Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

The following table shows the cost of producing different units of ball point pens by a firm. Table 21.1
  According to Table 21.1, the total fixed cost of the firm equals:

Accepted Answer

A) $18. 
B) $10. 
C) $2. 
D) $12. 
E) $8. 
A) $18. 
B) $10. 
C) $2. 
D) $12. 
E) $8. B

Question 3

The table below shows the total cost of producing different units of a commodity. Table 21.2
  According to Table 21.2, the average variable cost of producing two units of output is:

Accepted Answer

A) $48. 
B) $50. 
C) $62. 
D) $55. 
E) $60. 
A) $48. 
B) $50. 
C) $62. 
D) $55. 
E) $60. A

Question 4

The table given below shows the total fixed and variable costs of a firm. Table 21.3
  In Table 21.3, 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 5

The table given below shows the average total cost of production of a firm at different levels of the output. Table 21.5
  In Table 21.5, 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 6

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.

Question 7

The table given below shows the average total cost of production of a firm at different levels of the output. Table 21.5
  In Table 21.5, if the total fixed cost is $3, what is the total variable cost of producing 5 units?

Accepted Answer

A) $38 
B) $32 
C) $3 
D) $8 
E) Cannot be determined from the information given. 
A) $38 
B) $32 
C) $3 
D) $8 
E) Cannot be determined from the information given.

Question 8

A firm gets less efficient as it gets bigger, if it is experiencing:

Accepted Answer

A) economies of scale. 
B) constant returns to scale. 
C) increasing returns to factors. 
D) diseconomies of scale. 
E) a period of post war recovery. 
A) economies of scale. 
B) constant returns to scale. 
C) increasing returns to factors. 
D) diseconomies of scale. 
E) a period of post war recovery.

Question 9

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

Question 10

After hiring a new employee, a manager finds that the total output has increased.When the manager hires another employee however, he realizes that although the total production has increased, the increment is less than the previous case.This is the result of:

Accepted Answer

A) diseconomies of scale. 
B) a general economic downturn. 
C) diminishing marginal returns. 
D) the lack of skills of the two employees. 
E) constant returns to scale. 
A) diseconomies of scale. 
B) a general economic downturn. 
C) diminishing marginal returns. 
D) the lack of skills of the two employees. 
E) constant returns to scale.

Question 11

The table below shows the total cost of producing different units of a commodity. Table 21.2
  Refer to Table 21.2.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

If a firm is experiencing diminishing returns, then:

Accepted Answer

A) the firm must be hiring less-qualified units of the variable resource. 
B) the firm must be experiencing diseconomies of scale. 
C) marginal physical product must be decreasing. 
D) average physical product must be decreasing. 
E) total physical product must be decreasing. 
A) the firm must be hiring less-qualified units of the variable resource. 
B) the firm must be experiencing diseconomies of scale. 
C) marginal physical product must be decreasing. 
D) average physical product must be decreasing. 
E) total physical product must be decreasing.

Question 13

With expansion in the level of output, total fixed cost:

Accepted Answer

A) declines. 
B) increases. 
C) falls to zero. 
D) remains constant. 
E) becomes negative. 
A) declines. 
B) increases. 
C) falls to zero. 
D) remains constant. 
E) becomes negative.

Question 14

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 15

A positively sloped long run average cost implies:

Accepted Answer

A) economies of scale. 
B) constant returns to scale. 
C) diseconomies of scale. 
D) diminishing marginal returns to a factor. 
E) increasing returns to scale. 
A) economies of scale. 
B) constant returns to scale. 
C) diseconomies of scale. 
D) diminishing marginal returns to a factor. 
E) increasing returns to scale.

Question 16

The long run is referred to as a planning horizon because:

Accepted Answer

A) the firm has committed to a fixed quantity of at least one resource and the other resources are variable. 
B) the manager has selected the size of the firm that appears to be the least profitable and does not have the option of selecting any other plant size. 
C) the firm has not committed to a fixed quantity of any resource and has all options available to it. 
D) the manager has selected a scale of production. 
E) the firm is operating along a specific average-cost curve. 
A) the firm has committed to a fixed quantity of at least one resource and the other resources are variable. 
B) the manager has selected the size of the firm that appears to be the least profitable and does not have the option of selecting any other plant size. 
C) the firm has not committed to a fixed quantity of any resource and has all options available to it. 
D) the manager has selected a scale of production. 
E) the firm is operating along a specific average-cost curve.

Question 17

The table given below shows the total fixed and variable costs of a firm. Table 21.3
  Refer to Table 21.3.At what level of output does the average total cost starts increasing?

Accepted Answer

A) 1 
B) 6 
C) 5 
D) 7 
E) 4 
A) 1 
B) 6 
C) 5 
D) 7 
E) 4

Question 18

If a company is producing at a level of output at which the long-run average-total-cost curve reaches a minimum, the company:

Accepted Answer

A) is experiencing economies of scale. 
B) is at minimum efficient scale. 
C) is experiencing increasing returns to scale. 
D) will shut down. 
E) is experiencing diseconomies of scale. 
A) is experiencing economies of scale. 
B) is at minimum efficient scale. 
C) is experiencing increasing returns to scale. 
D) will shut down. 
E) is experiencing diseconomies of scale.

Question 19

The minimum efficient scale is same across all industries irrespective of the types of goods they produce.

Accepted Answer

A) True 
 B)False

Question 20

As the output produced by a firm increases, the average fixed cost:

Accepted Answer

A) continues to decline. 
B) initially increases, and then declines. 
C) quickly drops to zero. 
D) becomes constant. 
E) declines and finally becomes negative. 
A) continues to decline. 
B) initially increases, and then declines. 
C) quickly drops to zero. 
D) becomes constant. 
E) declines and finally becomes negative.

Exam 41: Supply: the Costs of Doing Business

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

The following table shows the cost of producing different units of ball point pens by a firm. Table 21.1 According to Table 21.1, the total fixed cost of the firm equals:

The table below shows the total cost of producing different units of a commodity. Table 21.2 According to Table 21.2, the average variable cost of producing two units of output is:

The table given below shows the total fixed and variable costs of a firm. Table 21.3 In Table 21.3, marginal cost is equal to average total cost at a quantity of:

The table given below shows the average total cost of production of a firm at different levels of the output. Table 21.5 In Table 21.5, the marginal cost of producing the third unit of output is:

Average total cost is calculated by dividing:

The table given below shows the average total cost of production of a firm at different levels of the output. Table 21.5 In Table 21.5, if the total fixed cost is $3, what is the total variable cost of producing 5 units?

A firm gets less efficient as it gets bigger, if it is experiencing:

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?

After hiring a new employee, a manager finds that the total output has increased.When the manager hires another employee however, he realizes that although the total production has increased, the increment is less than the previous case.This is the result of:

The table below shows the total cost of producing different units of a commodity. Table 21.2 Refer to Table 21.2.The average fixed cost of the first unit of output is:

If a firm is experiencing diminishing returns, then:

With expansion in the level of output, total fixed cost:

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

A positively sloped long run average cost implies:

The long run is referred to as a planning horizon because:

The table given below shows the total fixed and variable costs of a firm. Table 21.3 Refer to Table 21.3.At what level of output does the average total cost starts increasing?

If a company is producing at a level of output at which the long-run average-total-cost curve reaches a minimum, the company:

The minimum efficient scale is same across all industries irrespective of the types of goods they produce.

As the output produced by a firm increases, the average fixed cost:

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

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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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