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

  1. $ 50.00     $ 100.00
  2. 25.00           80.00
  3. 16.67             66.67
  4. 12.50             65.00
  5. 10.00            68.00
  6. 8.37              73.33
  7. 7.14               80.00
  8. 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

  1. $ 50.00          $ 100.00
  2. 25.00                 80.00
  3. 16.67                  66.67
  4. 12.50                  65.00
  5. 10.00                  68.00
  6. 8.37                   73.33
  7. 7.14                   80.00
  8. 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

  1. $ 50.00            $ 100.00
  2. 25.00                  80.00
  3. 16.67                   66.67
  4. 12.50                   65.00
  5. 10.00                  68.00
  6. 8.37                    73.33
  7. 7.14                     80.00
  8. 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

  1. $ 50.00        $ 100.00
  2. 25.00               80.00
  3. 16.67                66.67
  4. 12.50                65.00
  5. 10.00               68.00
  6. 8.37                  73.33
  7. 7.14                  80.00
  8. 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

  1. 0      —
  2. 8       8
  3.         10
  4. 25
  5. 30
  6.          3
  7. 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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