Question 1

Exhibit 8-3  
-Refer to Exhibit 8-3. At an output of 5 units, the average fixed cost is

Accepted Answer

A) $50.40. 
B) $252. 
C) $68. 
D) $100. 
E) $20. 
A) $50.40. 
B) $252. 
C) $68. 
D) $100. 
E) $20.

Question 2

Which of the following statements about average costs is false?

Accepted Answer

A) The difference between average total cost and average variable cost does not change as output increases. 
B) Average fixed cost decreases as output increases. 
C) Average variable cost first decreases and then increases as output increases. 
D) Average total cost first decreases and then increases as output increases. 
E) The difference between average total cost and average variable cost is average fixed cost. 
A) The difference between average total cost and average variable cost does not change as output increases. 
B) Average fixed cost decreases as output increases. 
C) Average variable cost first decreases and then increases as output increases. 
D) Average total cost first decreases and then increases as output increases. 
E) The difference between average total cost and average variable cost is average fixed cost.

Question 3

Fixed costs are costs paid for

Accepted Answer

A) resources that do not change with changes in output. 
B) obsolete plants and equipment not used anymore. 
C) plants and equipment in the long run. 
D) labor and material inputs that vary with output. 
E) the labor in fixing production equipment. 
A) resources that do not change with changes in output. 
B) obsolete plants and equipment not used anymore. 
C) plants and equipment in the long run. 
D) labor and material inputs that vary with output. 
E) the labor in fixing production equipment.

Question 4

Exhibit 8-2  
-Refer to Exhibit 8-2. At an output quantity of 5 units, the fixed cost is

Accepted Answer

A) $20. 
B) $100. 
C) $120. 
D) $185. 
E) $326. 
A) $20. 
B) $100. 
C) $120. 
D) $185. 
E) $326.

Question 5

If marginal cost is increasing, you know that average variable cost is increasing.

Accepted Answer

A) True 
 B)False

Question 6

In a given isocost line, any combination of different inputs results in the same total cost.

Accepted Answer

A) True 
 B)False

Question 7

If the total cost of producing 6 units is $228 and the total cost of producing 7 units is $245, what is the marginal cost of producing 7 units?

Accepted Answer

A) $35 
B) $38 
C) $245 
D) $3 
E) $17 
A) $35 
B) $38 
C) $245 
D) $3 
E) $17

Question 8

Labor costs are a typical example of fixed costs.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 8-10  
-Economies and diseconomies of scale are the reasons

Accepted Answer

A) average fixed cost decreases. 
B) long-run total cost decreases and then increases. 
C) short-run average total cost decreases and then increases. 
D) average variable cost decreases and then increases. 
E) long-run average cost decreases and then increases. 
A) average fixed cost decreases. 
B) long-run total cost decreases and then increases. 
C) short-run average total cost decreases and then increases. 
D) average variable cost decreases and then increases. 
E) long-run average cost decreases and then increases.

Question 10

Marginal product is at its maximum when marginal cost is at its minimum.

Accepted Answer

A) True 
 B)False

Question 11

If average variable cost is falling with increasing output, then

Accepted Answer

A) marginal cost must be less than average variable cost. 
B) marginal cost must be greater than average variable cost. 
C) average fixed cost is rising. 
D) marginal cost must be rising. 
E) marginal cost must be falling. 
A) marginal cost must be less than average variable cost. 
B) marginal cost must be greater than average variable cost. 
C) average fixed cost is rising. 
D) marginal cost must be rising. 
E) marginal cost must be falling.

Question 12

A firm's shutdown point is the same as its breakeven point.

Accepted Answer

A) True 
 B)False

Question 13

If total revenue is greater than variable cost but less than total costs, the firm should

Accepted Answer

A) remain in operation because revenues are sufficient to cover variable costs and some fixed costs. 
B) shut down because revenue is not sufficient to cover all costs. 
C) not make any decisions until it hires an economist. 
D) remain in operation because revenue is sufficient to cover all fixed costs. 
E) shut down because P is less than ATC. 
A) remain in operation because revenues are sufficient to cover variable costs and some fixed costs. 
B) shut down because revenue is not sufficient to cover all costs. 
C) not make any decisions until it hires an economist. 
D) remain in operation because revenue is sufficient to cover all fixed costs. 
E) shut down because P is less than ATC.

Question 14

Exhibit 8-4  
-Refer to Exhibit 8-4. Calculate the average fixed cost for 4 units of output.

Accepted Answer

$10
Fixed cost is $4

Question 15

Increasing marginal product of labor results in

Accepted Answer

A) increasing marginal cost. 
B) decreasing marginal cost. 
C) decreasing average fixed cost. 
D) increasing average cost. 
E) decreasing average cost. 
A) increasing marginal cost. 
B) decreasing marginal cost. 
C) decreasing average fixed cost. 
D) increasing average cost. 
E) decreasing average cost.

Question 16

A capital expansion causes average total costs to

Accepted Answer

A) increase at low levels of output. 
B) increase at all levels of output. 
C) increase at high levels of output. 
D) decrease at all levels of output. 
E) decrease at low levels of output. 
A) increase at low levels of output. 
B) increase at all levels of output. 
C) increase at high levels of output. 
D) decrease at all levels of output. 
E) decrease at low levels of output.

Question 17

Exhibit 8-9  
-Refer to Exhibit 8-9. Show that fixed costs are the same whether output is 100 units or 300 units.

Accepted Answer

Fixed costs at 100 units = ($1

Question 18

Increasing returns occur when

Accepted Answer

A) marginal cost is increasing. 
B) marginal cost is decreasing. 
C) average total cost is falling. 
D) average variable cost is falling. 
E) marginal product is decreasing. 
A) marginal cost is increasing. 
B) marginal cost is decreasing. 
C) average total cost is falling. 
D) average variable cost is falling. 
E) marginal product is decreasing.

Question 19

A production function is the relationship between

Accepted Answer

A) total costs and inputs. 
B) total costs and output. 
C) output and inputs. 
D) one input and another input. 
E) output and price. 
A) total costs and inputs. 
B) total costs and output. 
C) output and inputs. 
D) one input and another input. 
E) output and price.

Question 20

The long run is a period

Accepted Answer

A) that affects larger rather than smaller firms. 
B) long enough to allow firms to change plant size and capacity. 
C) long enough to allow firms to make economic decisions. 
D) of three years or longer. 
E) long enough for firms to begin earning profits. 
A) that affects larger rather than smaller firms. 
B) long enough to allow firms to change plant size and capacity. 
C) long enough to allow firms to make economic decisions. 
D) of three years or longer. 
E) long enough for firms to begin earning profits.

Exam 8: Costs and the Changes at Firms Over Time

Exhibit 8-3 -Refer to Exhibit 8-3. At an output of 5 units, the average fixed cost is

Which of the following statements about average costs is false?

Fixed costs are costs paid for

Exhibit 8-2 -Refer to Exhibit 8-2. At an output quantity of 5 units, the fixed cost is

If marginal cost is increasing, you know that average variable cost is increasing.

In a given isocost line, any combination of different inputs results in the same total cost.

If the total cost of producing 6 units is $228 and the total cost of producing 7 units is $245, what is the marginal cost of producing 7 units?

Labor costs are a typical example of fixed costs.

Exhibit 8-10 -Economies and diseconomies of scale are the reasons

Marginal product is at its maximum when marginal cost is at its minimum.

If average variable cost is falling with increasing output, then

A firm's shutdown point is the same as its breakeven point.

If total revenue is greater than variable cost but less than total costs, the firm should

Exhibit 8-4 -Refer to Exhibit 8-4. Calculate the average fixed cost for 4 units of output.

Increasing marginal product of labor results in

A capital expansion causes average total costs to

Exhibit 8-9 -Refer to Exhibit 8-9. Show that fixed costs are the same whether output is 100 units or 300 units.

Increasing returns occur when

A production function is the relationship between

The long run is a period

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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