Question 1

At the shutdown point, a firm

Accepted Answer

A) earns a normal profit. 
B) earns a positive economic profit. 
C) earns a zero economic profit. 
D) earns an economic loss. 
E) can earn either a profit or a loss. 
A) earns a normal profit. 
B) earns a positive economic profit. 
C) earns a zero economic profit. 
D) earns an economic loss. 
E) can earn either a profit or a loss.

Question 2

If a competitive firm is losing money in the short run, then it should

Accepted Answer

A) never shut down in the short run. 
B) shut down only if P is less than ATC. 
C) shut down only if its losses are greater than its fixed costs. 
D) shut down. 
E) shut down only if TR is greater than TVC. 
A) never shut down in the short run. 
B) shut down only if P is less than ATC. 
C) shut down only if its losses are greater than its fixed costs. 
D) shut down. 
E) shut down only if TR is greater than TVC.

Question 3

Which of the following is a good example of variable costs?

Accepted Answer

A) Cost of purchasing a truck 
B) Land cost 
C) Cost of heavy machinery 
D) Wage payments for workers 
E) Capital costs 
A) Cost of purchasing a truck 
B) Land cost 
C) Cost of heavy machinery 
D) Wage payments for workers 
E) Capital costs

Question 4

Which of the following typically has a U-shaped curve?

Accepted Answer

A) Average total cost 
B) Average fixed cost 
C) Fixed cost 
D) Total cost 
E) A production function 
A) Average total cost 
B) Average fixed cost 
C) Fixed cost 
D) Total cost 
E) A production function

Question 5

Explain what happens to variable costs when capital usage in a firm increases.

Accepted Answer

At all levels of output, varia

Question 6

The breakeven point for a competitive firm is the point where price equals average variable cost.

Accepted Answer

A) True 
 B)False

Question 7

The breakeven quantity for a firm is that quantity where

Accepted Answer

A) the firm maximizes profits. 
B) P = MC. 
C) the firm is making only economic profits. 
D) P = ATC. 
E) P = AFC. 
A) the firm maximizes profits. 
B) P = MC. 
C) the firm is making only economic profits. 
D) P = ATC. 
E) P = AFC.

Question 8

In the long run, only fixed costs can change; variable costs cannot.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following could be a reason a firm might experience economies of scale?

Accepted Answer

A) Specialization 
B) Ability to sell in other nations 
C) Inability to use large machinery 
D) Increased bureaucratization 
E) All of these 
A) Specialization 
B) Ability to sell in other nations 
C) Inability to use large machinery 
D) Increased bureaucratization 
E) All of these

Question 10

Exhibit 8-11  
-Refer to Exhibit 8-11, which is a long-run average total cost (ATC) schedule. The minimum efficient scale is at

Accepted Answer

A) 0 unit. 
B) 1 unit. 
C) 2 units. 
D) 3 units. 
E) 4 units. 
A) 0 unit. 
B) 1 unit. 
C) 2 units. 
D) 3 units. 
E) 4 units.

Question 11

Which of the following does not change with the level of output?

Accepted Answer

A) Variable costs 
B) Total costs 
C) Fixed costs 
D) Average total costs 
E) Marginal cost 
A) Variable costs 
B) Total costs 
C) Fixed costs 
D) Average total costs 
E) Marginal cost

Question 12

Exhibit 8-6  
-Refer to Exhibit 8-6. If the market price is $10, total revenue for the profit-maximizing firm is

Accepted Answer

A) $550. 
B) $3,000. 
C) $1,800. 
D) $1,350. 
E) $1,000. 
A) $550. 
B) $3,000. 
C) $1,800. 
D) $1,350. 
E) $1,000.

Question 13

A firm can minimize the total costs of producing a given output level at the point of tangency between an isoquant and the isocost line.

Accepted Answer

A) True 
 B)False

Question 14

In the long run,

Accepted Answer

A) most of the firm's resources cannot be varied. 
B) none of the firm's resources are variable. 
C) new technology cannot be introduced. 
D) all of a firm's resources are variable. 
E) at least one of the firm's resources is fixed. 
A) most of the firm's resources cannot be varied. 
B) none of the firm's resources are variable. 
C) new technology cannot be introduced. 
D) all of a firm's resources are variable. 
E) at least one of the firm's resources is fixed.

Question 15

Minimum efficient scale is the largest output size for which the long-run average total cost is at a minimum.

Accepted Answer

A) True 
 B)False

Question 16

An expansion of capital increases fixed costs but does not affect variable costs.

Accepted Answer

A) True 
 B)False

Question 17

The slope of an isoquant is called the

Accepted Answer

A) rate of change. 
B) input price ratio. 
C) rate of technical substitution. 
D) substitution ratio. 
E) price-cost margin. 
A) rate of change. 
B) input price ratio. 
C) rate of technical substitution. 
D) substitution ratio. 
E) price-cost margin.

Question 18

Why can't economists identify a definite time period that constitutes the short run?

Accepted Answer

The short run varies depending

Question 19

Long-run average total cost is derived from summing individual average total costs in different periods.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 8-10  
-Refer to Exhibit 8-10. The minimum efficient scale is where output is at

Accepted Answer

A) 3 units. 
B) 4 units. 
C) 5 units. 
D) 6 units. 
E) 7 units. 
A) 3 units. 
B) 4 units. 
C) 5 units. 
D) 6 units. 
E) 7 units.

Exam 8: Costs and the Changes at Firms Over Time

At the shutdown point, a firm

If a competitive firm is losing money in the short run, then it should

Which of the following is a good example of variable costs?

Which of the following typically has a U-shaped curve?

Explain what happens to variable costs when capital usage in a firm increases.

The breakeven point for a competitive firm is the point where price equals average variable cost.

The breakeven quantity for a firm is that quantity where

In the long run, only fixed costs can change; variable costs cannot.

Which of the following could be a reason a firm might experience economies of scale?

Exhibit 8-11 -Refer to Exhibit 8-11, which is a long-run average total cost (ATC) schedule. The minimum efficient scale is at

Which of the following does not change with the level of output?

Exhibit 8-6 -Refer to Exhibit 8-6. If the market price is $10, total revenue for the profit-maximizing firm is

A firm can minimize the total costs of producing a given output level at the point of tangency between an isoquant and the isocost line.

In the long run,

Minimum efficient scale is the largest output size for which the long-run average total cost is at a minimum.

An expansion of capital increases fixed costs but does not affect variable costs.

The slope of an isoquant is called the

Why can't economists identify a definite time period that constitutes the short run?

Long-run average total cost is derived from summing individual average total costs in different periods.

Exhibit 8-10 -Refer to Exhibit 8-10. The minimum efficient scale is where output is at

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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