Question 1

If marginal product increases with an increase in the variable input,the marginal cost must also increase as more units of the input are hired.

Accepted Answer

A) True 
 B)False

Question 2

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,total fixed cost is:

Accepted Answer

A) SR. 
B) LK. 
C) BE. 
D) area BEMN. 
E) area 0EMH. 
A) SR. 
B) LK. 
C) BE. 
D) area BEMN. 
E) area 0EMH.

Question 3

If short-run average total costs are rising in the oil tanker industry,it implies that economies of scale exist in that industry.

Accepted Answer

A) True 
 B)False

Question 4

If a firm doubles its resources and generates an output level which is more than double,it is said to be experiencing:

Accepted Answer

A) economic fluctuations. 
B) recession. 
C) diseconomies of scale. 
D) increasing marginal returns to a factor. 
E) economies of scale. 
A) economic fluctuations. 
B) recession. 
C) diseconomies of scale. 
D) increasing marginal returns to a factor. 
E) economies of scale.

Question 5

Every firm has to bear its fixed costs even when it produces nothing.

Accepted Answer

A) True 
 B)False

Question 6

Marginal fixed cost:

Accepted Answer

A) is a positive constant irrespective of output level. 
B) declines as output is increased because a fixed numerator is divided by an ever-growing denominator. 
C) generally increases as output is increased. 
D) is equal to average variable cost and average total cost at their minimum points. 
E) is always equal to zero and is therefore ignored by economists. 
A) is a positive constant irrespective of output level. 
B) declines as output is increased because a fixed numerator is divided by an ever-growing denominator. 
C) generally increases as output is increased. 
D) is equal to average variable cost and average total cost at their minimum points. 
E) is always equal to zero and is therefore ignored by economists.

Question 7

The table below shows the total cost of producing different units of a commodity. Table 7.2
  
-From Table 7.2,derive the value of total fixed costs.

Accepted Answer

A) $10 
B) $100 
C) $98 
D) $50 
E) $60 
A) $10 
B) $100 
C) $98 
D) $50 
E) $60

Question 8

The table given below shows the total fixed and variable costs of a firm. Table 7.3
  
-In Table 7.3,marginal cost is equal to average total cost at a quantity of:

Accepted Answer

A) 1 unit. 
B) 3 units. 
C) 4 units. 
D) 5 units. 
E) 8 units. 
A) 1 unit. 
B) 3 units. 
C) 4 units. 
D) 5 units. 
E) 8 units.

Question 9

The following table shows the cost of producing different units of ball point pens by a firm. Table 7.1
 
- According to Table 7.1,the average variable cost of producing five ball point pens is:

Accepted Answer

A) $3.5. 
B) $2. 
C) $4. 
D) $2.5 
E) $4.5 
A) $3.5. 
B) $2. 
C) $4. 
D) $2.5 
E) $4.5

Question 10

The table given below shows the total fixed and variable costs of a firm. Table 7.3
 
- In Table 7.3,the average fixed cost of the first unit of output is ____ while the average fixed cost of producing 8 units of output is ____.

Accepted Answer

A) $30; $40 
B) $40; $5 
C) $40; $40 
D) $40; $280 
E) $40; $320 
A) $30; $40 
B) $40; $5 
C) $40; $40 
D) $40; $280 
E) $40; $320

Question 11

The table below shows the total cost of producing different units of a commodity. Table 7.2
 
- Refer to Table 7.2.The average fixed cost of the first unit of output is:

Accepted Answer

A) $46. 
B) $98. 
C) $100. 
D) $50. 
E) $140. 
A) $46. 
B) $98. 
C) $100. 
D) $50. 
E) $140.

Question 12

Which of the following reflects the correct relationship between average total cost (ATC) and marginal cost (MC)?

Accepted Answer

A) When MC > ATC; ATC is falling. B) When ATC is minimum; ATC < MC. C) When MC < ATC; ATC is falling. D) When MC < ATC; ATC is constant. E) When ATC < MC; MC is falling. A) When MC > ATC; ATC is falling. B) When ATC is minimum; ATC < MC. C) When MC < ATC; ATC is falling. D) When MC < ATC; ATC is constant. E) When ATC < MC; MC is falling.

Question 13

The table given below shows the total cost of producing different units of the output by a competitive firm. Table 7.4
 
- Which of the following is correct if the firm described in Table 7.4 decides to produce nothing?

Accepted Answer

A) Total cost will be zero. 
B) Total fixed cost will be zero. 
C) Total variable cost will be zero. 
D) Average cost will be zero. 
E) It is impossible for the firm to produce nothing in the short run. 
A) Total cost will be zero. 
B) Total fixed cost will be zero. 
C) Total variable cost will be zero. 
D) Average cost will be zero. 
E) It is impossible for the firm to produce nothing in the short run.

Question 14

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,the marginal cost of producing the third unit of output is:

Accepted Answer

A) $7. 
B) $8. 
C) $5. 
D) $4. 
E) $6. 
A) $7. 
B) $8. 
C) $5. 
D) $4. 
E) $6.

Question 15

In the electricity generation industry,the cost per kilowatt hour of electricity declines as the capacity to generate output increases.This situation represents:

Accepted Answer

A) a poor opportunity for investors. 
B) constant returns to scale. 
C) diseconomies of scale. 
D) economies of scale. 
E) decreasing returns to scale. 
A) a poor opportunity for investors. 
B) constant returns to scale. 
C) diseconomies of scale. 
D) economies of scale. 
E) decreasing returns to scale.

Question 16

When more and more units of a variable factor are combined with constant amount of fixed factor,such that the variable factor becomes abundant compared to the fixed factor,the output will eventually:

Accepted Answer

A) increase at an increasing rate. 
B) increase at a diminishing rate. 
C) increase at a constant rate. 
D) remain unchanged. 
E) fall to zero. 
A) increase at an increasing rate. 
B) increase at a diminishing rate. 
C) increase at a constant rate. 
D) remain unchanged. 
E) fall to zero.

Question 17

If marginal physical product of labor is declining,then average physical product must also be declining.

Accepted Answer

A) True 
 B)False

Question 18

In the long run,total variable cost:

Accepted Answer

A) is equal to total fixed cost. 
B) is equal to total cost. 
C) is equal to average fixed cost. 
D) is more than total fixed cost. 
E) is less than total cost. 
A) is equal to total fixed cost. 
B) is equal to total cost. 
C) is equal to average fixed cost. 
D) is more than total fixed cost. 
E) is less than total cost.

Question 19

Overhead costs are identical to fixed costs.

Accepted Answer

A) True 
 B)False

Question 20

If the total cost of producing 6 units is $228 and the total cost of producing 7 units is $245,what is the marginal cost of producing the seventh unit?

Accepted Answer

A) $35 
B) $245 
C) $3 
D) $38 
E) $17 
A) $35 
B) $245 
C) $3 
D) $38 
E) $17

Exam 7: Supply: The Costs of Doing Business

If marginal product increases with an increase in the variable input,the marginal cost must also increase as more units of the input are hired.

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,total fixed cost is:

If short-run average total costs are rising in the oil tanker industry,it implies that economies of scale exist in that industry.

If a firm doubles its resources and generates an output level which is more than double,it is said to be experiencing:

Every firm has to bear its fixed costs even when it produces nothing.

Marginal fixed cost:

The table below shows the total cost of producing different units of a commodity. Table 7.2 -From Table 7.2,derive the value of total fixed costs.

The table given below shows the total fixed and variable costs of a firm. Table 7.3 -In Table 7.3,marginal cost is equal to average total cost at a quantity of:

The following table shows the cost of producing different units of ball point pens by a firm. Table 7.1 - According to Table 7.1,the average variable cost of producing five ball point pens is:

The table given below shows the total fixed and variable costs of a firm. Table 7.3 - In Table 7.3,the average fixed cost of the first unit of output is ____ while the average fixed cost of producing 8 units of output is ____.

The table below shows the total cost of producing different units of a commodity. Table 7.2 - Refer to Table 7.2.The average fixed cost of the first unit of output is:

Which of the following reflects the correct relationship between average total cost (ATC) and marginal cost (MC)?

The table given below shows the total cost of producing different units of the output by a competitive firm. Table 7.4 - Which of the following is correct if the firm described in Table 7.4 decides to produce nothing?

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,the marginal cost of producing the third unit of output is:

In the electricity generation industry,the cost per kilowatt hour of electricity declines as the capacity to generate output increases.This situation represents:

When more and more units of a variable factor are combined with constant amount of fixed factor,such that the variable factor becomes abundant compared to the fixed factor,the output will eventually:

If marginal physical product of labor is declining,then average physical product must also be declining.

In the long run,total variable cost:

Overhead costs are identical to fixed costs.

If the total cost of producing 6 units is $228 and the total cost of producing 7 units is $245,what is the marginal cost of producing the seventh unit?

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

Filters

The table given below shows the total fixed and variable costs of a firm. Table 7.3 - In Table 7.3,the average fixed cost of the first unit of output is while the average fixed cost of producing 8 units of output is .