QUESTION 1
A firm with fixed costs produces at the lowest point on its U-shaped average variable cost curve. If it raises output by 1 unit, then
- average total cost will decrease.
- average fixed cost will increase.
- average total cost will be less than average variable cost.
- average fixed cost will necessarily be below average variable cost.
10 points
QUESTION 2
An industry is expected to expand if firms in the industry are earning positive
- accounting profits.
- normal profits.
- economic profits.
- total revenues.
10 points
QUESTION 3
Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10.
Output ATC
- 1 $ 40
- 2 27
- 3 29
- 4 31
- 5 38
2. The total cost of producing 4 units of output is
- $31.
- $137.
- $87.
- $124.
10 points
QUESTION 4
Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10.
Output ATC
- 1 $ 40
- 2 27
- 3 29
- 4 31
- 5 38
2. The average variable cost of 4 units of output is
- $19.00.
- $21.00.
- $28.50.
- $33.50.
10 points
QUESTION 5
Answer the question on the basis of the accompanying table that shows average total costs (ATC) for a manufacturing firm whose total fixed costs are $10.
Output ATC
- 1 $ 40
- 2 27
- 3 29
- 4 31
- 5 38
2. The profit-maximizing level of output for this firm
- is 3.
- cannot be determined from the information given.
- is 4.
- is 5.
10 points
QUESTION 6
Answer the question on the basis of the following cost data.
Ouput Total Cost
- 0 $ 24
- 1 33
- 2 41
- 3 48
- 4 54
- 5 61
- 6 69
2. The marginal cost of producing the sixth unit of output is
- $12.
- $45.
- $8.
- $24.
10 points
QUESTION 7
Answer the question on the basis of the following cost data.
Output Average Fixed Cost Average Variable Cost
- $ 50.00 $ 100.00
- 25.00 80.00
- 16.67 66.67
- 12.50 65.00
- 10.00 68.00
- 8.37 73.33
- 7.14 80.00
- 6.25 87.50
2. Total fixed cost is
- $6.25.
- $50.00.
- $150.00.
- $100.00.
10 points
QUESTION 8
Answer the question on the basis of the following cost data.
Output Average Fixed Cost Average Variable Cost
- $ 50.00 $ 100.00
- 25.00 80.00
- 16.67 66.67
- 12.50 65.00
- 10.00 68.00
- 8.37 73.33
- 7.14 80.00
- 6.25 87.50
2. The average total cost of 5 units of output is
- $78.
- $10.
- $69.
- $3.
10 points
QUESTION 9
Answer the question on the basis of the following cost data.
Output Average Fixed Cost Average Variable Cost
- $ 50.00 $ 100.00
- 25.00 80.00
- 16.67 66.67
- 12.50 65.00
- 10.00 68.00
- 8.37 73.33
- 7.14 80.00
- 6.25 87.50
2. The total cost of four units of output is
- $310.
- $260.
- $215.
- $77.5.
10 points
QUESTION 10
Answer the question on the basis of the following cost data.
Output Average Fixed Cost Average Variable Cost
- $ 50.00 $ 100.00
- 25.00 80.00
- 16.67 66.67
- 12.50 65.00
- 10.00 68.00
- 8.37 73.33
- 7.14 80.00
- 6.25 87.50
2. The marginal cost curve would intersect the average variable cost curve at about
- 7 units of output.
- 4 units of output.
- 2 units of output.
- 6 units of output.
10 points
QUESTION 11
Answer the question on the basis of the following information.
Number of Workers Total Product Marginal Product
0 0 —
1 8 8
2 1 0
3 2 5
4 3 0
5 3
6 3 4
2. When two workers are employed,
- total product is 18.
- total product cannot be determined from the information given.
- average product is 10.
- total product is 20.
10 points
QUESTION 12
Answer the question on the basis of the following information.
Number of Workers Total Product Marginal Product
- 0 —
- 8 8
- 10
- 25
- 30
- 3
- 34
2. The average product when there are two workers
- is 9.
- is 10.
- is 28.
- cannot be determined from the information given.
10 points
QUESTION 13
Answer the question on the basis of the following information.
TFC = Total Fixed Cost Q = Quantity of Output
MC = Marginal Cost P = Product Price
TVC = Total Variable Cost
Average total cost is _______.
- TVC / Q
- TVC − MC
- TFC + TVC / Q
- TVC − TFC / Q
10 points
QUESTION 14
Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed.
Number of Workers Units of Output
- 0 0
- 1 40
- 2 90
- 3 126
- 4 150
- 5 165
- 6 180
2. The marginal product of the fourth worker is
- 24 units of output.
- 37.5 units of output.
- 15 units of output.
- 36 units of output.
10 points
QUESTION 15
As output increases, average fixed costs
- increase.
- remain constant.
- decrease.
- first increase and then decrease.
10 points
QUESTION 16
If a firm produces 10 units of output, total costs are $1,030, and average fixed costs are $10, then total variable costs are
- $1,040.
- $104.
- $930.
- $1,130.
10 points
QUESTION 17
If you operated a small bakery, which of the following would be a variable cost in the short run?
- baking ovens
- annual lease payment for use of the building
- interest on business loans
- baking supplies (flour, salt, etc.)
10 points
QUESTION 18
If you owned a small farm, which of the following would most likely be a fixed cost?
- hail insurance
- harvest labor
- seed
- fertilizer
10 points
QUESTION 19
The ability of Intel to spread product development and other “start-up” costs over a larger number of units of output results in
- economies of scale.
- diseconomies of scale.
- constant returns to scale.
- minimum efficient scale.
10 points
QUESTION 20
The long run is a period of time, or a time frame, in which
- the capacity of the production plant is fixed.
- the level of output is variable.
- all resources are fixed in quantity.
- the amount of all resources can be varied.
10 points
QUESTION 21
The law of diminishing returns explains why
- total cost eventually reaches a maximum point.
- total cost eventually rises faster and faster.
- total cost eventually rises more and more slowly.
- total cost eventually falls.
10 points
QUESTION 22
Zero economic profits mean that the firm is earning
- revenues that are equal to its accounting profits.
- revenues that just cover all of its actual expenses.
- as much as what it would have earned in its best alternative business venture.
- accounting profits that are equal to its accounting costs.
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