Question 1

Total cost is calculated as

Accepted Answer

A)  the sum of total fixed cost and total variable cost. 
B)  the product of average total cost and price. 
C)  the sum of all the firm's explicit costs. 
D)  the sum of average fixed cost and average variable cost. 
A)  the sum of total fixed cost and total variable cost. 
B)  the product of average total cost and price. 
C)  the sum of all the firm's explicit costs. 
D)  the sum of average fixed cost and average variable cost. A

Question 2

Refer to the information provided in Figure 8.8 below to answer the question(s) that follow.   Figure 8.8
-Refer to Figure 8.8. This farmer's profit-maximizing level of output is ________ units of output.

Accepted Answer

A)  200 
B)  700 
C)  1,000 
D)  1,400 
A)  200 
B)  700 
C)  1,000 
D)  1,400 C

Question 3

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. D

Question 4

Marginal cost is equal to average variable cost when average variable cost is

Accepted Answer

A)  zero. 
B)  at its minimum. 
C)  at its maximum. 
D)  equal to total variable cost. 
A)  zero. 
B)  at its minimum. 
C)  at its maximum. 
D)  equal to total variable cost.

Question 5

________ is the average cost of producing each unit of output.

Accepted Answer

A)  Average fixed cost 
B)  Average total cost 
C)  Average variable cost 
D)  Marginal cost 
A)  Average fixed cost 
B)  Average total cost 
C)  Average variable cost 
D)  Marginal cost

Question 6

Because marginal cost is always ________ in the short run, total variable cost always ________ when output increases.

Accepted Answer

A)  positive; increases 
B)  positive; decreases 
C)  negative; increases 
D)  negative; decreases 
A)  positive; increases 
B)  positive; decreases 
C)  negative; increases 
D)  negative; decreases

Question 7

Free entry implies that

Accepted Answer

A)  a perfectly competitive firm can never earn a profit. 
B)  if firms in an industry are making excessively high profits, new firms are likely to enter the industry. 
C)  the government regulates the number of firms that are allowed in an industry. 
D)  firms will always earn a profit, as new firms can enter the industry at any time they like. 
A)  a perfectly competitive firm can never earn a profit. 
B)  if firms in an industry are making excessively high profits, new firms are likely to enter the industry. 
C)  the government regulates the number of firms that are allowed in an industry. 
D)  firms will always earn a profit, as new firms can enter the industry at any time they like.

Question 8

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 9

If P = MC and MC > ATC, then a perfectly competitive firm will earn ________ profits.

Accepted Answer

A)  positive 
B)  zero 
C)  negative 
D)  break-even 
A)  positive 
B)  zero 
C)  negative 
D)  break-even

Question 10

Labor is the only variable input for Elliot's dog-walking service. His labor costs are $300 a day and his service walks 25 dogs per day. His labor costs increase to $315.50 a day to walk 26 dogs per day. The marginal cost of walking that 26th dog is

Accepted Answer

A)  $15.50. 
B)  $19.50. 
C)  $29.50. 
D)  indeterminate from the information given. 
A)  $15.50. 
B)  $19.50. 
C)  $29.50. 
D)  indeterminate from the information given.

Question 11

Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, price equals this firmʹs marginal cost. Assuming price exceeds average variable cost, to maximize profits Cathy's should

Accepted Answer

A)  make no adjustments as they are already maximizing their profits. 
B)  increase their output. 
C)  decrease their output. 
D)  stop producing since it is earning a loss. 
A)  make no adjustments as they are already maximizing their profits. 
B)  increase their output. 
C)  decrease their output. 
D)  stop producing since it is earning a loss.

Question 12

The shut-down decision is a short-run decision.

Accepted Answer

A) True 
 B)False

Question 13

Total variable costs ________ with decreasing output.

Accepted Answer

A)  always increase 
B)  always decrease 
C)  initially increase and then decrease 
D)  initially decrease and then increase 
A)  always increase 
B)  always decrease 
C)  initially increase and then decrease 
D)  initially decrease and then increase

Question 14

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 8.4. If six microwave ovens are produced, average variable costs are

Accepted Answer

A)  $50. 
B)  $100. 
C)  $150. 
D)  $300. 
A)  $50. 
B)  $100. 
C)  $150. 
D)  $300.

Question 15

Corn is produced in a perfectly competitive market. The demand for ethanol increases. This will cause the individual corn 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 16

Refer to the information provided in Table 8.4 below to answer the question(s) that follow.
Table 8.4
 $$\begin{array} { c c c c } 
\hline \text { Produce } & \text { Using Techniques } & \text { Units of Variable K } & \text { Inputs L } \
\hline 1 \text { unit of output } & \text { A } & 4 & 4 \
\hline & \text { B } & 2 & 6 \
\hline 2 \text { units of output } & & & \
\hline & \text { A } & 7 & 6 \
\hline& \text { B } & 4 & 10 \
\hline 3 \text { units of output } &\text { A }  &8 & 6 \
\hline &\text { B } & 6& 11 \
\hline
\end{array}$$
-Refer to Table 8.4. 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 total cost of producing two units of output is

Accepted Answer

A)  $10. 
B)  $20. 
C)  $45. 
D)  $50. 
A)  $10. 
B)  $20. 
C)  $45. 
D)  $50.

Question 17

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. Average fixed cost is represented by

Accepted Answer

A)  curve 1. 
B)  curve 2. 
C)  curve 3. 
D)  line segment AB. 
A)  curve 1. 
B)  curve 2. 
C)  curve 3. 
D)  line segment AB.

Question 18

A firm will ________ at the output where marginal cost increases

Accepted Answer

A)  begin to experience diminishing returns 
B)  begin to experience increasing returns 
C)  become profitable 
D)  start to experience losses 
A)  begin to experience diminishing returns 
B)  begin to experience increasing returns 
C)  become profitable 
D)  start to experience losses

Question 19

Refer to the information provided in Table 8.6 below to answer the question(s) that follow.
Table 8.6 $\text {Number of}$
$\begin{array}{llllllll}
\text {Earrings}&\text { TVC}&\text { MC }&\text {AVC}&\text { TFC }&\text {TC}&\text { AFC}&\text { ATC}\
\hline0 & & & & 
&& \
1 & 10& & & & \
2 & & 5& & & &15& \
3 & & &  & &55& \
4 & & &10 & & & \
5 & & & & &90&\
\hline
\end{array}$

-Refer to Table 8.6. If the firm is in a perfectly competitive industry with a market price of $15 per unit, the firm will produce ________ units and earn a profit of ________.

Accepted Answer

A)  three; $10 
B)  four; $10 
C)  four; -$10 
D)  five; $15 
A)  three; $10 
B)  four; $10 
C)  four; -$10 
D)  five; $15

Question 20

If marginal cost is increasing, then average variable cost must be increasing simultaneously.

Accepted Answer

A) True 
 B)False

Total cost is calculated as

Refer to the information provided in Figure 8.8 below to answer the question(s) that follow. Figure 8.8 -Refer to Figure 8.8. This farmer's profit-maximizing level of output is ________ units of output.

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

Marginal cost is equal to average variable cost when average variable cost is

________ is the average cost of producing each unit of output.

Because marginal cost is always in the short run, total variable cost always when output increases.

Free entry implies that

Total cost is

If P = MC and MC > ATC, then a perfectly competitive firm will earn ________ profits.

Labor is the only variable input for Elliot's dog-walking service. His labor costs are $300 a day and his service walks 25 dogs per day. His labor costs increase to $315.50 a day to walk 26 dogs per day. The marginal cost of walking that 26th dog is

Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, price equals this firmʹs marginal cost. Assuming price exceeds average variable cost, to maximize profits Cathy's should

The shut-down decision is a short-run decision.

Total variable costs ________ with decreasing output.

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 8.4. If six microwave ovens are produced, average variable costs are

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

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. Average fixed cost is represented by

A firm will ________ at the output where marginal cost increases

If marginal cost is increasing, then average variable cost must be increasing simultaneously.

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

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Exam 8: Short-Run Costs and Output Decisions

Total cost is calculated as

Refer to the information provided in Figure 8.8 below to answer the question(s) that follow. Figure 8.8 -Refer to Figure 8.8. This farmer's profit-maximizing level of output is ________ units of output.

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

Marginal cost is equal to average variable cost when average variable cost is

________ is the average cost of producing each unit of output.

Because marginal cost is always ________ in the short run, total variable cost always ________ when output increases.

Free entry implies that

Total cost is

If P = MC and MC > ATC, then a perfectly competitive firm will earn ________ profits.

Labor is the only variable input for Elliot's dog-walking service. His labor costs are $300 a day and his service walks 25 dogs per day. His labor costs increase to $315.50 a day to walk 26 dogs per day. The marginal cost of walking that 26th dog is

Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, price equals this firmʹs marginal cost. Assuming price exceeds average variable cost, to maximize profits Cathy's should

The shut-down decision is a short-run decision.

Total variable costs ________ with decreasing output.

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 8.4. If six microwave ovens are produced, average variable costs are

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

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. Average fixed cost is represented by

A firm will ________ at the output where marginal cost increases

If marginal cost is increasing, then average variable cost must be increasing simultaneously.

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

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Because marginal cost is always in the short run, total variable cost always when output increases.

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