Question 1

The average variable cost curve must always be U-shaped.

Accepted Answer

A) True 
 B)False  False

Question 2

Florence's Restaurant estimates that its total costs of providing Q meals per month is given by TC = 8,000 +5Q. If Florence charges $9 per meal, what is its break even level of output?

Accepted Answer

A)  4,000 meals 
B)  571.43 meals 
C)  888.89 meals 
D)  1,600 meals 
E)  2,000 meals 
A)  4,000 meals 
B)  571.43 meals 
C)  888.89 meals 
D)  1,600 meals 
E)  2,000 meals E

Question 3

Touchie McFeelie's production function for comic books is (0.1)   , where J is the number of jokes and L is the number of hours of cartoonists labor that he uses. If Touchie can vary both jokes and cartoonists' labor and if old jokes cost $3 each and cartoonists' labor costs $18 per hour, then the cheapest way to produce comics books requires using jokes and labor in the ratio   =

Accepted Answer

A) 6 
B) 8 
C) 2 
D) 2/3 
E)  4. 
A) 6 
B) 8 
C) 2 
D) 2/3 
E)  4. E

Question 4

Average cost can never rise while marginal costs are declining.

Accepted Answer

A) True 
 B)False

Question 5

A competitive firm has the short-run cost function c(y) = 2y3 - 16y2 + 128y + 10. The firm will produce a positive amount in the short run if and only if the price is greater than

Accepted Answer

A)  $192. 
B)  $48. 
C)  $99. 
D)  $96. 
E)  $95. 
A)  $192. 
B)  $48. 
C)  $99. 
D)  $96. 
E)  $95.

Question 6

If a competitive firm uses two inputs and has the production function F(x1, x2) =   1 +   2, then its marginal cost curve is horizontal.

Accepted Answer

A) True 
 B)False

Question 7

The cost function C(y) = 10 + 3y has marginal cost less than average cost for all levels of output.

Accepted Answer

A) True 
 B)False

Question 8

If the average cost curve is U-shaped, then the marginal cost curve must cross the average cost curve at the bottom of the U.

Accepted Answer

A) True 
 B)False

Question 9

The VCR manufacturing business is perfectly competitive.Suppose that currently, firms that manufacture VCRs utilize either technology 1 or technology 2,whose cost functions are TC1(Q) = 340 - 20Q + Q2
TC2(Q) = 405 - 30Q + Q2
In the long run, assuming no new manufacturing technologies,what will happen in this industry?

Accepted Answer

A)  Firms utilizing technology 1 and firms utilizing technology 2 will stay in business. 
B)  Firms utilizing technology 1 will stay in business, but firms utilizing technology 2 will shut down. 
C)  Firms utilizing technology 1 will shut down, but firms utilizing technology 2 will stay in business. 
D)  Firms utilizing technology 1 and firms utilizing technology 2 will shut down. 
E)  None of the above. 
A)  Firms utilizing technology 1 and firms utilizing technology 2 will stay in business. 
B)  Firms utilizing technology 1 will stay in business, but firms utilizing technology 2 will shut down. 
C)  Firms utilizing technology 1 will shut down, but firms utilizing technology 2 will stay in business. 
D)  Firms utilizing technology 1 and firms utilizing technology 2 will shut down. 
E)  None of the above.

Question 10

A firm has a short-run cost function c(y) = 3y + 14 for y > 0 and c(0) = 10. The firm's quasi-fixed costs are

Accepted Answer

A)  $10. 
B)  $4. 
C)  $9. 
D)  $14. 
E)  They are not possible to determine from this information. 
A)  $10. 
B)  $4. 
C)  $9. 
D)  $14. 
E)  They are not possible to determine from this information.

Question 11

A firm has the production function Q =   In the short run it must use exactly 15 units of factor 2. The price of factor 1 is $75 per unit and the price of factor 2 is $2 per unit. The firm's short-run marginal cost function is

Accepted Answer

A)  MC(Q) =. 
B)  MC(Q) = 30. 
C)  MC(Q) = 30 + 75Q2. 
D)  MC(Q) = 2Q. 
E)  MC(Q) = 15. 
A)  MC(Q) =. 
B)  MC(Q) = 30. 
C)  MC(Q) = 30 + 75Q2. 
D)  MC(Q) = 2Q. 
E)  MC(Q) = 15.

Question 12

The marginal cost curve passes through the minimum point of the average fixed cost curve.

Accepted Answer

A) True 
 B)False

Question 13

Rex Carr could pay $10 for a shovel that lasts one year and pay $5 a car to his brother Scoop to bury the cars, or he could buy a low-quality car smasher that costs $200 a year to own and that smashes cars at a marginal cost of $1 per car. If it were also possible for Rex to buy a high-quality hydraulic car smasher that cost $550 per year to own and if with this smasher he could dispose of cars at a cost of $.67 per car, it would be worthwhile for him to buy this high-quality smasher if he needed to dispose of

Accepted Answer

A)  no more than 525 cars per year. 
B)  no more than 1,050 cars per year. 
C)  at least 1,060 cars per year. 
D)  at least 1,050 cars per year. 
E)  at least 525 cars per year. 
A)  no more than 525 cars per year. 
B)  no more than 1,050 cars per year. 
C)  at least 1,060 cars per year. 
D)  at least 1,050 cars per year. 
E)  at least 525 cars per year.

Question 14

Touchie McFeelie from your workbook has a production function (0.1)   , where J is the number of old jokes used and L is the number of hours of cartoonists' labor. Touchie is stuck with 400 old jokes for which he paid 4 dollars each. If the hourly wage rate for cartoonists is 5 dollars, then the total cost of producing 16 comics books is

Accepted Answer

A)  1,680 dollars. 
B)  840 dollars. 
C)  2,520 dollars. 
D)  1,696 dollars. 
E)  420 dollars. 
A)  1,680 dollars. 
B)  840 dollars. 
C)  2,520 dollars. 
D)  1,696 dollars. 
E)  420 dollars.

Question 15

A firm has a short-run cost function c(y) = 3y + 11 for y > 0 and c(0) = 8. The firm's quasi-fixed costs are

Accepted Answer

A)  $8. 
B)  $11. 
C)  $3. 
D)  $7. 
E)  They are not possible to determine from this information. 
A)  $8. 
B)  $11. 
C)  $3. 
D)  $7. 
E)  They are not possible to determine from this information.

Question 16

Florence's Restaurant estimates that its total costs of providing Q meals per month is given by TC = 8,000 +6Q. If Florence charges $7 per meal, what is its break even level of output?

Accepted Answer

A)  1,333.33 meals 
B)  1,142.86 meals 
C)  615.38 meals 
D)  16,000 meals 
E)  8,000 meals 
A)  1,333.33 meals 
B)  1,142.86 meals 
C)  615.38 meals 
D)  16,000 meals 
E)  8,000 meals

Question 17

Touchie McFeelie from your workbook has a production function (0.1)   , where J is the number of old jokes used and L is the number of hours of cartoonists' labor. Touchie is stuck with 400 old jokes for which he paid 6 dollars each. If the hourly wage rate for cartoonists is 4 dollars, then the total cost of producing 16 comics books is

Accepted Answer

A)  2,464 dollars. 
B)  1,232 dollars. 
C)  2,480 dollars. 
D)  3,696 dollars. 
E)  616 dollars. 
A)  2,464 dollars. 
B)  1,232 dollars. 
C)  2,480 dollars. 
D)  3,696 dollars. 
E)  616 dollars.

Question 18

Mr. Dent Carr's total costs are 2s2 + 45s + 30. If he repairs 15 cars, his average variable costs will be

Accepted Answer

A)  $77. 
B)  $75. 
C)  $150. 
D)  $105. 
E)  $52.50. 
A)  $77. 
B)  $75. 
C)  $150. 
D)  $105. 
E)  $52.50.

Question 19

A firm's production function is given by q = min{M,   }, where M is the number of machines and L is the amount of labor that it uses. The price of labor is $1and the price of machines is $4 per unit. The firm's long-run marginal cost curve is

Accepted Answer

A)  upward sloping and gets flatter as Q increases. 
B)  a straight line with slope 2. 
C)  a straight line with slope 1. 
D)  upward sloping and gets steeper as Q increases. 
E)  a straight line with slope 4. 
A)  upward sloping and gets flatter as Q increases. 
B)  a straight line with slope 2. 
C)  a straight line with slope 1. 
D)  upward sloping and gets steeper as Q increases. 
E)  a straight line with slope 4.

Question 20

The VCR manufacturing business is perfectly competitive. Suppose that currently, firms that manufacture VCRs utilize either technology 1 or technology 2, whose cost functions are TC1(Q) = 1,120 - 60Q + Q2
TC2(Q) = 300 - 20Q + Q2
In the long run, assuming no new manufacturing technologies,what will happen in this industry?

Accepted Answer

A)  Firms utilizing technology 1 and firms utilizing technology 2 will stay in business. 
B)  Firms utilizing technology 1 will shut down, but firms utilizing technology 2 will stay in business. 
C)  Firms utilizing technology 1 will stay in business, but firms utilizing technology 2 will shut down. 
D)  Firms utilizing technology 1 and firms utilizing technology 2 will shut down. 
E)  None of the above. 
A)  Firms utilizing technology 1 and firms utilizing technology 2 will stay in business. 
B)  Firms utilizing technology 1 will shut down, but firms utilizing technology 2 will stay in business. 
C)  Firms utilizing technology 1 will stay in business, but firms utilizing technology 2 will shut down. 
D)  Firms utilizing technology 1 and firms utilizing technology 2 will shut down. 
E)  None of the above.

Exam 20: Cost Curves

The average variable cost curve must always be U-shaped.

Florence's Restaurant estimates that its total costs of providing Q meals per month is given by TC = 8,000 +5Q. If Florence charges $9 per meal, what is its break even level of output?

Average cost can never rise while marginal costs are declining.

A competitive firm has the short-run cost function c(y) = 2y3 - 16y2 + 128y + 10. The firm will produce a positive amount in the short run if and only if the price is greater than

If a competitive firm uses two inputs and has the production function F(x1, x2) = 1 + 2, then its marginal cost curve is horizontal.

The cost function C(y) = 10 + 3y has marginal cost less than average cost for all levels of output.

If the average cost curve is U-shaped, then the marginal cost curve must cross the average cost curve at the bottom of the U.

A firm has a short-run cost function c(y) = 3y + 14 for y > 0 and c(0) = 10. The firm's quasi-fixed costs are

A firm has the production function Q = In the short run it must use exactly 15 units of factor 2. The price of factor 1 is $75 per unit and the price of factor 2 is $2 per unit. The firm's short-run marginal cost function is

The marginal cost curve passes through the minimum point of the average fixed cost curve.

A firm has a short-run cost function c(y) = 3y + 11 for y > 0 and c(0) = 8. The firm's quasi-fixed costs are

Florence's Restaurant estimates that its total costs of providing Q meals per month is given by TC = 8,000 +6Q. If Florence charges $7 per meal, what is its break even level of output?

Mr. Dent Carr's total costs are 2s2 + 45s + 30. If he repairs 15 cars, his average variable costs will be

A firm's production function is given by q = min{M, }, where M is the number of machines and L is the amount of labor that it uses. The price of labor is $1and the price of machines is $4 per unit. The firm's long-run marginal cost curve is

Budget Constraint

A: Budget Constraint

Preferences

A: Preferences

Utility

A: Utility

Choice

A: Choice

Demand

A: Demand

Revealed Preference

A: Revealed Preference

Slutsky Equation

A: Slutsky Equation

Buying and Selling

A: Buying and Selling

Intertemporal Choice

A: Intertemporal Choice

Asset Markets

A: Asset Markets

Uncertainty

A: Uncertainty

Risky Assets

A: Risky Assets

Consumers Surplus

A: Consumers Surplus

Market Demand

A: Market Demand

Equilibrium

A: Equilibrium

Auctions

A: Auctions

Technology

A: Technology

Profit Maximization

A: Profit Maximization

Cost Minimization

A: Cost Minimization

A: Cost Curves

Firm Supply

A: Firm Supply

Industry Supply

A: Industry Supply

Monopoly

A: Monopoly

Monopoly Behavior

A: Monopoly Behavior

Factor Markets

A: Factor Markets

Oligopoly

A: Oligopoly

Game Theory

A: Game Theory

Game Applications

A: Game Applications

Behavioral Economics

Exchange

A: Exchange

Production

A: Production

Welfare

A: Welfare

Externalities

A: Externalities

Information Technology

Mr. Dent Carr's total costs are 2s² + 45s + 30. If he repairs 15 cars, his average variable costs will be