Question 1

If a firm produces 10 units of output, total costs are $1,030, and average fixed costs are $10, then total variable costs are

Accepted Answer

A)  $104. 
B)  $930. 
C)  $1,040. 
D)  $1,130. 
A)  $104. 
B)  $930. 
C)  $1,040. 
D)  $1,130.

Question 2

The total product curve graphically shows how much

Accepted Answer

A)  profit the firm will earn at various levels of production. 
B)  output the firm will produce at various prices of its product. 
C)  the costs of production will be as the firm changes its total production level. 
D)  output the firm can produce with various quantities of its variable input. 
A)  profit the firm will earn at various levels of production. 
B)  output the firm will produce at various prices of its product. 
C)  the costs of production will be as the firm changes its total production level. 
D)  output the firm can produce with various quantities of its variable input.

Question 3

Marginal product

Accepted Answer

A)  diminishes at all levels of production. 
B)  may initially increase, then diminish, but never become negative. 
C)  may initially increase, then diminish, and ultimately become negative. 
D)  is always less than average product. 
A)  diminishes at all levels of production. 
B)  may initially increase, then diminish, but never become negative. 
C)  may initially increase, then diminish, and ultimately become negative. 
D)  is always less than average product.

Question 4

Suppose a firm is in a range of production where it is experiencing economies of scale. Knowing this, we can predict that

Accepted Answer

A)  the long-run average total cost curve is upsloping. 
B)  a 10 percent increase in all inputs will increase output by less than 10 percent. 
C)  a 10 percent increase in all inputs will increase output by more than 10 percent. 
D)  the firm is encountering problems of managerial bureaucracy because of its size. 
A)  the long-run average total cost curve is upsloping. 
B)  a 10 percent increase in all inputs will increase output by less than 10 percent. 
C)  a 10 percent increase in all inputs will increase output by more than 10 percent. 
D)  the firm is encountering problems of managerial bureaucracy because of its size.

Question 5

If a firm decides to produce no output in the short run, its costs will be

Accepted Answer

A)  its marginal costs. 
B)  its variable costs. 
C)  its fixed costs. 
D)  zero. 
A)  its marginal costs. 
B)  its variable costs. 
C)  its fixed costs. 
D)  zero.

Question 6

The law of diminishing returns explains why

Accepted Answer

A)  total cost eventually rises faster and faster. 
B)  total cost eventually falls. 
C)  total cost eventually rises more and more slowly. 
D)  total cost eventually reaches a maximum point. 
A)  total cost eventually rises faster and faster. 
B)  total cost eventually falls. 
C)  total cost eventually rises more and more slowly. 
D)  total cost eventually reaches a maximum point.

Question 7

The law of diminishing returns indicates that

Accepted Answer

A)  as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point. 
B)  because of economies and diseconomies of scale, a competitive firm's long-run average total cost curve will be U-shaped. 
C)  the demand for goods produced by purely competitive industries is downsloping. 
D)  beyond some point, the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction. 
A)  as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point. 
B)  because of economies and diseconomies of scale, a competitive firm's long-run average total cost curve will be U-shaped. 
C)  the demand for goods produced by purely competitive industries is downsloping. 
D)  beyond some point, the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.

Question 8

For most producing firms,

Accepted Answer

A)  marginal cost rises as output is carried to a certain level, and then begins to decline. 
B)  total costs rise as output is carried to a certain level, and then begin to decline. 
C)  average total costs decline as output is carried to a certain level, and then begin to rise. 
D)  average total costs rise as output is carried to a certain level, and then begin to decline. 
A)  marginal cost rises as output is carried to a certain level, and then begins to decline. 
B)  total costs rise as output is carried to a certain level, and then begin to decline. 
C)  average total costs decline as output is carried to a certain level, and then begin to rise. 
D)  average total costs rise as output is carried to a certain level, and then begin to decline.

Question 9

If an industry's long-run average total cost curve has an extended range of constant returns to scale, this implies that

Accepted Answer

A)  technology precludes both economies and diseconomies of scale. 
B)  the industry will be a natural monopoly. 
C)  both relatively small and relatively large firms can be viable in the industry. 
D)  the industry will comprise a very large number of small firms. 
A)  technology precludes both economies and diseconomies of scale. 
B)  the industry will be a natural monopoly. 
C)  both relatively small and relatively large firms can be viable in the industry. 
D)  the industry will comprise a very large number of small firms.

Question 10

If the minimum efficient scale in an industry were smaller than the size of the market of that industry, then we would have a natural-monopoly situation.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is correct?

Accepted Answer

A)  There is no relationship between MP and MC. 
B)  When AP is rising, MC is falling, and when AP is falling, MC is rising. 
C)  When MP is rising, MC is rising, and when MP is falling, MC is falling. 
D)  When MP is rising, MC is falling, and when MP is falling, MC is rising. 
A)  There is no relationship between MP and MC. 
B)  When AP is rising, MC is falling, and when AP is falling, MC is rising. 
C)  When MP is rising, MC is rising, and when MP is falling, MC is falling. 
D)  When MP is rising, MC is falling, and when MP is falling, MC is rising.

Question 12

In the short run, which of the following statements is correct?

Accepted Answer

A)  The marginal cost curve intersects the average variable and average fixed cost curves at their minimum points. 
B)  Average variable cost declines continuously as total output is expanded. 
C)  Total cost will exceed variable cost. 
D)  If the inputs of all resources are increased by equal amounts, total output will expand by diminishing amounts. 
A)  The marginal cost curve intersects the average variable and average fixed cost curves at their minimum points. 
B)  Average variable cost declines continuously as total output is expanded. 
C)  Total cost will exceed variable cost. 
D)  If the inputs of all resources are increased by equal amounts, total output will expand by diminishing amounts.

Question 13

A natural monopoly exists when

Accepted Answer

A)  unit costs are minimized by having one firm produce an industry's entire output. 
B)  several formerly competing producers merge to become the only firm in an industry. 
C)  short-run average total cost curves are tangent to long-run average total cost curves. 
D)  minimum efficient scale is attained at a small level of output. 
A)  unit costs are minimized by having one firm produce an industry's entire output. 
B)  several formerly competing producers merge to become the only firm in an industry. 
C)  short-run average total cost curves are tangent to long-run average total cost curves. 
D)  minimum efficient scale is attained at a small level of output.

Question 14

Plant sizes get larger as you move from ATC-1 to ATC-4.   The firm's minimum efficient scale is at what output level?

Accepted Answer

A)  2,500 
B)  3,000 
C)  3,500 
D)  4,000 
A)  2,500 
B)  3,000 
C)  3,500 
D)  4,000

Question 15

The amount of calendar time associated with the long run

Accepted Answer

A)  is less than that associated with the immediate market period. 
B)  varies from industry to industry. 
C)  is the same for all firms. 
D)  is, by definition, any length of time greater than one year. 
A)  is less than that associated with the immediate market period. 
B)  varies from industry to industry. 
C)  is the same for all firms. 
D)  is, by definition, any length of time greater than one year.

Question 16

In the short run,

Accepted Answer

A)  TVC will increase for a time at a diminishing rate, but then beyond some point will increase at an increasing rate. 
B)  TVC will increase for a time at an increasing rate, but then beyond some point will increase at a diminishing rate. 
C)  TVC will increase by the same absolute amount for each additional unit of output produced. 
D)  one cannot generalize concerning the behavior of TVC as output increases. 
A)  TVC will increase for a time at a diminishing rate, but then beyond some point will increase at an increasing rate. 
B)  TVC will increase for a time at an increasing rate, but then beyond some point will increase at a diminishing rate. 
C)  TVC will increase by the same absolute amount for each additional unit of output produced. 
D)  one cannot generalize concerning the behavior of TVC as output increases.

Question 17

Marginal cost

Accepted Answer

A)  equals both average variable cost and average total cost at their respective minimums. 
B)  is the difference between total cost and total variable cost. 
C)  rises for a time but then begins to decline when diminishing returns set in. 
D)  declines continuously as output increases. 
A)  equals both average variable cost and average total cost at their respective minimums. 
B)  is the difference between total cost and total variable cost. 
C)  rises for a time but then begins to decline when diminishing returns set in. 
D)  declines continuously as output increases.

Question 18

The main difference between the short run and the long run is that

Accepted Answer

A)  firms earn zero profits in the long run. 
B)  the long run always refers to a time period of one year or longer. 
C)  in the short run, some inputs are fixed and some are variable. 
D)  in the long run, all inputs are fixed. 
A)  firms earn zero profits in the long run. 
B)  the long run always refers to a time period of one year or longer. 
C)  in the short run, some inputs are fixed and some are variable. 
D)  in the long run, all inputs are fixed.

Question 19

Answer the question on the basis of the following cost data. $\begin{array} { | c | c | c | } 
\hline \text { Output } & \text { Average Fixed Cost } & \text { Average Variable Cost } \
\hline 1 & \$ 50.00 & \$ 100.00 \
\hline 2 & 25.00 & 80.00 \
\hline 3 & 16.67 & 66.67 \
\hline 4 & 12.50 & 65.00 \
\hline 5 & 10.00 & 68.00 \
\hline 6 & 8.37 & 73.33 \
\hline 7 & 7.14 & 80.00 \
\hline 8 & 6.25 & 87.50 \
\hline
\end{array}$ The marginal cost of the fifth unit of output is

Accepted Answer

A)  $3. 
B)  $62. 
C)  $80. 
D)  $78. 
A)  $3. 
B)  $62. 
C)  $80. 
D)  $78.

Question 20

Economic profits are calculated by subtracting

Accepted Answer

A)  explicit costs from total revenue. 
B)  implicit costs from total revenue. 
C)  implicit costs from normal profits. 
D)  explicit and implicit costs from total revenue. 
A)  explicit costs from total revenue. 
B)  implicit costs from total revenue. 
C)  implicit costs from normal profits. 
D)  explicit and implicit costs from total revenue.

Exam 9: Businesses and the Costs of Production

If a firm produces 10 units of output, total costs are $1,030, and average fixed costs are $10, then total variable costs are

The total product curve graphically shows how much

Marginal product

Suppose a firm is in a range of production where it is experiencing economies of scale. Knowing this, we can predict that

If a firm decides to produce no output in the short run, its costs will be

The law of diminishing returns explains why

The law of diminishing returns indicates that

For most producing firms,

If an industry's long-run average total cost curve has an extended range of constant returns to scale, this implies that

If the minimum efficient scale in an industry were smaller than the size of the market of that industry, then we would have a natural-monopoly situation.

Which of the following is correct?

In the short run, which of the following statements is correct?

A natural monopoly exists when

Plant sizes get larger as you move from ATC-1 to ATC-4. The firm's minimum efficient scale is at what output level?

The amount of calendar time associated with the long run

In the short run,

Marginal cost

The main difference between the short run and the long run is that

Answer the question on the basis of the following cost data. Output Average Fixed Cost Average Variable Cost 1 \ 50.00 \ 100.00 2 25.00 80.00 3 16.67 66.67 4 12.50 65.00 5 10.00 68.00 6 8.37 73.33 7 7.14 80.00 8 6.25 87.50 The marginal cost of the fifth unit of output is

Economic profits are calculated by subtracting

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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