Question 1

Which of the following statements is true?

Accepted Answer

A)  TC = TFC − TVC. 
B)  AVC = TC / Q. 
C)  TFC = TC − TVC. 
D)  MC equals the change in ATC divided by the change in Q. 
A)  TC = TFC − TVC. 
B)  AVC = TC / Q. 
C)  TFC = TC − TVC. 
D)  MC equals the change in ATC divided by the change in Q.

Question 2

The primary cause of diseconomies of scale is scarcity of machinery and capital.

Accepted Answer

A) True 
 B)False

Question 3

When costs that vary with the level of output are divided by the output, you have calculated:

Accepted Answer

A)  total changing cost. 
B)  total fixed cost. 
C)  average fixed cost. 
D)  average variable cost. 
A)  total changing cost. 
B)  total fixed cost. 
C)  average fixed cost. 
D)  average variable cost.

Question 4

In the long run, all costs are fixed costs.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 7-16 Long-run average cost curves  
-Which firm in Exhibit 7-16 displays a long-run average cost curve with economies of scale throughout the range of output shown?

Accepted Answer

A)  Firm A. 
B)  Firm B. 
C)  Firm C. 
D)  Firms A and B. 
A)  Firm A. 
B)  Firm B. 
C)  Firm C. 
D)  Firms A and B.

Question 6

When marginal cost is below average total cost:

Accepted Answer

A)  total cost is falling. 
B)  total cost is rising. 
C)  average total cost is falling. 
D)  average fixed cost is rising. 
E)  total variable cost is falling. 
A)  total cost is falling. 
B)  total cost is rising. 
C)  average total cost is falling. 
D)  average fixed cost is rising. 
E)  total variable cost is falling.

Question 7

If the total variable cost curve for a firm is S-shaped, what is the shape of the total cost curve for that firm?

Accepted Answer

A)  U-shaped 
B)  Flat. 
C)  Hill-shaped. 
D)  S-shaped. 
E)  There is not enough information. 
A)  U-shaped 
B)  Flat. 
C)  Hill-shaped. 
D)  S-shaped. 
E)  There is not enough information.

Question 8

The long run is a planning period:

Accepted Answer

A)  during which the firm can vary all inputs including its plant size. 
B)  less than six months. 
C)  less than one year. 
D)  less than five years. 
A)  during which the firm can vary all inputs including its plant size. 
B)  less than six months. 
C)  less than one year. 
D)  less than five years.

Question 9

Suppose a firm earns an accounting profit. This means the firm also earns a positive economic profit.

Accepted Answer

A) True 
 B)False

Question 10

Exhibit 7-16 Long-run average cost curves  
-In Exhibit 7-16, which firm's long-run average cost curve experiences constant returns to scale?

Accepted Answer

A)  Firm A. 
B)  Firm B. 
C)  Firm C. 
D)  Firms A and C. 
A)  Firm A. 
B)  Firm B. 
C)  Firm C. 
D)  Firms A and C.

Question 11

Exhibit 7-10 Short-run cost schedule for book publisher's hourly production $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Total } \
\text { Output }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Variable Cost }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Cost }
\end{array} \
\hline 0 \text { cases of books } & \$ 0 & \$ 200 \
1 & 100 & 300 \
2 & 150 & 350 \
3 & 250 & 450 \
4 & 450 & 650 \
\hline
\end{array}$$
-In Exhibit 7-10, the publisher's fixed cost is equal to:

Accepted Answer

A)  $50. 
B)  $100. 
C)  $200. 
D)  $300. 
A)  $50. 
B)  $100. 
C)  $200. 
D)  $300.

Question 12

The marginal product curve rises when the marginal cost curve rises.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is true if the total cost curve is rising?

Accepted Answer

A)  Total fixed cost is decreasing. 
B)  Total fixed cost is increasing. 
C)  Marginal cost is decreasing. 
D)  Marginal cost is increasing. 
A)  Total fixed cost is decreasing. 
B)  Total fixed cost is increasing. 
C)  Marginal cost is decreasing. 
D)  Marginal cost is increasing.

Question 14

If a firm has total revenue of $200 million, explicit costs of $190 million, and implicit costs of $30 million, its economic profit is:

Accepted Answer

A)  $200 million. 
B)  $70 million. 
C)  $10 million. 
D)  −$10 million. 
E)  −$20 million. 
A)  $200 million. 
B)  $70 million. 
C)  $10 million. 
D)  −$10 million. 
E)  −$20 million.

Question 15

Long-run economies of scale exist over the range of output for which the long-run average cost curve:

Accepted Answer

A)  is constant. 
B)  is falling. 
C)  is rising. 
D)  does not exist. 
A)  is constant. 
B)  is falling. 
C)  is rising. 
D)  does not exist.

Question 16

Which of the following explains most accurately why the firm's short-run marginal cost curve will eventually rise?

Accepted Answer

A)  As more of the variable factor is used, its price will rise. 
B)  When diminishing marginal returns set in, it will take ever-larger quantities of the variable resources to produce an additional unit of output. 
C)  As the variable factor is used more intensely, its marginal product will rise, causing an increase in marginal costs. 
D)  As the size of the firm increases, the operational efficiency of the firm declines, causing an increase in marginal costs. 
A)  As more of the variable factor is used, its price will rise. 
B)  When diminishing marginal returns set in, it will take ever-larger quantities of the variable resources to produce an additional unit of output. 
C)  As the variable factor is used more intensely, its marginal product will rise, causing an increase in marginal costs. 
D)  As the size of the firm increases, the operational efficiency of the firm declines, causing an increase in marginal costs.

Question 17

If a firm's long-run average cost curve is rising, it is experiencing:

Accepted Answer

A)  a constant return to scale. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  none of these. 
A)  a constant return to scale. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  none of these.

Question 18

Marginal cost is best defined as:

Accepted Answer

A)  a cost that does not vary with the rate of output. 
B)  the difference between fixed and variable cost at any level of output. 
C)  the amount added to total cost when one more unit of output is produced. 
D)  the difference between price and average total cost at the profit-maximizing level of output. 
A)  a cost that does not vary with the rate of output. 
B)  the difference between fixed and variable cost at any level of output. 
C)  the amount added to total cost when one more unit of output is produced. 
D)  the difference between price and average total cost at the profit-maximizing level of output.

Question 19

Which of the following is most likely to be a fixed cost for a business?

Accepted Answer

A)  expenditures on low-skill labor. 
B)  shipping charges for the delivery of products. 
C)  managerial salaries. 
D)  property taxes on the firm's buildings. 
A)  expenditures on low-skill labor. 
B)  shipping charges for the delivery of products. 
C)  managerial salaries. 
D)  property taxes on the firm's buildings.

Question 20

Economic profit equals accounting profit minus implicit costs.

Accepted Answer

A) True 
 B)False

Which of the following statements is true?

The primary cause of diseconomies of scale is scarcity of machinery and capital.

When costs that vary with the level of output are divided by the output, you have calculated:

In the long run, all costs are fixed costs.

Exhibit 7-16 Long-run average cost curves -Which firm in Exhibit 7-16 displays a long-run average cost curve with economies of scale throughout the range of output shown?

When marginal cost is below average total cost:

If the total variable cost curve for a firm is S-shaped, what is the shape of the total cost curve for that firm?

The long run is a planning period:

Suppose a firm earns an accounting profit. This means the firm also earns a positive economic profit.

Exhibit 7-16 Long-run average cost curves -In Exhibit 7-16, which firm's long-run average cost curve experiences constant returns to scale?

Exhibit 7-10 Short-run cost schedule for book publisher's hourly production Total Output Total Variable Cost Total Cost 0 cases of books \ 0 \ 200 1 100 300 2 150 350 3 250 450 4 450 650 -In Exhibit 7-10, the publisher's fixed cost is equal to:

The marginal product curve rises when the marginal cost curve rises.

Which of the following is true if the total cost curve is rising?

If a firm has total revenue of $200 million, explicit costs of $190 million, and implicit costs of $30 million, its economic profit is:

Long-run economies of scale exist over the range of output for which the long-run average cost curve:

Which of the following explains most accurately why the firm's short-run marginal cost curve will eventually rise?

If a firm's long-run average cost curve is rising, it is experiencing:

Marginal cost is best defined as:

Which of the following is most likely to be a fixed cost for a business?

Economic profit equals accounting profit minus implicit costs.

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

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Exam 7: Production Costs

Which of the following statements is true?

The primary cause of diseconomies of scale is scarcity of machinery and capital.

When costs that vary with the level of output are divided by the output, you have calculated:

In the long run, all costs are fixed costs.

Exhibit 7-16 Long-run average cost curves -Which firm in Exhibit 7-16 displays a long-run average cost curve with economies of scale throughout the range of output shown?

When marginal cost is below average total cost:

If the total variable cost curve for a firm is S-shaped, what is the shape of the total cost curve for that firm?

The long run is a planning period:

Suppose a firm earns an accounting profit. This means the firm also earns a positive economic profit.

Exhibit 7-16 Long-run average cost curves -In Exhibit 7-16, which firm's long-run average cost curve experiences constant returns to scale?

Exhibit 7-10 Short-run cost schedule for book publisher's hourly production Total Output Total Variable Cost Total Cost 0 cases of books \ 0 \ 200 1 100 300 2 150 350 3 250 450 4 450 650 -In Exhibit 7-10, the publisher's fixed cost is equal to:

The marginal product curve rises when the marginal cost curve rises.

Which of the following is true if the total cost curve is rising?

If a firm has total revenue of $200 million, explicit costs of $190 million, and implicit costs of $30 million, its economic profit is:

Long-run economies of scale exist over the range of output for which the long-run average cost curve:

Which of the following explains most accurately why the firm's short-run marginal cost curve will eventually rise?

If a firm's long-run average cost curve is rising, it is experiencing:

Marginal cost is best defined as:

Which of the following is most likely to be a fixed cost for a business?

Economic profit equals accounting profit minus implicit costs.

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

Filters