Question 1

The vertical distance between a firm's average total cost curve and its average variable cost curve is its

Accepted Answer

A) marginal cost 
B) sunk cost 
C) total variable cost 
D) total fixed cost 
E) average fixed cost 
A) marginal cost 
B) sunk cost 
C) total variable cost 
D) total fixed cost 
E) average fixed cost

Question 2

-Figure 7-9 shows three different cost curves,labeled A,B,and C,for a firm.Which of these curves is most likely to represent average fixed cost?

Accepted Answer

A) curve A 
B) curve B 
C) curve C 
D) neither A,B,nor C 
E) cannot be determined without more information 
A) curve A 
B) curve B 
C) curve C 
D) neither A,B,nor C 
E) cannot be determined without more information

Question 3

Diseconomies of scale tend to occur in large firms because

Accepted Answer

A) the many layers of management are cumbersome and because it is difficult to monitor employees 
B) such firms are operating at inappropriate plant sizes for their output levels 
C) such firms are operating at a point above their long-run average total cost curves 
D) their ability to adjust their plant sizes is constrained by the existence of fixed inputs 
E) they fail to garner all the possible gains from specialization 
A) the many layers of management are cumbersome and because it is difficult to monitor employees 
B) such firms are operating at inappropriate plant sizes for their output levels 
C) such firms are operating at a point above their long-run average total cost curves 
D) their ability to adjust their plant sizes is constrained by the existence of fixed inputs 
E) they fail to garner all the possible gains from specialization

Question 4

The total cost to a firm of producing zero units of output is

Accepted Answer

A) zero in both the short run and the long run 
B) its fixed cost in the short run,zero in the long run 
C) its fixed cost in the long run,zero in the short run 
D) its fixed cost in both the short run and the long run 
E) its variable cost in both the short run and the long run 
A) zero in both the short run and the long run 
B) its fixed cost in the short run,zero in the long run 
C) its fixed cost in the long run,zero in the short run 
D) its fixed cost in both the short run and the long run 
E) its variable cost in both the short run and the long run

Question 5

The law of diminishing marginal returns says that as additional units of a variable input are added to

Accepted Answer

A) fixed amounts of other inputs,total output will eventually remain constant 
B) varying amounts of other inputs,total output will eventually decline 
C) fixed amounts of other inputs,the resulting increases in total output will eventually become smaller 
D) varying amount of other inputs,the resulting increases in total output will eventually become smaller 
E) a declining amount of output,technology will eventually deteriorate 
A) fixed amounts of other inputs,total output will eventually remain constant 
B) varying amounts of other inputs,total output will eventually decline 
C) fixed amounts of other inputs,the resulting increases in total output will eventually become smaller 
D) varying amount of other inputs,the resulting increases in total output will eventually become smaller 
E) a declining amount of output,technology will eventually deteriorate

Question 6

The least-cost rule for firms states that in the long run,firms will

Accepted Answer

A) produce output at the point where ATC is minimized 
B) produce output at the point where MC is minimized 
C) minimize variable costs 
D) choose the output level with the lowest TC 
E) choose the lowest-cost input combination for any output level 
A) produce output at the point where ATC is minimized 
B) produce output at the point where MC is minimized 
C) minimize variable costs 
D) choose the output level with the lowest TC 
E) choose the lowest-cost input combination for any output level

Question 7

Bob gives up his factory job in order to open a bait-and-tackle shop.The earnings from his factory job represent

Accepted Answer

A) the hourly wage paid by the shop 
B) the marginal cost of running the shop 
C) the average cost of running the shop 
D) a fixed cost that can vary in the long run 
E) an implicit cost of opening the shop 
A) the hourly wage paid by the shop 
B) the marginal cost of running the shop 
C) the average cost of running the shop 
D) a fixed cost that can vary in the long run 
E) an implicit cost of opening the shop

Question 8

If the marginal product of labor falls,the marginal cost of output

Accepted Answer

A) declines,then increases 
B) becomes negative 
C) rises 
D) remains constant 
E) falls 
A) declines,then increases 
B) becomes negative 
C) rises 
D) remains constant 
E) falls

Question 9

Whenever marginal cost is below average cost,average cost must fall as output increases.

Accepted Answer

A) True 
 B)False

Question 10

Total fixed costs decrease as output expands.

Accepted Answer

A) True 
 B)False

Question 11

When long-run average total cost decreases as output increases,a firm experiences

Accepted Answer

A) increasing average fixed cost 
B) decreasing total cost 
C) economies of scale 
D) diseconomies of scale 
E) constant returns to scale 
A) increasing average fixed cost 
B) decreasing total cost 
C) economies of scale 
D) diseconomies of scale 
E) constant returns to scale

Question 12

-Figure 7-6 shows the total cost for six different levels of output for a particular firm.What is the marginal cost (MC)of the last unit of output listed in the table (i.e. ,the fifth unit of output)?

Accepted Answer

A) $2,700 
B) $540 
C) $100 
D) $90 
E) $500 
A) $2,700 
B) $540 
C) $100 
D) $90 
E) $500

Question 13

In a firm's planning horizon,the long run refers to

Accepted Answer

A) a period of one year or more 
B) the term to which the current board of directors has been elected 
C) the period during which all of the firm's inputs can be varied 
D) the period during which at least one of the firm's inputs is fixed 
E) the period during which the level of available technology is fixed 
A) a period of one year or more 
B) the term to which the current board of directors has been elected 
C) the period during which all of the firm's inputs can be varied 
D) the period during which at least one of the firm's inputs is fixed 
E) the period during which the level of available technology is fixed

Question 14

Which of the following explains why long-run average total cost at first decreases as output increases?

Accepted Answer

A) diseconomies of scale 
B) less efficient use of lumpy inputs 
C) fixed costs become spread out over more units of output 
D) gains from specialization of inputs 
E) marginal costs rise at a slower rate than average costs in the short run 
A) diseconomies of scale 
B) less efficient use of lumpy inputs 
C) fixed costs become spread out over more units of output 
D) gains from specialization of inputs 
E) marginal costs rise at a slower rate than average costs in the short run

Question 15

-For the total product curve shown in Figure 7-3,for which unit of labor is the marginal product 20 units of output?

Accepted Answer

A) first 
B) second 
C) third 
D) fourth 
E) fifth 
A) first 
B) second 
C) third 
D) fourth 
E) fifth

Question 16

A firm's implicit costs are

Accepted Answer

A) its maintenance costs 
B) its paid-out costs of production 
C) its main source of executive costs 
D) irrelevant to the determination of economic profit 
E) opportunity costs of production that do not involve money outlays 
A) its maintenance costs 
B) its paid-out costs of production 
C) its main source of executive costs 
D) irrelevant to the determination of economic profit 
E) opportunity costs of production that do not involve money outlays

Question 17

A sunk cost is one that

Accepted Answer

A) changes as the level of output changes in the short run 
B) was paid in the past and will not change regardless of later decisions 
C) should determine the rational course of action in the future 
D) has the most impact on profit-maximizing decisions 
E) influences rational decision makers 
A) changes as the level of output changes in the short run 
B) was paid in the past and will not change regardless of later decisions 
C) should determine the rational course of action in the future 
D) has the most impact on profit-maximizing decisions 
E) influences rational decision makers

Question 18

If all firms in a market have the same LRATC curve,

Accepted Answer

A) only one of them can survive in the long run 
B) the lowest possible long-run price is determined by LRATC at minimum efficient scale 
C) the highest possible long-run price is determined by LRATC at minimum efficient scale 
D) minimum efficient scale must be zero 
E) there is no minimum efficient scale 
A) only one of them can survive in the long run 
B) the lowest possible long-run price is determined by LRATC at minimum efficient scale 
C) the highest possible long-run price is determined by LRATC at minimum efficient scale 
D) minimum efficient scale must be zero 
E) there is no minimum efficient scale

Question 19

If minimum average cost is the same over a large range of output,

Accepted Answer

A) the market will evolve into a natural monopoly 
B) minimum efficient scale is large as well 
C) only a few large firms will survive in the long run 
D) smaller firms have a cost advantage over larger firms 
E) firms of varying sizes can coexist 
A) the market will evolve into a natural monopoly 
B) minimum efficient scale is large as well 
C) only a few large firms will survive in the long run 
D) smaller firms have a cost advantage over larger firms 
E) firms of varying sizes can coexist

Question 20

When long-run average total cost increases as output increases,a firm experiences

Accepted Answer

A) diseconomies of scale 
B) economies of scale 
C) constant returns to scale 
D) decreasing marginal cost 
E) greater total cost in the long run than in the short run 
A) diseconomies of scale 
B) economies of scale 
C) constant returns to scale 
D) decreasing marginal cost 
E) greater total cost in the long run than in the short run

The vertical distance between a firm's average total cost curve and its average variable cost curve is its

-Figure 7-9 shows three different cost curves,labeled A,B,and C,for a firm.Which of these curves is most likely to represent average fixed cost?

Diseconomies of scale tend to occur in large firms because

The total cost to a firm of producing zero units of output is

The law of diminishing marginal returns says that as additional units of a variable input are added to

The least-cost rule for firms states that in the long run,firms will

Bob gives up his factory job in order to open a bait-and-tackle shop.The earnings from his factory job represent

If the marginal product of labor falls,the marginal cost of output

Whenever marginal cost is below average cost,average cost must fall as output increases.

Total fixed costs decrease as output expands.

When long-run average total cost decreases as output increases,a firm experiences

-Figure 7-6 shows the total cost for six different levels of output for a particular firm.What is the marginal cost (MC)of the last unit of output listed in the table (i.e. ,the fifth unit of output)?

In a firm's planning horizon,the long run refers to

Which of the following explains why long-run average total cost at first decreases as output increases?

-For the total product curve shown in Figure 7-3,for which unit of labor is the marginal product 20 units of output?

A firm's implicit costs are

A sunk cost is one that

If all firms in a market have the same LRATC curve,

If minimum average cost is the same over a large range of output,

When long-run average total cost increases as output increases,a firm experiences

What Is Economics

Scarcity, choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

Elasticity

Consumer Choice

How Firms Make Decisions: Profit Maximization

Perfect Competition

B:Perfect Competition

Monopolistic Competition and Oligopoly

Monopoly

Labor Markets

B: Labor Markets

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

Filters

Exam 7: Production and Cost

The vertical distance between a firm's average total cost curve and its average variable cost curve is its

-Figure 7-9 shows three different cost curves,labeled A,B,and C,for a firm.Which of these curves is most likely to represent average fixed cost?

Diseconomies of scale tend to occur in large firms because

The total cost to a firm of producing zero units of output is

The law of diminishing marginal returns says that as additional units of a variable input are added to

The least-cost rule for firms states that in the long run,firms will

Bob gives up his factory job in order to open a bait-and-tackle shop.The earnings from his factory job represent

If the marginal product of labor falls,the marginal cost of output

Whenever marginal cost is below average cost,average cost must fall as output increases.

Total fixed costs decrease as output expands.

When long-run average total cost decreases as output increases,a firm experiences

-Figure 7-6 shows the total cost for six different levels of output for a particular firm.What is the marginal cost (MC)of the last unit of output listed in the table (i.e. ,the fifth unit of output)?

In a firm's planning horizon,the long run refers to

Which of the following explains why long-run average total cost at first decreases as output increases?

-For the total product curve shown in Figure 7-3,for which unit of labor is the marginal product 20 units of output?

A firm's implicit costs are

A sunk cost is one that

If all firms in a market have the same LRATC curve,

If minimum average cost is the same over a large range of output,

When long-run average total cost increases as output increases,a firm experiences

What Is Economics

Scarcity, choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

Elasticity

Consumer Choice

How Firms Make Decisions: Profit Maximization

Perfect Competition

B:Perfect Competition

Monopolistic Competition and Oligopoly

Monopoly

Labor Markets

B: Labor Markets

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

Filters