Question 1

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

Question 2

Marginal product increases over some range because of specialization that takes place within a firm.

Accepted Answer

A) True 
 B)False  True

Question 3

Labor costs are a typical example of fixed costs.

Accepted Answer

A) True 
 B)False  False

Question 4

Which of the following would likely result in diseconomies of scale?

Accepted Answer

A)  The development of auxiliary services in the neighborhood 
B)  Adoption of a new (more efficient) production process 
C)  Specialization 
D)  Management problems 
E)  Lowering the per-unit cost of resources by buying them in larger quantities 
A)  The development of auxiliary services in the neighborhood 
B)  Adoption of a new (more efficient) production process 
C)  Specialization 
D)  Management problems 
E)  Lowering the per-unit cost of resources by buying them in larger quantities

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

When comparing countries with big labor supplies like India to countries with relatively lower labor supplies like the United States and Canada, we would expect production in countries like India to be

Accepted Answer

A)  labor intensive because of the relative abundance of labor. 
B)  labor intensive because of the relatively high expense of labor. 
C)  capital intensive because of the high value of capital. 
D)  capital intensive because of the relative scarcity of labor. 
E)  labor intensive because of traditional production practices. 
A)  labor intensive because of the relative abundance of labor. 
B)  labor intensive because of the relatively high expense of labor. 
C)  capital intensive because of the high value of capital. 
D)  capital intensive because of the relative scarcity of labor. 
E)  labor intensive because of traditional production practices.

Question 7

If total revenue is greater than variable costs but less than total costs, a firm should remain in operation because its revenue is sufficient to cover variable costs and some fixed costs.

Accepted Answer

A) True 
 B)False

Question 8

A firm can earn a loss even if it produces at a price that is equal to its marginal cost.

Accepted Answer

A) True 
 B)False

Question 9

In the long run, a firm can increase production by

Accepted Answer

A)  increasing variable costs. 
B)  increasing capital input. 
C)  reducing labor input. 
D)  shutting down. 
E)  minimizing fixed costs. 
A)  increasing variable costs. 
B)  increasing capital input. 
C)  reducing labor input. 
D)  shutting down. 
E)  minimizing fixed costs.

Question 10

Some competitive firms are willing to operate at a loss in the short run because their revenues are at least able to cover their fixed costs.

Accepted Answer

A) True 
 B)False

Question 11

The distance between the average total cost curve and the average variable cost curve is the amount of average fixed cost.

Accepted Answer

A) True 
 B)False

Question 12

Average total cost, average variable cost, average fixed cost, and marginal cost curves all have U-shapes.

Accepted Answer

A) True 
 B)False

Question 13

Exhibit 8-9  
-Refer to Exhibit 8-9. Show that fixed costs are the same whether output is 100 units or 300 units.

Accepted Answer

Fixed costs at 100 units = ($1

Question 14

If marginal cost is at its minimum,

Accepted Answer

A)  total output is at its maximum. 
B)  average total cost is at its minimum. 
C)  total cost is at its maximum. 
D)  marginal product is at its maximum. 
E)  average variable cost is at its minimum. 
A)  total output is at its maximum. 
B)  average total cost is at its minimum. 
C)  total cost is at its maximum. 
D)  marginal product is at its maximum. 
E)  average variable cost is at its minimum.

Question 15

The slope of the average fixed curve is always negative.

Accepted Answer

A) True 
 B)False

Question 16

Average fixed cost

Accepted Answer

A)  increases as output rises. 
B)  remains constant as output rises. 
C)  equals marginal cost for the first unit of output. 
D)  decreases as output rises. 
E)  increases with rising output and then declines. 
A)  increases as output rises. 
B)  remains constant as output rises. 
C)  equals marginal cost for the first unit of output. 
D)  decreases as output rises. 
E)  increases with rising output and then declines.

Question 17

Increasing marginal product of labor results in increasing marginal cost.

Accepted Answer

A) True 
 B)False

Question 18

Why can't economists identify a definite time period that constitutes the short run?

Accepted Answer

The short run varies depending

Question 19

Constant returns to scale occur when a firm's output remains constant regardless of its input.

Accepted Answer

A) True 
 B)False

Question 20

A firm that shuts down earns an economic loss equal to its

Accepted Answer

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

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

Marginal product increases over some range because of specialization that takes place within a firm.

Labor costs are a typical example of fixed costs.

Which of the following would likely result in diseconomies of scale?

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

When comparing countries with big labor supplies like India to countries with relatively lower labor supplies like the United States and Canada, we would expect production in countries like India to be

If total revenue is greater than variable costs but less than total costs, a firm should remain in operation because its revenue is sufficient to cover variable costs and some fixed costs.

A firm can earn a loss even if it produces at a price that is equal to its marginal cost.

In the long run, a firm can increase production by

Some competitive firms are willing to operate at a loss in the short run because their revenues are at least able to cover their fixed costs.

The distance between the average total cost curve and the average variable cost curve is the amount of average fixed cost.

Average total cost, average variable cost, average fixed cost, and marginal cost curves all have U-shapes.

Exhibit 8-9 -Refer to Exhibit 8-9. Show that fixed costs are the same whether output is 100 units or 300 units.

If marginal cost is at its minimum,

The slope of the average fixed curve is always negative.

Average fixed cost

Increasing marginal product of labor results in increasing marginal cost.

Why can't economists identify a definite time period that constitutes the short run?

Constant returns to scale occur when a firm's output remains constant regardless of its input.

A firm that shuts down earns an economic loss equal to its

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

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Exam 8: Costs and the Changes at Firms Over Time

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

Marginal product increases over some range because of specialization that takes place within a firm.

Labor costs are a typical example of fixed costs.

Which of the following would likely result in diseconomies of scale?

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

When comparing countries with big labor supplies like India to countries with relatively lower labor supplies like the United States and Canada, we would expect production in countries like India to be

If total revenue is greater than variable costs but less than total costs, a firm should remain in operation because its revenue is sufficient to cover variable costs and some fixed costs.

A firm can earn a loss even if it produces at a price that is equal to its marginal cost.

In the long run, a firm can increase production by

Some competitive firms are willing to operate at a loss in the short run because their revenues are at least able to cover their fixed costs.

The distance between the average total cost curve and the average variable cost curve is the amount of average fixed cost.

Average total cost, average variable cost, average fixed cost, and marginal cost curves all have U-shapes.

Exhibit 8-9 -Refer to Exhibit 8-9. Show that fixed costs are the same whether output is 100 units or 300 units.

If marginal cost is at its minimum,

The slope of the average fixed curve is always negative.

Average fixed cost

Increasing marginal product of labor results in increasing marginal cost.

Why can't economists identify a definite time period that constitutes the short run?

Constant returns to scale occur when a firm's output remains constant regardless of its input.

A firm that shuts down earns an economic loss equal to its

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Filters