Question 1

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. E

Question 2

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 C

Question 3

The figure given below shows the average fixed cost (AFC)and the average variable cost (AVC)curves of a competive firm. Figure 7.1   Refer to Figure 7.1.Compute the total cost of producing 4 units of the output.

Accepted Answer

A) $64. 
B) $72. 
C) $80. 
D) $84. 
E) $90. 
A) $64. 
B) $72. 
C) $80. 
D) $84. 
E) $90. C

Question 4

According to economic theory, the difference between the long run and the short run is:

Accepted Answer

A) about two months. 
B) about two years. 
C) not relevant for executive decision makers. 
D) strictly theoretical so that in practice there is no difference between the short run and the long run. 
E) the ability for a firm to vary all resources. 
A) about two months. 
B) about two years. 
C) not relevant for executive decision makers. 
D) strictly theoretical so that in practice there is no difference between the short run and the long run. 
E) the ability for a firm to vary all resources.

Question 5

When a firm is experiencing economies of scale, it will:

Accepted Answer

A) under use a larger plant size than is indicated by short-run efficiency concerns. 
B) under use a smaller plant than is indicated by short-run efficiency concerns. 
C) overuse a larger plant size than is indicated by short-run efficiency concerns. 
D) overuse a smaller plant size than is indicated by short-run efficiency concerns. 
E) produce at the minimum short-run and long-run average costs. 
A) under use a larger plant size than is indicated by short-run efficiency concerns. 
B) under use a smaller plant than is indicated by short-run efficiency concerns. 
C) overuse a larger plant size than is indicated by short-run efficiency concerns. 
D) overuse a smaller plant size than is indicated by short-run efficiency concerns. 
E) produce at the minimum short-run and long-run average costs.

Question 6

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 7

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 8

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 9

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 10

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 11

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 12

Assume that one laborer produces 6 units of output, two laborers produce 14 units, three laborers 22 units, four laborers 24 units, and five laborers 25 units.Diminishing returns set in when the firm hires:

Accepted Answer

A) the first laborer. 
B) the second laborer. 
C) the third laborer. 
D) the fourth laborer. 
E) the fifth laborer. 
A) the first laborer. 
B) the second laborer. 
C) the third laborer. 
D) the fourth laborer. 
E) the fifth laborer.

Question 13

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.

Question 14

Assume that one laborer produces 6 units of output, two laborers produce 14 units, three produce 20 units, and four produce 24 units.If the cost is $20 per unit of labor and fixed costs are $100, what is the average total cost at 14 units of output?

Accepted Answer

A) $50 
B) $20 
C) $10 
D) $100 
E) $40 
A) $50 
B) $20 
C) $10 
D) $100 
E) $40

Question 15

The minimum efficient scale is the level of output where the short-run average-total-cost curve reaches its minimum point.

Accepted Answer

A) True 
 B)False

Question 16

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 G:

Accepted Answer

A) both average total cost and average variable cost are falling. 
B) average fixed cost is equal to the distance JK. 
C) average variable cost exceeds marginal cost by the amount LJ. 
D) average total cost exceeds marginal cost by the amount KJ. 
E) total cost is equal to the area 0AJG. 
A) both average total cost and average variable cost are falling. 
B) average fixed cost is equal to the distance JK. 
C) average variable cost exceeds marginal cost by the amount LJ. 
D) average total cost exceeds marginal cost by the amount KJ. 
E) total cost is equal to the area 0AJG.

Question 17

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 18

If a firm experiences economies of scale,

Accepted Answer

A) it moves up along the long run average total cost curve. 
B) expansion of output becomes more expensive for the firm. 
C) the firm can reduce its per unit cost by producing less. 
D) the firm must shut down in the long run. 
E) the firm can reduce its per unit cost by expanding production. 
A) it moves up along the long run average total cost curve. 
B) expansion of output becomes more expensive for the firm. 
C) the firm can reduce its per unit cost by producing less. 
D) the firm must shut down in the long run. 
E) the firm can reduce its per unit cost by expanding production.

Question 19

The term minimum efficient scale means:

Accepted Answer

A) the output corresponding to the minimum point of the short run average total cost curve. 
B) the total of all efficient points along the long-run average-cost curve. 
C) diseconomies of scale. 
D) the minimum point of the long-run average-cost curve, or the output level at which the cost per unit of output is the lowest. 
E) the maximum point of the long-run average-cost curve, or the output level at which the cost per unit of output is the highest. 
A) the output corresponding to the minimum point of the short run average total cost curve. 
B) the total of all efficient points along the long-run average-cost curve. 
C) diseconomies of scale. 
D) the minimum point of the long-run average-cost curve, or the output level at which the cost per unit of output is the lowest. 
E) the maximum point of the long-run average-cost curve, or the output level at which the cost per unit of output is the highest.

Question 20

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.

Exam 9: Supply: The Costs of Doing Business

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

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 figure given below shows the average fixed cost (AFC)and the average variable cost (AVC)curves of a competive firm. Figure 7.1 Refer to Figure 7.1.Compute the total cost of producing 4 units of the output.

According to economic theory, the difference between the long run and the short run is:

When a firm is experiencing economies of scale, it will:

If a firm is experiencing diminishing returns, then:

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

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

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

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,

Assume that one laborer produces 6 units of output, two laborers produce 14 units, three laborers 22 units, four laborers 24 units, and five laborers 25 units.Diminishing returns set in when the firm hires:

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

Assume that one laborer produces 6 units of output, two laborers produce 14 units, three produce 20 units, and four produce 24 units.If the cost is $20 per unit of labor and fixed costs are $100, what is the average total cost at 14 units of output?

The minimum efficient scale is the level of output where the short-run average-total-cost curve reaches its minimum point.

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 G:

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:

If a firm experiences economies of scale,

The term minimum efficient scale means:

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:

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

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

Supply: the Costs of Doing Business

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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