Question 1

Draw typical average total cost, average variable cost, and marginal cost curves for a competitive firm with price at the shutdown point. Show that total revenue equals variable costs at this quantity. Also show the firm's losses at this quantity.

Accepted Answer

The answer of Draw typical average total cost, average variable...

Question 2

Exhibit 8-5 
-Refer to Exhibit 8-5. The curve marked I is the firm's

Accepted Answer

A) marginal cost curve. 
B) average fixed cost curve. 
C) total cost curve. 
D) average total cost curve. 
E) average variable cost curve.

Question 3

Long-run average cost and short-run average cost curves have their U-shapes for the same reasons.

Accepted Answer

A) True 
 B)False

Question 4

Exhibit 8-11 
-Economies of scale can exist in both the short run and the long run.

Accepted Answer

A) True 
 B)False

Question 5

Average total cost is equal to marginal cost when

Accepted Answer

A) average fixed cost is rising. 
B) average variable cost is falling. 
C) marginal cost is at its minimum. 
D) average total cost is at its minimum. 
E) average variable cost is also equal to marginal cost.

Question 6

Fixed cost does not vary with the quantity of output that a firm produces.

Accepted Answer

A) True 
 B)False

Question 7

If the average score of the first two exams is 85 and the score of the third exam is lower than 85, then the average score of all three exams must be lower than 85.

Accepted Answer

A) True 
 B)False

Question 8

Exhibit 8-3 
-Both fixed cost and average fixed cost do not decline as the quantity of output increases.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 8-5 
-If average fixed cost is falling with increasing output, then

Accepted Answer

A) marginal cost must be increasing. 
B) average total cost must be decreasing. 
C) average variable cost must be decreasing. 
D) total fixed cost must be constant. 
E) marginal cost must be decreasing.

Question 10

The marginal cost curve intersects the average total cost curve at the lowest point of the average total cost curve.

Accepted Answer

A) True 
 B)False

Question 11

Capital expansion causes the average total cost to decrease at low levels of output but increase at high levels of output.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 8-2 
-Refer to Exhibit 8-2. At an output quantity of 3 units, the variable cost is

Accepted Answer

A) $13. 
B) $20. 
C) $48. 
D) $148. 
E) $185.

Question 13

Exhibit 8-5 
-Refer to Exhibit 8-5. At an output level of K,

Accepted Answer

A) TC is area AEHF. 
B) ATC exceeds MC by amount $G -$F. 
C) AFC is amount $D-   $I. 
D) ATC and AVC are both falling because MC is less than both. 
E) AVC exceeds MC by amount $H- $F.

Question 14

Exhibit 8-2 
-Refer to Exhibit 8-2. The marginal cost of producing the sixth unit of output is

Accepted Answer

A) $12.30. 
B) $37. 
C) $54.30. 
D) $67. 
E) $74.

Question 15

An isocost line has a

Accepted Answer

A) positive slope because the two inputs can replace each other in production. 
B) negative slope because the two inputs can replace each other in production. 
C) negative slope because the two inputs are complementary to each other in production. 
D) positive slope because the two inputs are complementary to each other in production. 
E) slope equal to zero because the two inputs are ally identical.

Question 16

Fixed costs exist

Accepted Answer

A) in both the short run and the long run. 
B) in the short run but not in the long run. 
C) in the long run but not in the short run. 
D) in neither the short run nor the long run. 
E) sometimes in the short run and sometimes in the long run.

Question 17

When marginal cost is greater than average variable cost but less than average total cost,

Accepted Answer

A) average total cost is rising. 
B) marginal cost is falling. 
C) average fixed cost is minimized. 
D) average variable cost is falling. 
E) marginal cost is rising.

Question 18

Suppose one firm buys cattle to process only the skins for leather, and another firm buys cattle to process only the meat for food. If the two firms merged, they would experience

Accepted Answer

A) increasing returns. 
B) economies of scale. 
C) economies of scope. 
D) increasing marginal product. 
E) decreasing marginal cost.

Question 19

Are there economies of scale for a waiter serving customers in a restaurant? What economies of scale are realized if party sizes increase? Is there a maximum party size beyond which scale diseconomies are experienced?

Accepted Answer

The answer of Are there economies of scale for a...

Question 20

Consider the relationship between the average test score of a class and one student's test score. Suppose there are 10 students with an average test score of 80. Suppose the marginal score is the test score of a new student, Kelly.

Accepted Answer

The answer of Consider the relationship between the average test...

Exam 8: Costs and the Changes at Firms Over Time

Draw typical average total cost, average variable cost, and marginal cost curves for a competitive firm with price at the shutdown point. Show that total revenue equals variable costs at this quantity. Also show the firm's losses at this quantity.

Exhibit 8-5 -Refer to Exhibit 8-5. The curve marked I is the firm's

Long-run average cost and short-run average cost curves have their U-shapes for the same reasons.

Exhibit 8-11 -Economies of scale can exist in both the short run and the long run.

Average total cost is equal to marginal cost when

Fixed cost does not vary with the quantity of output that a firm produces.

If the average score of the first two exams is 85 and the score of the third exam is lower than 85, then the average score of all three exams must be lower than 85.

Exhibit 8-3 -Both fixed cost and average fixed cost do not decline as the quantity of output increases.

Exhibit 8-5 -If average fixed cost is falling with increasing output, then

The marginal cost curve intersects the average total cost curve at the lowest point of the average total cost curve.

Capital expansion causes the average total cost to decrease at low levels of output but increase at high levels of output.

Exhibit 8-2 -Refer to Exhibit 8-2. At an output quantity of 3 units, the variable cost is

Exhibit 8-5 -Refer to Exhibit 8-5. At an output level of K,

Exhibit 8-2 -Refer to Exhibit 8-2. The marginal cost of producing the sixth unit of output is

An isocost line has a

Fixed costs exist

When marginal cost is greater than average variable cost but less than average total cost,

Suppose one firm buys cattle to process only the skins for leather, and another firm buys cattle to process only the meat for food. If the two firms merged, they would experience

Are there economies of scale for a waiter serving customers in a restaurant? What economies of scale are realized if party sizes increase? Is there a maximum party size beyond which scale diseconomies are experienced?

Consider the relationship between the average test score of a class and one student's test score. Suppose there are 10 students with an average test score of 80. Suppose the marginal score is the test score of a new student, Kelly.