Question 1

Total cost is

Accepted Answer

A)  TFC -TVC. 
B)  TFC/TVC. 
C)  TFC + TVC. 
D)  AFC + AVC. 
A)  TFC -TVC. 
B)  TFC/TVC. 
C)  TFC + TVC. 
D)  AFC + AVC.

Question 2

In a short-run production process, a diminishing marginal product of labor explains why marginal cost is

Accepted Answer

A)  positive and rising. 
B)  positive but falling. 
C)  zero. 
D)  negative and falling. 
A)  positive and rising. 
B)  positive but falling. 
C)  zero. 
D)  negative and falling.

Question 3

Refer to the information provided in Figure 8.1 below to answer the question(s) that follow.   Figure 8.1
-Refer to Figure 8.1 above. The total fixed costs for Cyndy's Floral Arrangements are $1,000. If Cyndy's Floral Arrangements produces 200 silk flower arrangements, the average fixed costs are

Accepted Answer

A)  $0.20. 
B)  $5. 
C)  $20. 
D)  $200. 
A)  $0.20. 
B)  $5. 
C)  $20. 
D)  $200.

Question 4

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow.   Figure 8.5
-Refer to Figure 8.5. If six drones are produced, total variable costs are

Accepted Answer

A)  $10. 
B)  $13.33. 
C)  $70. 
D)  $80. 
A)  $10. 
B)  $13.33. 
C)  $70. 
D)  $80.

Question 5

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow.   Figure 8.5
-Refer to Figure 8.5. If two drones are produced, average variable costs are

Accepted Answer

A)  $10. 
B)  $20. 
C)  $25. 
D)  $50. 
A)  $10. 
B)  $20. 
C)  $25. 
D)  $50.

Question 6

A firm is producing output less than the output associated with the minimum point on the firm's short run average variable cost curve. At this level of output the firm uses its fixed capital input ________ and its variable labor input ________.

Accepted Answer

A)  at the lowest average cost; at the lowest average cost 
B)  at the lowest average cost; at a level higher than the lowest average cost 
C)  at a level higher than the lowest average cost; at the lowest average cost 
D)  at a level higher than the lowest average cost; at a level higher than the lowest average cost 
A)  at the lowest average cost; at the lowest average cost 
B)  at the lowest average cost; at a level higher than the lowest average cost 
C)  at a level higher than the lowest average cost; at the lowest average cost 
D)  at a level higher than the lowest average cost; at a level higher than the lowest average cost

Question 7

Which of the following represents an accurate situation for a perfectly competitive firm?

Accepted Answer

A)  P = $12 and MR = $8 
B)  P = $5 and MR = $7 
C)  P = $9 and MR = $9 
D)  P = $16 and MR = $0 
A)  P = $12 and MR = $8 
B)  P = $5 and MR = $7 
C)  P = $9 and MR = $9 
D)  P = $16 and MR = $0

Question 8

In perfect competition, the marginal revenue curve

Accepted Answer

A)  and the demand curve facing the firm are identical. 
B)  is always above the demand curve facing the firm. 
C)  is always below the demand curve facing the firm. 
D)  intersects the demand curve when marginal revenue is minimized. 
A)  and the demand curve facing the firm are identical. 
B)  is always above the demand curve facing the firm. 
C)  is always below the demand curve facing the firm. 
D)  intersects the demand curve when marginal revenue is minimized.

Question 9

Refer to the information provided in Figure 8.9 below to answer the question(s) that follow.   Figure 8.9
-Refer to Figure 8.9. At the market price of $18 per bale, if this farmer produces the profit-maximizing level of hay, the total revenue would be

Accepted Answer

A)  $1,200. 
B)  $2,800. 
C)  $5,600. 
D)  $6,300. 
A)  $1,200. 
B)  $2,800. 
C)  $5,600. 
D)  $6,300.

Question 10

For Elliot's dog-walking service, the only variable input is labor. Elliot's labor costs are $300 a day and his service walks 30 dogs per day. To walk 31 dogs per day, his labor costs increase to $305 a day. The marginal cost of walking that 31st dog is

Accepted Answer

A)  $5. 
B)  $9.83. 
C)  $19.52. 
D)  indeterminate from the information given. 
A)  $5. 
B)  $9.83. 
C)  $19.52. 
D)  indeterminate from the information given.

Question 11

Refer to the information provided in Table 8.4 below to answer the question(s) that follow.
Table 8.4
  
-Refer to Table 8.4. Assuming the price of capital (K) is $10 per unit and the price of labor (L) is $5 per unit, what production technique should this firm use to produce 2 units of output?

Accepted Answer

A)  production technique A 
B)  production technique B 
C)  The firm is indifferent between production technique A and production technique B. 
D)  It is impossible to determine if the firm should select production technique A or B because total fixed costs are not given. 
A)  production technique A 
B)  production technique B 
C)  The firm is indifferent between production technique A and production technique B. 
D)  It is impossible to determine if the firm should select production technique A or B because total fixed costs are not given.

Question 12

Wheat is produced in a perfectly competitive market. Market demand for wheat increases. This will cause the individual wheat farmer's marginal revenue to ________ and their profit-maximizing level of output to ________.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 13

Average variable cost and average total costs get closer together as output increases because

Accepted Answer

A)  diminishing returns set in. 
B)  average fixed costs decrease as output increases. 
C)  marginal costs decrease as output increases. 
D)  economies of scale become apparent. 
A)  diminishing returns set in. 
B)  average fixed costs decrease as output increases. 
C)  marginal costs decrease as output increases. 
D)  economies of scale become apparent.

Question 14

Twenty‐five students in a class take a test for which the average grade is 75. Then a twenty‐sixth student enters the class, takes the test, and scores 80. The test average calculated with 26 students will ________.

Accepted Answer

A)  rise above 75 
B)  fall below 75 
C)  change from 75 but the direction is unclear 
D)  still equal 75 
A)  rise above 75 
B)  fall below 75 
C)  change from 75 but the direction is unclear 
D)  still equal 75

Question 15

In the short run a firm's lowest cost level of output is the minimum point on its ________ cost curve.

Accepted Answer

A)  average total 
B)  total variable 
C)  average fixed 
D)  marginal 
A)  average total 
B)  total variable 
C)  average fixed 
D)  marginal

Question 16

A market demand curve is ________.

Accepted Answer

A)  downward sloping 
B)  upward sloping 
C)  perfectly elastic 
D)  perfectly inelastic 
A)  downward sloping 
B)  upward sloping 
C)  perfectly elastic 
D)  perfectly inelastic

Question 17

________ are likely a fixed cost of a firm.

Accepted Answer

A)  Utility costs 
B)  The costs of raw materials used in production 
C)  Mortgage payments for a new warehouse 
D)  Expenses for holiday office parties 
A)  Utility costs 
B)  The costs of raw materials used in production 
C)  Mortgage payments for a new warehouse 
D)  Expenses for holiday office parties

Question 18

Average total cost is

Accepted Answer

A)  AFC - AVC. 
B)  AFC/AVC. 
C)  AFC + AVC. 
D)  TFC + TVC. 
A)  AFC - AVC. 
B)  AFC/AVC. 
C)  AFC + AVC. 
D)  TFC + TVC.

Question 19

Average total cost of producing 100 units of output is $5. If the marginal cost of producing the 101st unit is $6, then average total cost of 101 units is less than $5.

Accepted Answer

A) True 
 B)False

Question 20

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow.   Figure 8.6
-Refer to Figure 8.6. Curve 1 is Outdoor Equipment's

Accepted Answer

A)  marginal cost curve. 
B)  average variable cost curve. 
C)  average total cost curve. 
D)  average fixed cost curve. 
A)  marginal cost curve. 
B)  average variable cost curve. 
C)  average total cost curve. 
D)  average fixed cost curve.

Exam 8: Short-Run Costs and Output Decisions

Total cost is

In a short-run production process, a diminishing marginal product of labor explains why marginal cost is

Refer to the information provided in Figure 8.1 below to answer the question(s) that follow. Figure 8.1 -Refer to Figure 8.1 above. The total fixed costs for Cyndy's Floral Arrangements are $1,000. If Cyndy's Floral Arrangements produces 200 silk flower arrangements, the average fixed costs are

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow. Figure 8.5 -Refer to Figure 8.5. If six drones are produced, total variable costs are

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow. Figure 8.5 -Refer to Figure 8.5. If two drones are produced, average variable costs are

A firm is producing output less than the output associated with the minimum point on the firm's short run average variable cost curve. At this level of output the firm uses its fixed capital input ________ and its variable labor input ________.

Which of the following represents an accurate situation for a perfectly competitive firm?

In perfect competition, the marginal revenue curve

Refer to the information provided in Figure 8.9 below to answer the question(s) that follow. Figure 8.9 -Refer to Figure 8.9. At the market price of $18 per bale, if this farmer produces the profit-maximizing level of hay, the total revenue would be

For Elliot's dog-walking service, the only variable input is labor. Elliot's labor costs are $300 a day and his service walks 30 dogs per day. To walk 31 dogs per day, his labor costs increase to $305 a day. The marginal cost of walking that 31st dog is

Refer to the information provided in Table 8.4 below to answer the question(s) that follow. Table 8.4 -Refer to Table 8.4. Assuming the price of capital (K) is $10 per unit and the price of labor (L) is $5 per unit, what production technique should this firm use to produce 2 units of output?

Wheat is produced in a perfectly competitive market. Market demand for wheat increases. This will cause the individual wheat farmer's marginal revenue to ________ and their profit-maximizing level of output to ________.

Average variable cost and average total costs get closer together as output increases because

Twenty‐five students in a class take a test for which the average grade is 75. Then a twenty‐sixth student enters the class, takes the test, and scores 80. The test average calculated with 26 students will ________.

In the short run a firm's lowest cost level of output is the minimum point on its ________ cost curve.

A market demand curve is ________.

________ are likely a fixed cost of a firm.

Average total cost is

Average total cost of producing 100 units of output is $5. If the marginal cost of producing the 101st unit is $6, then average total cost of 101 units is less than $5.

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow. Figure 8.6 -Refer to Figure 8.6. Curve 1 is Outdoor Equipment's

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Long-Run Costs and Output Decisions

Input Demand: The Labor and Land Markets

Input Demand: The Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

A firm is producing output less than the output associated with the minimum point on the firm's short run average variable cost curve. At this level of output the firm uses its fixed capital input and its variable labor input .

Wheat is produced in a perfectly competitive market. Market demand for wheat increases. This will cause the individual wheat farmer's marginal revenue to and their profit-maximizing level of output to .