Question 1

The phrase "to spread the overhead" refers to reducing the cost that are not directly attributable to the production process.

Accepted Answer

A) True 
 B)False  True

Question 2

Average total cost is calculated by dividing:

Accepted Answer

A) the change in total cost by the change in the quantity of output. 
B) total output by the number of people employed. 
C) the change in total output by the change in the number of people employed. 
D) total cost by total output. 
E) total output by total cost. 
A) the change in total cost by the change in the quantity of output. 
B) total output by the number of people employed. 
C) the change in total output by the change in the number of people employed. 
D) total cost by total output. 
E) total output by total cost. D

Question 3

The planning horizon refers to the short run,when the firm must plan how much of a variable input to apply to a fixed input.

Accepted Answer

A) True 
 B)False  False

Question 4

If a firm has constant returns to scale,then doubling all of its inputs will just double its output.

Accepted Answer

A) True 
 B)False

Question 5

At its minimum point,the average-total-cost curve is intersected by the:

Accepted Answer

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

Question 6

If an average cost curve is U-shaped,then:

Accepted Answer

A) costs per unit are constant throughout the entire range of production. 
B) costs per unit are declining throughout the entire range of production. 
C) costs per unit are increasing throughout the entire range of production. 
D) costs per unit first rise,then reach a maximum,and then begin to fall as output is increased. 
E) costs per unit first fall,then reach a minimum,and then increase as output is increased. 
A) costs per unit are constant throughout the entire range of production. 
B) costs per unit are declining throughout the entire range of production. 
C) costs per unit are increasing throughout the entire range of production. 
D) costs per unit first rise,then reach a maximum,and then begin to fall as output is increased. 
E) costs per unit first fall,then reach a minimum,and then increase as output is increased.

Question 7

The table given below shows the total cost of producing different units of the output by a competitive firm. Table 7.4
 
- In Table 7.4,at 4 units of output,

Accepted Answer

A) AFC = $6.25 and AVC = $10 
B) AFC = $6.25 and AVC = $40 
C) AFC = $40 and AVC = $6.25 
D) AFC = $25 and AVC = $40 
E) AFC and AVC cannot be determined from the information provided. 
A) AFC = $6.25 and AVC = $10 
B) AFC = $6.25 and AVC = $40 
C) AFC = $40 and AVC = $6.25 
D) AFC = $25 and AVC = $40 
E) AFC and AVC cannot be determined from the information provided.

Question 8

For a steel manufacturing firm,overhead costs would include:

Accepted Answer

A) cost of iron ore. 
B) cost incurred in buying blast furnaces. 
C) insurance premiums of the firm. 
D) wages of the laborers. 
E) cost of electricity for running the machines in the factory. 
A) cost of iron ore. 
B) cost incurred in buying blast furnaces. 
C) insurance premiums of the firm. 
D) wages of the laborers. 
E) cost of electricity for running the machines in the factory.

Question 9

The following table shows the cost of producing different units of ball point pens by a firm. Table 7.1
 
- Refer to Table 7.1.What is the marginal cost of producing the fourth and the fifth unit?

Accepted Answer

A) $4 
B) $6 
C) $8 
D) $2 
E) $10 
A) $4 
B) $6 
C) $8 
D) $2 
E) $10

Question 10

The figure given below shows cost curves of a firm. Figure: 7.2  
- In the figure,
|: Marginal cost curve
||: Average total cost curve
|||: Average variable cost curve
Refer to Figure 7.2.At an output level of H,average total cost is:

Accepted Answer

A) 0E. 
B) BE. 
C) area 0EMH. 
D) 0B. 
E) area 0BNH. 
A) 0E. 
B) BE. 
C) area 0EMH. 
D) 0B. 
E) area 0BNH.

Question 11

Suppose that the total fixed cost of producing five sailboats is $4,000,total variable cost is $4,000,and the total cost of producing six sailboats is $10,000.The marginal cost of the sixth sailboat is:

Accepted Answer

A) $2,000. 
B) $4,000. 
C) $8,000. 
D) $10,000. 
E) $6,000. 
A) $2,000. 
B) $4,000. 
C) $8,000. 
D) $10,000. 
E) $6,000.

Question 12

The table given below shows the total fixed and variable costs of a firm. Table 7.3
 
- If the firm described in Table 7.3 decides to produce nothing,which of the following would be true?

Accepted Answer

A) Total cost will become zero. 
B) Total variable cost will become $30. 
C) Total cost will equal $40. 
D) Average total cost will equal zero. 
E) Marginal cost will equal $10. 
A) Total cost will become zero. 
B) Total variable cost will become $30. 
C) Total cost will equal $40. 
D) Average total cost will equal zero. 
E) Marginal cost will equal $10.

Question 13

When more and more doses of fertilizers are added to a fixed plot of agricultural land,the crop yield initially declines but eventually rises.

Accepted Answer

A) True 
 B)False

Question 14

Economies of scale exist when the long-run average-total-cost curve is positively sloped.

Accepted Answer

A) True 
 B)False

Question 15

The table given below shows the average total cost of production of a firm at different levels of the output. Table 7.5
  
-In Table 7.5,what is the total cost of producing 4 units?

Accepted Answer

A) $28 
B) $10 
C) $15 
D) $20 
E) $35 
A) $28 
B) $10 
C) $15 
D) $20 
E) $35

Question 16

If long-run costs are plotted on the vertical axis and quantity of output plotted on the horizontal axis,a line that is perfectly horizontal implies:

Accepted Answer

A) constant returns to scale. 
B) economies of scale. 
C) diseconomies of scale. 
D) inefficient use of capital. 
E) inefficient use of labor. 
A) constant returns to scale. 
B) economies of scale. 
C) diseconomies of scale. 
D) inefficient use of capital. 
E) inefficient use of labor.

Question 17

Diseconomies of scale:

Accepted Answer

A) occur only in the short run. 
B) occur when at least one resource is fixed and unit costs decrease as the quantity of production increases. 
C) occur when at least one resource is fixed and unit costs increase as the quantity of production increases. 
D) are represented by the upward-sloping portion of the short-run average-total-cost curve. 
E) occur when all resources are variable and unit costs increase as the quantity of production increases. 
A) occur only in the short run. 
B) occur when at least one resource is fixed and unit costs decrease as the quantity of production increases. 
C) occur when at least one resource is fixed and unit costs increase as the quantity of production increases. 
D) are represented by the upward-sloping portion of the short-run average-total-cost curve. 
E) occur when all resources are variable and unit costs increase as the quantity of production increases.

Question 18

The long-run average total cost curve connects the lowest cost for each level of output given by the short run average total cost curves.

Accepted Answer

A) True 
 B)False

Question 19

The average fixed cost continues to decline with expansion of output.

Accepted Answer

A) True 
 B)False

Question 20

When average total cost is minimum,it is:

Accepted Answer

A) equal to average variable cost. 
B) greater than marginal cost. 
C) equal to average fixed cost. 
D) equal to marginal cost. 
E) less than marginal cost. 
A) equal to average variable cost. 
B) greater than marginal cost. 
C) equal to average fixed cost. 
D) equal to marginal cost. 
E) less than marginal cost.

Exam 7: Supply: The Costs of Doing Business

The phrase "to spread the overhead" refers to reducing the cost that are not directly attributable to the production process.

Average total cost is calculated by dividing:

The planning horizon refers to the short run,when the firm must plan how much of a variable input to apply to a fixed input.

If a firm has constant returns to scale,then doubling all of its inputs will just double its output.

At its minimum point,the average-total-cost curve is intersected by the:

If an average cost curve is U-shaped,then:

The table given below shows the total cost of producing different units of the output by a competitive firm. Table 7.4 - In Table 7.4,at 4 units of output,

For a steel manufacturing firm,overhead costs would include:

The following table shows the cost of producing different units of ball point pens by a firm. Table 7.1 - Refer to Table 7.1.What is the marginal cost of producing the fourth and the fifth unit?

The figure given below shows cost curves of a firm. Figure: 7.2 - In the figure, |: Marginal cost curve ||: Average total cost curve |||: Average variable cost curve Refer to Figure 7.2.At an output level of H,average total cost is:

Suppose that the total fixed cost of producing five sailboats is $4,000,total variable cost is $4,000,and the total cost of producing six sailboats is $10,000.The marginal cost of the sixth sailboat is:

The table given below shows the total fixed and variable costs of a firm. Table 7.3 - If the firm described in Table 7.3 decides to produce nothing,which of the following would be true?

When more and more doses of fertilizers are added to a fixed plot of agricultural land,the crop yield initially declines but eventually rises.

Economies of scale exist when the long-run average-total-cost curve is positively sloped.

The table given below shows the average total cost of production of a firm at different levels of the output. Table 7.5 -In Table 7.5,what is the total cost of producing 4 units?

If long-run costs are plotted on the vertical axis and quantity of output plotted on the horizontal axis,a line that is perfectly horizontal implies:

Diseconomies of scale:

The long-run average total cost curve connects the lowest cost for each level of output given by the short run average total cost curves.

The average fixed cost continues to decline with expansion of output.

When average total cost is minimum,it is:

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Consumer Choice

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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