Question 1

Average total cost is

Accepted Answer

A) total cost divided by the quantity of output produced. 
B) total explicit costs divided by the quantity of output produced. 
C) variable cost divided by the quantity of output produced. 
D) the change in fixed plus variable cost divided by the quantity of output produced. 
A) total cost divided by the quantity of output produced. 
B) total explicit costs divided by the quantity of output produced. 
C) variable cost divided by the quantity of output produced. 
D) the change in fixed plus variable cost divided by the quantity of output produced.

Question 2

Which of the following is true at the output level where average total cost is at its minimum?

Accepted Answer

A) Marginal cost equals average total cost. 
B) Average variable cost equals fixed cost. 
C) Marginal cost equals average variable cost. 
D) Average total cost equals average fixed cost. 
A) Marginal cost equals average total cost. 
B) Average variable cost equals fixed cost. 
C) Marginal cost equals average variable cost. 
D) Average total cost equals average fixed cost.

Question 3

In a diagram showing the average total cost and average variable cost curves, the minimum point of the average total cost is

Accepted Answer

A) at the same level of output as the minimum point of the average variable cost. 
B) at a larger level of output than the minimum point of the average variable cost. 
C) at a lower level of output than the minimum point of the average variable cost. 
D) at the same level of output as the maximum of the total product curve. 
A) at the same level of output as the minimum point of the average variable cost. 
B) at a larger level of output than the minimum point of the average variable cost. 
C) at a lower level of output than the minimum point of the average variable cost. 
D) at the same level of output as the maximum of the total product curve.

Question 4

Explain whether each of the following is a fixed cost or a variable cost for Damian Dandridge's tattoo parlor.
a.The payment he makes to buy tattoo ink.
b.The wages he pays his employees.
c.The $500-per-month payment he makes to advertise his shop on highway billboards.
d.The lease payment he makes to the landlord who owns the building where his shop is located.
e.The payment he makes on his liability insurance policy.

Accepted Answer

c, d, and e are fixed costs because they

Question 5

The long-run average cost curve shows

Accepted Answer

A) the lowest average cost of producing every level of output in the long run. 
B) where the most profitable level of output occurs. 
C) the average cost of producing where diminishing returns are not present. 
D) the plant size or scale that the firm should build. 
A) the lowest average cost of producing every level of output in the long run. 
B) where the most profitable level of output occurs. 
C) the average cost of producing where diminishing returns are not present. 
D) the plant size or scale that the firm should build.

Question 6

In the short run, marginal product of labor increases at first and then falls because

Accepted Answer

A) as more labor is hired, they are not as skilled as the first ones hired. 
B) there are fewer opportunities for division of labor and specialization when fewer workers are hired. 
C) managerial inefficiency sets in when a firm gets too large. 
D) the new workers do not have as much experience as those who have been with the firm for a long time and therefore are not as productive. 
A) as more labor is hired, they are not as skilled as the first ones hired. 
B) there are fewer opportunities for division of labor and specialization when fewer workers are hired. 
C) managerial inefficiency sets in when a firm gets too large. 
D) the new workers do not have as much experience as those who have been with the firm for a long time and therefore are not as productive.

Question 7

Average variable cost can be calculated using any of the formulas below except

Accepted Answer

A) TVC/Q. 
B) (TC - F
C) /Q. 
C) Δ(TC - F
C) /ΔQ. 
D) (TC/Q)- AFC. 
A) TVC/Q. 
B) (TC - F
C) /Q. 
C) Δ(TC - F
C) /ΔQ. 
D) (TC/Q)- AFC.

Question 8

Suppose the price of capital and labor remain constant.As a firm's expenditures for capital and labor increase, its isocost line

Accepted Answer

A) shifts out parallel to the original isocost line. 
B) shifts in parallel to the original isocost line. 
C) rotates outward on the Y-intercept. 
D) rotates outward on the X-intercept. 
A) shifts out parallel to the original isocost line. 
B) shifts in parallel to the original isocost line. 
C) rotates outward on the Y-intercept. 
D) rotates outward on the X-intercept.

Question 9

In the long run

Accepted Answer

A) the firm's fixed costs are greater than its fixed costs in the short run. 
B) all of the firm's costs are explicit costs; there are no implicit costs of production. 
C) the firm is more profitable than it is in the short run. 
D) all of the firm's costs are variable costs. 
A) the firm's fixed costs are greater than its fixed costs in the short run. 
B) all of the firm's costs are explicit costs; there are no implicit costs of production. 
C) the firm is more profitable than it is in the short run. 
D) all of the firm's costs are variable costs.

Question 10

Economic costs include implicit costs but not explicit costs.

Accepted Answer

A) True 
 B)False

Question 11

Red Stone Creamery currently hires 5 workers.When it added a 6th worker, its output actually fell.Which of the following statements is true?

Accepted Answer

A) The marginal product of the sixth worker must be negative. 
B) The average product of the sixth worker is negative. 
C) The sixth worker is not as skilled as the fifth worker. 
D) The total product becomes negative. 
A) The marginal product of the sixth worker must be negative. 
B) The average product of the sixth worker is negative. 
C) The sixth worker is not as skilled as the fifth worker. 
D) The total product becomes negative.

Question 12

The change in a firm's total cost from producing one more unit of a good or service is

Accepted Answer

A) the result of economies of scale. 
B) the definition of marginal product 
C) the definition of marginal cost. 
D) impossible to observe in large firms with many manufacturing plants. 
A) the result of economies of scale. 
B) the definition of marginal product 
C) the definition of marginal cost. 
D) impossible to observe in large firms with many manufacturing plants.

Question 13

Figure 11-2
  
-Refer to Figure 11-2.Short run output is maximized at

Accepted Answer

A) L₁. 
B) L₂. 
C) L₃. 
D) insufficient information to determine 
A) L₁. 
B) L₂. 
C) L₃. 
D) insufficient information to determine

Question 14

Consider a firm that uses two inputs, labor and capital, to produce its output.Assume labor is measured on the horizontal axis and capital on the vertical axis.Which of the following best explains why the marginal rate of technical substitution decreases in absolute value as we move down an isoquant?

Accepted Answer

A) The law of diminishing returns: for a given decline in capital, decreasing amounts of labor are required to produce the same level of output. 
B) The law of increasing marginal opportunity cost: if a firm uses less and less capital it must use more and more labor, which drives up the cost of labor. 
C) The law of diminishing returns: for a given decline in capital, increasing amounts of labor are required to produce the same level of output. 
D) The law of imperfect substitutability: labor and capital are not perfect substitutes; therefore, a firm must replace decreases in capital with increases in labor. 
A) The law of diminishing returns: for a given decline in capital, decreasing amounts of labor are required to produce the same level of output. 
B) The law of increasing marginal opportunity cost: if a firm uses less and less capital it must use more and more labor, which drives up the cost of labor. 
C) The law of diminishing returns: for a given decline in capital, increasing amounts of labor are required to produce the same level of output. 
D) The law of imperfect substitutability: labor and capital are not perfect substitutes; therefore, a firm must replace decreases in capital with increases in labor.

Question 15

In the long run the relevant cost is total cost.

Accepted Answer

A) True 
 B)False

Question 16

Table 11-7
   
Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
-Refer to Table 11-7.What is the average total cost of production when the firm produces 120 lanterns?

Accepted Answer

A) $1,680 
B) $72 
C) $14 
D) $12.3 
A) $1,680 
B) $72 
C) $14 
D) $12.3

Question 17

If production displays diseconomies of scale, the long-run average cost curve is

Accepted Answer

A) above the short-run average total cost curve. 
B) above the long-run marginal cost curve. 
C) upward sloping. 
D) downward sloping. 
A) above the short-run average total cost curve. 
B) above the long-run marginal cost curve. 
C) upward sloping. 
D) downward sloping.

Question 18

If production displays economies of scale, the long-run average cost curve is

Accepted Answer

A) above the short-run average total cost curve. 
B) downward sloping. 
C) upward sloping. 
D) below the long-run marginal cost curve. 
A) above the short-run average total cost curve. 
B) downward sloping. 
C) upward sloping. 
D) below the long-run marginal cost curve.

Question 19

When firms analyze the relationship between their level of production and their costs they separate the time period involved into

Accepted Answer

A) morning and evening. 
B) 6 months or less; 6 months to 1 year; more than 1 year. 
C) a fixed period and a variable period. 
D) the short run and the long run. 
A) morning and evening. 
B) 6 months or less; 6 months to 1 year; more than 1 year. 
C) a fixed period and a variable period. 
D) the short run and the long run.

Question 20

Figure 11-2
  
-Refer to Figure 11-2.The curve labeled "F" is

Accepted Answer

A) the total product curve. 
B) the average product curve. 
C) the marginal product curve. 
D) the output supply curve. 
A) the total product curve. 
B) the average product curve. 
C) the marginal product curve. 
D) the output supply curve.

Average total cost is

Which of the following is true at the output level where average total cost is at its minimum?

In a diagram showing the average total cost and average variable cost curves, the minimum point of the average total cost is

The long-run average cost curve shows

In the short run, marginal product of labor increases at first and then falls because

Average variable cost can be calculated using any of the formulas below except

Suppose the price of capital and labor remain constant.As a firm's expenditures for capital and labor increase, its isocost line

In the long run

Economic costs include implicit costs but not explicit costs.

Red Stone Creamery currently hires 5 workers.When it added a 6th worker, its output actually fell.Which of the following statements is true?

The change in a firm's total cost from producing one more unit of a good or service is

Figure 11-2 -Refer to Figure 11-2.Short run output is maximized at

In the long run the relevant cost is total cost.

Table 11-7 Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights. -Refer to Table 11-7.What is the average total cost of production when the firm produces 120 lanterns?

If production displays diseconomies of scale, the long-run average cost curve is

If production displays economies of scale, the long-run average cost curve is

When firms analyze the relationship between their level of production and their costs they separate the time period involved into

Figure 11-2 -Refer to Figure 11-2.The curve labeled "F" is

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

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Exam 11: Technology, Production, and Costs

Average total cost is

Which of the following is true at the output level where average total cost is at its minimum?

In a diagram showing the average total cost and average variable cost curves, the minimum point of the average total cost is

The long-run average cost curve shows

In the short run, marginal product of labor increases at first and then falls because

Average variable cost can be calculated using any of the formulas below except

Suppose the price of capital and labor remain constant.As a firm's expenditures for capital and labor increase, its isocost line

In the long run

Economic costs include implicit costs but not explicit costs.

Red Stone Creamery currently hires 5 workers.When it added a 6th worker, its output actually fell.Which of the following statements is true?

The change in a firm's total cost from producing one more unit of a good or service is

Figure 11-2 -Refer to Figure 11-2.Short run output is maximized at

In the long run the relevant cost is total cost.

Table 11-7 Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights. -Refer to Table 11-7.What is the average total cost of production when the firm produces 120 lanterns?

If production displays diseconomies of scale, the long-run average cost curve is

If production displays economies of scale, the long-run average cost curve is

When firms analyze the relationship between their level of production and their costs they separate the time period involved into

Figure 11-2 -Refer to Figure 11-2.The curve labeled "F" is

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters