.50.
D)   $50.The firm's total costs are $200 * 100 = $20,000.Its total variable costs are $150 * 100 = $15,000.Thus,its fixed costs are $20,000 - 15,000 = $5,000.E) B) and D)
F) A) and B)

Exam 6: Businesses and Their Costs

Diseconomies of scale mean that:

Correct Answer
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When diseconomies of scale occur:

Correct Answer
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The Sunshine Corporation finds its costs are $40 when it produces no output.Its total variable costs (TVC) change with output as shown in the accompanying table. Refer to the above information.The total cost of producing 3 units of output is:

Correct Answer
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The above diagram shows the short-run average total cost curves for five different plant sizes of a firm.The shape of each individual curve reflects:

Correct Answer
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When total product is increasing at an increasing rate,marginal product is:

Correct Answer
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Total cost minus total variable cost equals:

Correct Answer
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The legal concept of limited liability is important in which of the following types of business organizations?

Correct Answer
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Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

Correct Answer
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Marginal cost:

Correct Answer
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Which of the following is not correct?

Correct Answer
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Assume that in the short run a firm is producing 100 units of output,has average total costs of $200,and has average variable costs of $150.The firm's total fixed costs are:

Correct Answer
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As the firm in the above diagram expands from plant size #1 to plant size #3,it experiences:

Correct Answer
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A conglomerate is a(n) :

Correct Answer
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Economies of scale are indicated by:

Correct Answer
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Other things equal,if the fixed costs of a firm were to increase by $100,000 per year,which of the following would happen?

Correct Answer
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Refer to the above data.The average total cost of producing 3 units of output is:

Correct Answer
verified

Exam 6: Businesses and Their Costs

Diseconomies of scale mean that:

Correct AnswerverifiedShow Answer

When diseconomies of scale occur:

Correct AnswerverifiedShow Answer

The Sunshine Corporation finds its costs are $40 when it produces no output.Its total variable costs (TVC) change with output as shown in the accompanying table. Refer to the above information.The total cost of producing 3 units of output is:

Correct AnswerverifiedShow Answer

The above diagram shows the short-run average total cost curves for five different plant sizes of a firm.The shape of each individual curve reflects:

Correct AnswerverifiedShow Answer

When total product is increasing at an increasing rate,marginal product is:

Correct AnswerverifiedShow Answer

Total cost minus total variable cost equals:

Correct AnswerverifiedShow Answer

The legal concept of limited liability is important in which of the following types of business organizations?

Correct AnswerverifiedShow Answer

Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

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Marginal cost:

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Which of the following is not correct?

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Assume that in the short run a firm is producing 100 units of output,has average total costs of $200,and has average variable costs of $150.The firm's total fixed costs are:

Correct AnswerverifiedShow Answer

As the firm in the above diagram expands from plant size #1 to plant size #3,it experiences:

Correct AnswerverifiedShow Answer

A conglomerate is a(n) :

Correct AnswerverifiedShow Answer

Economies of scale are indicated by:

Correct AnswerverifiedShow Answer

Other things equal,if the fixed costs of a firm were to increase by $100,000 per year,which of the following would happen?

Correct AnswerverifiedShow Answer

Refer to the above data.The average total cost of producing 3 units of output is:

Correct AnswerverifiedShow Answer

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