Question 1

All of the following statements about variable costs are true except

Accepted Answer

A)  they are equal to total costs in the long run. 
B)  they are zero if output is zero. 
C)  they are equal to the product of average variable cost and the output level. 
D)  they are constant as output increases. 
A)  they are equal to total costs in the long run. 
B)  they are zero if output is zero. 
C)  they are equal to the product of average variable cost and the output level. 
D)  they are constant as output increases.

Question 2

In perfect competition, a firm's ________ curve is horizontal.

Accepted Answer

A)  marginal cost 
B)  total revenue 
C)  marginal revenue 
D)  total cost. 
A)  marginal cost 
B)  total revenue 
C)  marginal revenue 
D)  total cost.

Question 3

Marginal cost is total variable cost divided by output.

Accepted Answer

A) True 
 B)False

Question 4

Average total cost of producing 100 units of output is $5. If the marginal cost of producing the 101st unit is $4, then average total cost of 101 units is less than $5.

Accepted Answer

A) True 
 B)False

Question 5

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. If this farmer is producing the profit-maximizing level of output, her total revenue is

Accepted Answer

A)  $0. 
B)  $8,400. 
C)  $12,000. 
D)  $16,800. 
A)  $0. 
B)  $8,400. 
C)  $12,000. 
D)  $16,800.

Question 6

Which of the following is most likely to be a variable cost for a firm?

Accepted Answer

A)  the interest payments made on loans 
B)  the franchiser's fee that a restaurant must pay to the national restaurant chain 
C)  the monthly rent on office space that it leased for a year 
D)  the payroll taxes that are paid on employee wages 
A)  the interest payments made on loans 
B)  the franchiser's fee that a restaurant must pay to the national restaurant chain 
C)  the monthly rent on office space that it leased for a year 
D)  the payroll taxes that are paid on employee wages

Question 7

A short-run total cost schedule is a total variable cost schedule shifted ________ by the amount of total fixed cost cost.

Accepted Answer

A)  downward 
B)  to the right 
C)  upward 
D)  to the left 
A)  downward 
B)  to the right 
C)  upward 
D)  to the left

Question 8

Refer to the information provided in Table 8.1 below to answer the question(s) that follow.
Table 8.1  
-Refer to Table 8.1. Assume that the relevant time period is the short run. Assuming the price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, the average variable cost of producing two units of output is

Accepted Answer

A)  $20. 
B)  $40. 
C)  $90. 
D)  $100. 
A)  $20. 
B)  $40. 
C)  $90. 
D)  $100.

Question 9

Refer to the information provided in Figure 8.4 below to answer the question(s) that follow.   Figure 8.4
-Refer to Figure 8.4. If six microwave ovens are produced, Micro Oven's average total costs are

Accepted Answer

A)  $100. 
B)  $150. 
C)  $300. 
D)  indeterminate from this information. 
A)  $100. 
B)  $150. 
C)  $300. 
D)  indeterminate from this information.

Question 10

Refer to the information provided in Figure 8.11 below to answer the question(s) that follow.   Figure 8.11
-Refer to Figure 8.11. Assuming the wool market (industry) is perfectly competitive and the industry consists of 100 firms of identical size, each firm would produce an average of ________ pounds of wool and sell the wool for ________ per pound.

Accepted Answer

A)  50; $0.03 
B)  5,000; $3.00 
C)  5,000; $0.03 
D)  50; $3.00 
A)  50; $0.03 
B)  5,000; $3.00 
C)  5,000; $0.03 
D)  50; $3.00

Question 11

In the short run when the marginal product of labor ________, the marginal cost of an additional unit of output ________.

Accepted Answer

A)  rises; rises 
B)  falls; rises 
C)  rises; doesn't change 
D)  falls; falls 
A)  rises; rises 
B)  falls; rises 
C)  rises; doesn't change 
D)  falls; falls

Question 12

Refer to the information provided in Figure 8.2 below to answer the question(s) that follow.   Figure 8.2
-Refer to Figure 8.2 above. The total fixed costs for The Barber Shop are $3,000. If The Barber Shop produces 300 haircuts, the average fixed costs are

Accepted Answer

A)  $0.20. 
B)  $5. 
C)  $10. 
D)  $100. 
A)  $0.20. 
B)  $5. 
C)  $10. 
D)  $100.

Question 13

Profit-maximizing firms want to maximize the difference between

Accepted Answer

A)  total revenue and marginal cost. 
B)  total revenue and total cost. 
C)  marginal revenue and marginal cost. 
D)  marginal revenue and average cost. 
A)  total revenue and marginal cost. 
B)  total revenue and total cost. 
C)  marginal revenue and marginal cost. 
D)  marginal revenue and average cost.

Question 14

Economists usually assume that ________ is a variable input in the ________ run.

Accepted Answer

A)  labor; short 
B)  capital; short 
C)  labor; short and long 
D)  capital; short and long 
A)  labor; short 
B)  capital; short 
C)  labor; short and long 
D)  capital; short and long

Question 15

A perfectly competitive industry consists of firms that produce ________ products.

Accepted Answer

A)  identical 
B)  unique 
C)  slightly differentiated 
D)  significantly differentiated 
A)  identical 
B)  unique 
C)  slightly differentiated 
D)  significantly differentiated

Question 16

Refer to the information provided in Table 8.3 below to answer the question(s) that follow.
Table 8.3  
-Refer to Table 8.3. From the information in the given table

Accepted Answer

A)  the firm is in the long run. 
B)  the firm eventually experiences diminishing returns to its variable input. 
C)  the marginal cost curve intersects the average total cost curve between 3 and 4 units of output. 
D)  the difference between total cost and total variable cost decreases as output increases. 
A)  the firm is in the long run. 
B)  the firm eventually experiences diminishing returns to its variable input. 
C)  the marginal cost curve intersects the average total cost curve between 3 and 4 units of output. 
D)  the difference between total cost and total variable cost decreases as output increases.

Question 17

If a firm's total costs are $75 when it produces 10 units of output and $80 when it produces 11 units of output, then the marginal cost of producing the 11th unit is

Accepted Answer

A)  $1. 
B)  $5. 
C)  $8.09. 
D)  $10. 
A)  $1. 
B)  $5. 
C)  $8.09. 
D)  $10.

Question 18

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 no drones are produced, total variable costs are

Accepted Answer

A)  $0. 
B)  $25. 
C)  $50. 
D)  indeterminate from this information. 
A)  $0. 
B)  $25. 
C)  $50. 
D)  indeterminate from this information.

Question 19

A perfectly competitive firm ________ at the level of output where P = ATC.

Accepted Answer

A)  earns an economic profit 
B)  suffers an economic loss 
C)  breaks even 
D)  shuts down 
A)  earns an economic profit 
B)  suffers an economic loss 
C)  breaks even 
D)  shuts down

Question 20

The formula for MC is

Accepted Answer

A)  TVC/q. 
B)  q/TVC. 
C)  ΔTVC/q. 
D)  ΔTVC/Δq. 
A)  TVC/q. 
B)  q/TVC. 
C)  ΔTVC/q. 
D)  ΔTVC/Δq.

Exam 8: Short-Run Costs and Output Decisions

All of the following statements about variable costs are true except

In perfect competition, a firm's ________ curve is horizontal.

Marginal cost is total variable cost divided by output.

Average total cost of producing 100 units of output is $5. If the marginal cost of producing the 101st unit is $4, then average total cost of 101 units is less than $5.

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. If this farmer is producing the profit-maximizing level of output, her total revenue is

Which of the following is most likely to be a variable cost for a firm?

A short-run total cost schedule is a total variable cost schedule shifted ________ by the amount of total fixed cost cost.

Refer to the information provided in Figure 8.4 below to answer the question(s) that follow. Figure 8.4 -Refer to Figure 8.4. If six microwave ovens are produced, Micro Oven's average total costs are

In the short run when the marginal product of labor ________, the marginal cost of an additional unit of output ________.

Refer to the information provided in Figure 8.2 below to answer the question(s) that follow. Figure 8.2 -Refer to Figure 8.2 above. The total fixed costs for The Barber Shop are $3,000. If The Barber Shop produces 300 haircuts, the average fixed costs are

Profit-maximizing firms want to maximize the difference between

Economists usually assume that ________ is a variable input in the ________ run.

A perfectly competitive industry consists of firms that produce ________ products.

Refer to the information provided in Table 8.3 below to answer the question(s) that follow. Table 8.3 -Refer to Table 8.3. From the information in the given table

If a firm's total costs are $75 when it produces 10 units of output and $80 when it produces 11 units of output, then the marginal cost of producing the 11th unit is

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 no drones are produced, total variable costs are

A perfectly competitive firm ________ at the level of output where P = ATC.

The formula for MC is

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

In the short run when the marginal product of labor , the marginal cost of an additional unit of output .

Economists usually assume that is a variable input in the run.