Question 1

If the average variable cost of the fifth hat is $50, then the total variable cost of five hats is

Accepted Answer

A)  $10. 
B)  $250. 
C)  $1,800. 
D)  indeterminate from this information. 
A)  $10. 
B)  $250. 
C)  $1,800. 
D)  indeterminate from this information.

Question 2

Joe's Butcher Shop is producing where MR = MC; Joe's Butcher Shop must be

Accepted Answer

A)  earning a zero economic profit. 
B)  incurring a loss. 
C)  maximizing profits. 
D)  maximizing revenue but not maximizing profits. 
A)  earning a zero economic profit. 
B)  incurring a loss. 
C)  maximizing profits. 
D)  maximizing revenue but not maximizing profits.

Question 3

The decision by firms of the quantity of output to supply is based on

Accepted Answer

A)  techniques of production available. 
B)  the price of output. 
C)  the price of inputs. 
D)  government oversight. 
A)  techniques of production available. 
B)  the price of output. 
C)  the price of inputs. 
D)  government oversight.

Question 4

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow
 
Figure 8.5
-Refer to Figure 8.4. Micro Oven's average fixed costs of producing three units of output are

Accepted Answer

A)  $100. 
B)  $150. 
C)  $166.67. 
D)  indeterminate from this information. 
A)  $100. 
B)  $150. 
C)  $166.67. 
D)  indeterminate from this information.

Question 5

A point on a total variable cost curve shows the ________ variable cost a firm will bear to produce a certain output.

Accepted Answer

A)  highest 
B)  lowest 
C)  change in 
D)  average 
A)  highest 
B)  lowest 
C)  change in 
D)  average

Question 6

________ are likely a fixed cost of a firm.

Accepted Answer

A)  Utility costs 
B)  The costs of raw materials used in production 
C)  Mortgage payments for a new warehouse 
D)  Expenses for holiday office parties 
A)  Utility costs 
B)  The costs of raw materials used in production 
C)  Mortgage payments for a new warehouse 
D)  Expenses for holiday office parties

Question 7

In the short run, ________ costs exceed ________ costs.

Accepted Answer

A)  total fixed; total 
B)  average variable; average total 
C)  total variable; total 
D)  average total; average variable 
A)  total fixed; total 
B)  average variable; average total 
C)  total variable; total 
D)  average total; average variable

Question 8

Which of the following is the closest example of a perfectly competitive industry?

Accepted Answer

A)  casual dining restaurants 
B)  cigarettes 
C)  convenience stores 
D)  alfalfa 
A)  casual dining restaurants 
B)  cigarettes 
C)  convenience stores 
D)  alfalfa

Question 9

Wheat is produced in a perfectly competitive market. Market demand for wheat increases. This will cause the individual wheat farmer's marginal revenue to ________ and their profit-maximizing level of output to ________.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 10

Marginal cost is total variable cost divided by output.

Accepted Answer

A) True 
 B)False

Question 11

Assume Robbie's Robots operates in a perfectly competitive market producing 3,000 robots per day. At this output level, the selling price is $800 per robot and the marginal cost is $625 per robot. To maximize profits, Robbie's Robots should

Accepted Answer

A)  make no adjustments as they are already maximizing their profits. 
B)  increase their output. 
C)  decrease their output. 
D)  stop producing since it is earning a loss. 
A)  make no adjustments as they are already maximizing their profits. 
B)  increase their output. 
C)  decrease their output. 
D)  stop producing since it is earning a loss.

Question 12

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow
 
Figure 8.5
-Refer to Figure 8.5. If four drones are produced, average variable costs are

Accepted Answer

A)  $5. 
B)  $10. 
C)  $17.50. 
D)  $25. 
A)  $5. 
B)  $10. 
C)  $17.50. 
D)  $25.

Question 13

If marginal cost is above average total cost, average total cost will

Accepted Answer

A)  be minimized. 
B)  decrease. 
C)  increase. 
D)  remain constant. 
A)  be minimized. 
B)  decrease. 
C)  increase. 
D)  remain constant.

Question 14

A market demand curve is

Accepted Answer

A)  downward sloping. 
B)  upward sloping. 
C)  perfectly elastic. 
D)  perfectly inelastic. 
A)  downward sloping. 
B)  upward sloping. 
C)  perfectly elastic. 
D)  perfectly inelastic.

Question 15

For a perfectly competitive firm, when P = MC = ATC, the firm should reduce its output so as to increase its profits.

Accepted Answer

A) True 
 B)False

Question 16

If an individual perfectly competitive firm charges a price ________ the industry equilibrium price while competitors charge the equilibrium price, the firm will not sell any of what it produces.

Accepted Answer

A)  above 
B)  below 
C)  equal to 
D)  More information is needed to answer the question. 
A)  above 
B)  below 
C)  equal to 
D)  More information is needed to answer the question.

Question 17

The short-run average variable cost curve eventually begins to increase at an increasing rate because of

Accepted Answer

A)  diseconomies of scale. 
B)  a constraint that does not allow the firm to change its production technology. 
C)  diminishing returns phenomena. 
D)  increasing returns to scale to capital. 
A)  diseconomies of scale. 
B)  a constraint that does not allow the firm to change its production technology. 
C)  diminishing returns phenomena. 
D)  increasing returns to scale to capital.

Question 18

Firms ________ their ________ costs in the short run.

Accepted Answer

A)  can change; fixed 
B)  cannot change; total 
C)  can change; overhead 
D)  can change; variable 
A)  can change; fixed 
B)  cannot change; total 
C)  can change; overhead 
D)  can change; variable

Question 19

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow.   Figure 8.6
-Refer to Figure 8.6. Curve 1 is Outdoor Equipment's

Accepted Answer

A)  marginal cost curve. 
B)  average variable cost curve. 
C)  average total cost curve. 
D)  average fixed cost curve. 
A)  marginal cost curve. 
B)  average variable cost curve. 
C)  average total cost curve. 
D)  average fixed cost curve.

Question 20

Fixed costs

Accepted Answer

A)  do not exist in the long run. 
B)  depend on a firm's level of output. 
C)  are zero if a firm produces no output. 
D)  are total costs minus average variable costs. 
A)  do not exist in the long run. 
B)  depend on a firm's level of output. 
C)  are zero if a firm produces no output. 
D)  are total costs minus average variable costs.

Exam 8: Short-Run Costs and Output Decisions

If the average variable cost of the fifth hat is $50, then the total variable cost of five hats is

Joe's Butcher Shop is producing where MR = MC; Joe's Butcher Shop must be

The decision by firms of the quantity of output to supply is based on

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow Figure 8.5 -Refer to Figure 8.4. Micro Oven's average fixed costs of producing three units of output are

A point on a total variable cost curve shows the ________ variable cost a firm will bear to produce a certain output.

________ are likely a fixed cost of a firm.

In the short run, ________ costs exceed ________ costs.

Which of the following is the closest example of a perfectly competitive industry?

Wheat is produced in a perfectly competitive market. Market demand for wheat increases. This will cause the individual wheat farmer's marginal revenue to ________ and their profit-maximizing level of output to ________.

Marginal cost is total variable cost divided by output.

Assume Robbie's Robots operates in a perfectly competitive market producing 3,000 robots per day. At this output level, the selling price is $800 per robot and the marginal cost is $625 per robot. To maximize profits, Robbie's Robots should

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow Figure 8.5 -Refer to Figure 8.5. If four drones are produced, average variable costs are

If marginal cost is above average total cost, average total cost will

A market demand curve is

For a perfectly competitive firm, when P = MC = ATC, the firm should reduce its output so as to increase its profits.

If an individual perfectly competitive firm charges a price ________ the industry equilibrium price while competitors charge the equilibrium price, the firm will not sell any of what it produces.

The short-run average variable cost curve eventually begins to increase at an increasing rate because of

Firms ________ their ________ costs in the short run.

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow. Figure 8.6 -Refer to Figure 8.6. Curve 1 is Outdoor Equipment's

Fixed costs

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

In the short run, costs exceed costs.

Wheat is produced in a perfectly competitive market. Market demand for wheat increases. This will cause the individual wheat farmer's marginal revenue to and their profit-maximizing level of output to .

Firms their costs in the short run.