Question 1

In the long run,

Accepted Answer

A)  all costs are variable costs.
B)  all costs are fixed costs.
C)  variable costs equal fixed costs.
D)  fixed costs are greater than variable costs.E) C) and D)
F) A) and C)

Question 2

One reason why newspaper-publishers' cost per paper increases as their circulation numbers fall is due to diminishing marginal returns.

Accepted Answer

A) True 
 B)False

Question 3

When diseconomies of scale occur,

Accepted Answer

A)  the long-run average total cost curve falls.
B)  marginal cost intersects average total cost.
C)  the long-run average total cost curve rises.
D)  average fixed costs will rise.E) All of the above
F) A) and B)

Question 4

The short-run marginal-cost curve is upward-sloping because of the law of diminishing marginal returns.

Accepted Answer

A) True 
 B)False

Question 5

The diagram of product curves suggests that

Accepted Answer

A)  when marginal product is zero, total product is at a minimum.
B)  when marginal product lies above average product, average product is rising.
C)  when marginal product lies below average product, average product is rising.
D)  when total product is at a maximum, so are marginal product and average product.E) A) and B)
F) A) and C)

Question 6

The Sunshine Corporation finds that its costs are $40 when it produces no output. Its total variable costs (TVC) change with output as shown in the accompanying table. Use this information to answer the following question.  The average total cost of 3 units of output is

Accepted Answer

A)  $65.
B)  $21.67.
C)  $40.
D)  $35.E) All of the above
F) A) and B)

Question 7

In the short run,

Accepted Answer

A)  TVC will increase for a time at a diminishing rate, but then beyond some point will increase at an increasing rate.
B)  TVC will increase for a time at an increasing rate, but then beyond some point will increase at a diminishing rate.
C)  TVC will increase by the same absolute amount for each additional unit of output produced.
D)  one cannot generalize concerning the behavior of TVC as output increases.E) B) and C)
F) A) and D)

Question 8

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes.  In the long run, the firm should use plant size "A" for

Accepted Answer

A)  all possible levels of output.
B)  10 to 30 units of output.
C)  30 to 60 units of output.
D)  all outputs greater than or equal to 40.E) A) and D)
F) A) and C)

Question 9

Answer the question on the basis of the following information.TFC = Total Fixed Cost Q = Quantity of OutputMC = Marginal Cost P = Product PriceTVC = Total Variable CostAverage total cost is _______.

Accepted Answer

A)  TVC − MC
B)  TVC − TFC / Q
C)  TVC / Q
D)  TFC + TVC / QE) None of the above
F) C) and D)

Question 10

If a firm produces zero output in the short run, then its profits will also be zero.

Accepted Answer

A) True 
 B)False

Question 11

Marginal product is highest where marginal cost is lowest.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements concerning the relationships between total product (TP) , average product (AP) , and marginal product (MP) is not correct?

Accepted Answer

A)  AP continues to rise so long as TP is rising.
B)  AP reaches a maximum before TP reaches a maximum.
C)  TP reaches a maximum when the MP of the variable input becomes zero.
D)  MP cuts AP at the maximum AP.E) A) and C)
F) B) and D)

Question 13

The fixed cost of the firm is $500. The firm's total variable cost is indicated in the table.  The average total cost of the firm when 3 units of output are being produced is

Accepted Answer

A)  $350.
B)  $400.
C)  $500.
D)  $700.E) None of the above
F) C) and D)

Question 14

Which of the following is most likely to be an implicit cost for Company X?

Accepted Answer

A)  forgone rent from the building owned and used by Company X
B)  rental payments on IBM equipment
C)  payments for raw materials purchased from Company Y
D)  transportation costs paid to a nearby trucking firmE) C) and D)
F) None of the above

Question 15

Which of the following is correct?

Accepted Answer

A)  When total product is rising, both average product and marginal product must also be rising.
B)  When marginal product is falling, total product must be falling.
C)  When marginal product is falling, average product must also be falling.
D)  Marginal product rises faster than average product and also falls faster than average product.E) A) and B)
F) B) and C)

Question 16

Total fixed cost (TFC)

Accepted Answer

A)  falls as the firm expands output from zero, but eventually rises.
B)  falls continuously as total output expands.
C)  varies directly with total output.
D)  does not change as total output increases or decreases.E) A) and D)
F) B) and C)

Question 17

The Sunshine Corporation finds that its costs are $40 when it produces no output. Its total variable costs (TVC) change with output as shown in the accompanying table. Use this information to answer the following question.  The marginal cost of the third unit of output is

Accepted Answer

A)  $105.
B)  $25.
C)  $15.
D)  $20.E) B) and D)
F) B) and C)

Question 18

Suppose that, when producing 10 units of output, a firm's AVC is $22, its AFC is $5, and its MC is $30. This firm's

Accepted Answer

A)  ATC is $35.
B)  ATC is $57.
C)  total cost is $270.
D)  total cost is $30.E) A) and B)
F) None of the above

Question 19

Assume that the only variable resource used to produce output is labor.  Refer to the provided table. When the firm hires four units of labor, the average product of labor is

Accepted Answer

A)  5 units of output.
B)  7.50 units of output.
C)  8.50 units of output.
D)  30 units of output.E) A) and C)
F) B) and C)

Question 20

Refer to the graph. Diminishing marginal returns are reflected in

Accepted Answer

A)  the shift of the short-run average total cost curve from ATC₂ to ATC₁.
B)  a move along short-run average total cost curve ATC₂ from point e to point f.
C)  a move along short-run average total cost curve ATC₁ from point b to point a.
D)  the shift of the short-run average total cost curve from ATC₁ to ATC₂.E) C) and D)
F) A) and B)

Exam 9: Businesses and the Costs of Production

Which of the following is correct?

Correct AnswerverifiedShow Answer

Which of the following statements concerning the relationships between total product (TP) , average product (AP) , and marginal product (MP) is not correct?

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following information.TFC = Total Fixed Cost Q = Quantity of OutputMC = Marginal Cost P = Product PriceTVC = Total Variable CostAverage total cost is _______.

Correct AnswerverifiedShow Answer

In the short run,

Correct AnswerverifiedShow Answer

Marginal product is highest where marginal cost is lowest.

Correct AnswerverifiedShow Answer

One reason why newspaper-publishers' cost per paper increases as their circulation numbers fall is due to diminishing marginal returns.

Correct AnswerverifiedShow Answer

When diseconomies of scale occur,

Correct AnswerverifiedShow Answer

Assume that the only variable resource used to produce output is labor. Refer to the provided table. When the firm hires four units of labor, the average product of labor is

Correct AnswerverifiedShow Answer

Which of the following is most likely to be an implicit cost for Company X?

Correct AnswerverifiedShow Answer

Refer to the graph. Diminishing marginal returns are reflected in

Correct AnswerverifiedShow Answer

The fixed cost of the firm is $500. The firm's total variable cost is indicated in the table. The average total cost of the firm when 3 units of output are being produced is

Correct AnswerverifiedShow Answer

Total fixed cost (TFC)

Correct AnswerverifiedShow Answer

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes. In the long run, the firm should use plant size "A" for

Correct AnswerverifiedShow Answer

Suppose that, when producing 10 units of output, a firm's AVC is $22, its AFC is $5, and its MC is $30. This firm's

Correct AnswerverifiedShow Answer

The Sunshine Corporation finds that its costs are $40 when it produces no output. Its total variable costs (TVC) change with output as shown in the accompanying table. Use this information to answer the following question. The marginal cost of the third unit of output is

Correct AnswerverifiedShow Answer

The Sunshine Corporation finds that its costs are $40 when it produces no output. Its total variable costs (TVC) change with output as shown in the accompanying table. Use this information to answer the following question. The average total cost of 3 units of output is

Correct AnswerverifiedShow Answer

If a firm produces zero output in the short run, then its profits will also be zero.

Correct AnswerverifiedShow Answer

The diagram of product curves suggests that

Correct AnswerverifiedShow Answer

The short-run marginal-cost curve is upward-sloping because of the law of diminishing marginal returns.

Correct AnswerverifiedShow Answer

In the long run,

Correct AnswerverifiedShow Answer

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