Question 1

A firm produces 300 units of output at a total cost of $1,000.If fixed costs are $100,

Accepted Answer

A)  average fixed cost is $10. 
B)  average variable cost is $3. 
C)  average total cost is $4. 
D)  average total cost is $5.

Question 2

Figure 13-3 
-Refer to Figure 13-3.Which of the following is true of the production function (not pictured)that underlies this total cost function?

Accepted Answer

A)  (i)only 
B)  (ii)and (iii)only 
C)  (i)and (iii)only 
D)  (i),(ii),and (iii)

Question 3

Average total cost equals

Accepted Answer

A)  change in total costs divided by quantity produced. 
B)  change in total costs divided by change in quantity produced. 
C)  (fixed costs + variable costs)divided by quantity produced. 
D)  (fixed costs + variable costs)divided by change in quantity produced.

Question 4

Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles. 
-Refer to Figure 13-9.The firm experiences constant returns to scale at which output levels?

Accepted Answer

A)  output levels less than M 
B)  output levels between M and N 
C)  output levels greater than N 
D)  All of the above are correct as long as the firm is operating in the long run.

Question 5

Let L represent the number of workers hired by a firm and let Q represent that firm's quantity of output.Assume two points on the firm's production function are (L = 5,Q = 125)and (L = 6,Q = 162).Then the marginal product of the 6th worker is

Accepted Answer

A)  25 units of output. 
B)  27 units of output. 
C)  37 units of output. 
D)  162 units of output.

Question 6

When calculating a firm's profit,an economist will subtract only

Accepted Answer

A)  explicit costs from total revenue since these are the only costs that can be measured explicitly. 
B)  implicit costs from total revenue since these include both the costs that can be directly measured as well as the costs that can be indirectly measured. 
C)  the opportunity costs from total revenue since these include both the implicit and explicit costs of the firm. 
D)  the marginal cost since the cost of the next unit is the only relevant cost.

Question 7

Thirsty Thelma owns and operates a small lemonade stand.When Thelma is producing a low quantity of lemonade she has few workers and her equipment is not being fully utilized.Because she can easily put her idle resources to use,

Accepted Answer

A)  the marginal cost of an extra worker is large. 
B)  the marginal cost of one more glass of lemonade is smaller than if output were high. 
C)  the marginal product of an extra worker is small. 
D)  her lemonade stand is likely to be crowded with workers.

Question 8

Susan used to work as a telemarketer,earning $25,000 per year.She gave up that job to start a catering business.In calculating the economic profit of her catering business,the $25,000 income that she gave up is counted as part of the catering firm's

Accepted Answer

A)  total revenue. 
B)  opportunity costs. 
C)  explicit costs. 
D)  marginal costs.

Question 9

Figure 13-7 
-Refer to Figure 13-7.Quantity B represents the output level where the firm

Accepted Answer

A)  maximizes profits. 
B)  minimizes average variable costs. 
C)  produces at the efficient scale. 
D)  minimizes marginal costs.

Question 10

The minimum points of the average variable cost and average total cost curves occur where

Accepted Answer

A)  the marginal cost curve lies below the average variable cost and average total cost curves. 
B)  the marginal cost curve intersects those curves. 
C)  the average variable cost and average total cost curves intersect. 
D)  the slope of total cost is the smallest.

Question 11

The fact that many inputs are fixed in the short run but variable in the long run has little impact on the firm's cost curves.

Accepted Answer

A) True 
 B)False

Question 12

The production function depicts a relationship between which two variables? Also,draw a production function that exhibits diminishing marginal product.

Accepted Answer

The answer of The production function depicts a relationship between...

Question 13

Average total cost is increasing whenever

Accepted Answer

A)  total cost is increasing. 
B)  marginal cost is increasing. 
C)  marginal cost is less than average total cost. 
D)  marginal cost is greater than average total cost.

Question 14

Some reasons that firms may experience diseconomies of scale include that

Accepted Answer

A)  the firm is too small to take advantage of specialization. 
B)  large management structures may be bureaucratic and inefficient. 
C)  if there are too few employees,managers do not have enough to do. 
D)  average fixed costs begin to rise again.

Question 15

Which of the following can be added to profit to obtain total revenue?

Accepted Answer

A)  net profit 
B)  capital profit 
C)  operational profit 
D)  total cost

Question 16

Figure 13-3 
-Refer to Figure 13-3.Assuming that the firm depicted produces cookies,which of the statements below is most consistent with the shape of the total cost curve?

Accepted Answer

A)  Producing an additional cookie is always more costly than producing the previous cookie. 
B)  Total production of cookies decreases with additional units of input. 
C)  Producing additional cookies is equally costly,regardless of how many cookies are already being produced. 
D)  Producing additional cookies becomes increasingly costly only when the number of cookies already being produced is large.

Question 17

If long-run average total cost is rising,then the firm is experiencing economies of scale.

Accepted Answer

A) True 
 B)False

Question 18

Figure 13-2 
-Refer to Figure 13-2.As the number of workers increases,

Accepted Answer

A)  marginal product decreases. 
B)  total output decreases. 
C)  marginal product increases but at a decreasing rate. 
D)  Both a and b are correct.

Question 19

Figure 13-10 
-Refer to Figure 13-10.The firm experiences economies of scale if it changes its level of output from

Accepted Answer

A)  Q1 to Q2. 
B)  Q2 to Q3. 
C)  Q3 to Q4. 
D)  Q4 to Q5.

Question 20

Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles. 
-Refer to Figure 13-9.Which of the curves is most likely to characterize the short-run average total cost curve of the smallest factory?

Accepted Answer

A)  ATCA 
B)  ATCB 
C)  ATCC 
D)  ATCD

Exam 13: The Costs of Production

A firm produces 300 units of output at a total cost of $1,000.If fixed costs are $100,

Figure 13-3 -Refer to Figure 13-3.Which of the following is true of the production function (not pictured) that underlies this total cost function?

Average total cost equals

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9.The firm experiences constant returns to scale at which output levels?

Let L represent the number of workers hired by a firm and let Q represent that firm's quantity of output.Assume two points on the firm's production function are (L = 5,Q = 125) and (L = 6,Q = 162) .Then the marginal product of the 6th worker is

When calculating a firm's profit,an economist will subtract only

Thirsty Thelma owns and operates a small lemonade stand.When Thelma is producing a low quantity of lemonade she has few workers and her equipment is not being fully utilized.Because she can easily put her idle resources to use,

Susan used to work as a telemarketer,earning $25,000 per year.She gave up that job to start a catering business.In calculating the economic profit of her catering business,the $25,000 income that she gave up is counted as part of the catering firm's

Figure 13-7 -Refer to Figure 13-7.Quantity B represents the output level where the firm

The minimum points of the average variable cost and average total cost curves occur where

The fact that many inputs are fixed in the short run but variable in the long run has little impact on the firm's cost curves.

The production function depicts a relationship between which two variables? Also,draw a production function that exhibits diminishing marginal product.

Average total cost is increasing whenever

Some reasons that firms may experience diseconomies of scale include that

Which of the following can be added to profit to obtain total revenue?

Figure 13-3 -Refer to Figure 13-3.Assuming that the firm depicted produces cookies,which of the statements below is most consistent with the shape of the total cost curve?

If long-run average total cost is rising,then the firm is experiencing economies of scale.

Figure 13-2 -Refer to Figure 13-2.As the number of workers increases,

Figure 13-10 -Refer to Figure 13-10.The firm experiences economies of scale if it changes its level of output from

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9.Which of the curves is most likely to characterize the short-run average total cost curve of the smallest factory?