Question 1

Marginal cost

Accepted Answer

A) Rises as a direct result of diminishing returns. 
B) Falls whenever marginal physical product decreases. 
C) Falls in the short run because some resources are fixed. 
D) Rises whenever marginal revenue product rises. 
A) Rises as a direct result of diminishing returns. 
B) Falls whenever marginal physical product decreases. 
C) Falls in the short run because some resources are fixed. 
D) Rises whenever marginal revenue product rises.

Question 2

Economies of scale are reductions in average

Accepted Answer

A) Total cost that result from declining average fixed costs. 
B) Fixed cost that result from reducing the firm's scale of operations. 
C) Total cost that result from using operations of larger size. 
D) Fixed cost resulting from improved technology and production efficiency. 
A) Total cost that result from declining average fixed costs. 
B) Fixed cost that result from reducing the firm's scale of operations. 
C) Total cost that result from using operations of larger size. 
D) Fixed cost resulting from improved technology and production efficiency.

Question 3

The average total cost (ATC)curve will be downward sloping so long as

Accepted Answer

A) Average variable cost is less than average total cost. 
B) Marginal cost is greater than average total cost. 
C) Average fixed cost is less than average total cost. 
D) Marginal cost is less than average total cost. 
A) Average variable cost is less than average total cost. 
B) Marginal cost is greater than average total cost. 
C) Average fixed cost is less than average total cost. 
D) Marginal cost is less than average total cost.

Question 4

An increase in production in the short run definitely results in an increase in

Accepted Answer

A) Average total costs. 
B) Marginal costs. 
C) Total costs. 
D) Average fixed costs. 
A) Average total costs. 
B) Marginal costs. 
C) Total costs. 
D) Average fixed costs.

Question 5

The shape of the marginal cost curve reflects the

Accepted Answer

A) Law of diminishing returns. 
B) Competitiveness of the firm. 
C) Law of diminishing marginal utility. 
D) Law of demand. 
A) Law of diminishing returns. 
B) Competitiveness of the firm. 
C) Law of diminishing marginal utility. 
D) Law of demand.

Question 6

If a firm has constant returns to scale,the long-run cost curve will be downward-sloping.

Accepted Answer

A) True 
 B)False

Question 7

What is the total cost of 120 units in Figure 21.2?

Accepted Answer

A) $34,560. 
B) $9,600. 
C) $24,960. 
D) $10,560. 
A) $34,560. 
B) $9,600. 
C) $24,960. 
D) $10,560.

Question 8

Table 21.2 $\begin{array}{|l|r|r|r|r|}
\hline \text { Output (units per day) } & 0 & 10 & 20 & 30 \
\hline \text { Total cost (dollars per day) } & \$ 40 & \$ 54 & \$ 62 & \$ 80\
\hline
\end{array}$

At 10 units of output in Table 21.2,the total fixed cost is

Accepted Answer

A) $44. 
B) $14. 
C) $40. 
D) $54. 
A) $44. 
B) $14. 
C) $40. 
D) $54.

Question 9

In Figure 21.4,a firm that produces over 800 units of output should choose a plant with which short-run average total cost function?

Accepted Answer

A) ATC1 only. 
B) ATC2 only. 
C) ATC3 only. 
D) Either ATC2 or ATC3. 
A) ATC1 only. 
B) ATC2 only. 
C) ATC3 only. 
D) Either ATC2 or ATC3.

Question 10

Which of the following is most likely a fixed cost?

Accepted Answer

A) Raw materials cost. 
B) Labor cost. 
C) Energy cost. 
D) Property taxes. 
A) Raw materials cost. 
B) Labor cost. 
C) Energy cost. 
D) Property taxes.

Question 11

At any given rate of output,the difference between total cost and fixed cost is

Accepted Answer

A) Marginal cost. 
B) Average variable cost. 
C) Zero in the short run. 
D) Variable cost. 
A) Marginal cost. 
B) Average variable cost. 
C) Zero in the short run. 
D) Variable cost.

Question 12

Profit is

Accepted Answer

A) The difference between total cost and variable cost. 
B) The difference between total revenue and total cost. 
C) Earned at all points along the production function. 
D) Possible only with technical efficiency. 
A) The difference between total cost and variable cost. 
B) The difference between total revenue and total cost. 
C) Earned at all points along the production function. 
D) Possible only with technical efficiency.

Question 13

The total cost at a zero level of output is always equal to the variable cost.

Accepted Answer

A) True 
 B)False

Question 14

The long-run ATC curve is simply a composite of the best short-run ATC possibilities.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is a factor of production for the Little Biscuit Bread Company?

Accepted Answer

A) Flour. 
B) Bread. 
C) Productivity. 
D) Money. 
A) Flour. 
B) Bread. 
C) Productivity. 
D) Money.

Question 16

Which of the following is a long-run concept?

Accepted Answer

A) Diminishing marginal productivity. 
B) Diminishing returns. 
C) Diseconomies of scale. 
D) Fixed costs. 
A) Diminishing marginal productivity. 
B) Diminishing returns. 
C) Diseconomies of scale. 
D) Fixed costs.

Question 17

Average total cost is equal to

Accepted Answer

A) Total cost divided by fixed cost. 
B) Total cost multiplied by quantity. 
C) The sum of average variable cost and marginal cost. 
D) Total cost divided by quantity produced. 
A) Total cost divided by fixed cost. 
B) Total cost multiplied by quantity. 
C) The sum of average variable cost and marginal cost. 
D) Total cost divided by quantity produced.

Question 18

Which of the following statements about the relationship between economic costs and accounting costs is true?

Accepted Answer

A) Accounting costs are always less than or equal to economic costs. 
B) Accounting costs must always equal economic costs. 
C) Accounting costs are always greater than economic costs. 
D) Accounting costs are equal to or greater than economic costs. 
A) Accounting costs are always less than or equal to economic costs. 
B) Accounting costs must always equal economic costs. 
C) Accounting costs are always greater than economic costs. 
D) Accounting costs are equal to or greater than economic costs.

Question 19

Economies of scale

Accepted Answer

A) Exist in both the short run and the long run. 
B) Explain why average variable and average total costs decline in the short run. 
C) Explain why average total costs decline as output increases in the long run. 
D) Explain why average total costs increase as output increases in the long run. 
A) Exist in both the short run and the long run. 
B) Explain why average variable and average total costs decline in the short run. 
C) Explain why average total costs decline as output increases in the long run. 
D) Explain why average total costs increase as output increases in the long run.

Question 20

Diminishing returns occur because

Accepted Answer

A) Of inefficiency in the production process. 
B) Of the use of inferior factors of production. 
C) A firm increases the amount of a variable input without changing a fixed input. 
D) Of lower opportunity costs of the factors of production. 
A) Of inefficiency in the production process. 
B) Of the use of inferior factors of production. 
C) A firm increases the amount of a variable input without changing a fixed input. 
D) Of lower opportunity costs of the factors of production.

Exam 21: The Costs of Production

Marginal cost

Economies of scale are reductions in average

The average total cost (ATC)curve will be downward sloping so long as

An increase in production in the short run definitely results in an increase in

The shape of the marginal cost curve reflects the

If a firm has constant returns to scale,the long-run cost curve will be downward-sloping.

What is the total cost of 120 units in Figure 21.2?

Table 21.2 Output (units per day) 0 10 20 30 Total cost (dollars per day) \ 40 \ 54 \ 62 \ 80 At 10 units of output in Table 21.2,the total fixed cost is

In Figure 21.4,a firm that produces over 800 units of output should choose a plant with which short-run average total cost function?

Which of the following is most likely a fixed cost?

At any given rate of output,the difference between total cost and fixed cost is

Profit is

The total cost at a zero level of output is always equal to the variable cost.

The long-run ATC curve is simply a composite of the best short-run ATC possibilities.

Which of the following is a factor of production for the Little Biscuit Bread Company?

Which of the following is a long-run concept?

Average total cost is equal to

Which of the following statements about the relationship between economic costs and accounting costs is true?

Economies of scale

Diminishing returns occur because

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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