Question 1

One formula for ________ is TVC/q.

Accepted Answer

A)  TFC 
B)  AVC 
C)  MC 
D)  TC 
A)  TFC 
B)  AVC 
C)  MC 
D)  TC

Question 2

Refer to the information provided in Figure 8.11 below to answer the question(s) that follow.   Figure 8.11
-Refer to the Figure 8.11. Assuming wool is a perfectly competitive industry, the demand curve faced by each wool producer is ________ starting at $3.00 per pound.

Accepted Answer

A)  downward-sloping 
B)  upward-sloping 
C)  vertical 
D)  horizontal 
A)  downward-sloping 
B)  upward-sloping 
C)  vertical 
D)  horizontal

Question 3

If the average variable cost curve is below the marginal cost curve, then

Accepted Answer

A)  marginal costs must be decreasing. 
B)  marginal costs must be increasing. 
C)  marginal costs can be either increasing or decreasing. 
D)  average variable costs must be decreasing. 
A)  marginal costs must be decreasing. 
B)  marginal costs must be increasing. 
C)  marginal costs can be either increasing or decreasing. 
D)  average variable costs must be decreasing.

Question 4

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 5

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. 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 6

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 four drones are produced, average fixed costs are

Accepted Answer

A)  $5. 
B)  $10. 
C)  $12.50. 
D)  $17.50. 
A)  $5. 
B)  $10. 
C)  $12.50. 
D)  $17.50.

Question 7

The marginal revenue curve for a perfectly competitive firm will be downward sloping.

Accepted Answer

A) True 
 B)False

Question 8

If an individual perfectly competitive firm charges a price below the industry equilibrium price, it will

Accepted Answer

A)  not sell anything. 
B)  sell part of what it produces. 
C)  sell all that it produces and gain more revenue than competing firms will. 
D)  sell all that it produces but gain less revenue than competing firms will. 
A)  not sell anything. 
B)  sell part of what it produces. 
C)  sell all that it produces and gain more revenue than competing firms will. 
D)  sell all that it produces but gain less revenue than competing firms will.

Question 9

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 10

The ________ part of a perfectly competitive firm's marginal cost curve is the firm's short-run supply curve.

Accepted Answer

A)  rising 
B)  falling 
C)  horizontal 
D)  backward-bending 
A)  rising 
B)  falling 
C)  horizontal 
D)  backward-bending

Question 11

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. 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 12

Wilbur's Widgets, a widget company, produces 100 widgets. Its average fixed cost is $6 and its total variable cost is $400. The total cost of producing 100 widgets is

Accepted Answer

A)  $306. 
B)  $400. 
C)  $600. 
D)  $1,000. 
A)  $306. 
B)  $400. 
C)  $600. 
D)  $1,000.

Question 13

Which of the following is the closest example of a perfectly competitive market?

Accepted Answer

A)  fast foods 
B)  beer 
C)  gasoline stations 
D)  soybeans 
A)  fast foods 
B)  beer 
C)  gasoline stations 
D)  soybeans

Question 14

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 15

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 16

Total variable costs

Accepted Answer

A)  initially increase as output increases, and then decrease. 
B)  always decrease with output. 
C)  always increase with output. 
D)  initially decrease and then increase with output. 
A)  initially increase as output increases, and then decrease. 
B)  always decrease with output. 
C)  always increase with output. 
D)  initially decrease and then increase with output.

Question 17

If a firm's total costs are $100 when 10 units of output are produced and $103 when 11 units of output are produced, the marginal cost of the 11th unit is

Accepted Answer

A)  $1. 
B)  $3. 
C)  $5. 
D)  $9.36. 
A)  $1. 
B)  $3. 
C)  $5. 
D)  $9.36.

Question 18

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

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 19

________ marginal returns implies ________ marginal costs.

Accepted Answer

A)  Diminishing; decreasing 
B)  Increasing; increasing 
C)  Diminishing; increasing 
D)  Increasing; constant 
A)  Diminishing; decreasing 
B)  Increasing; increasing 
C)  Diminishing; increasing 
D)  Increasing; constant

Question 20

Refer to the information provided in Table 8.2 below to answer the question(s) that follow.
Table 8.2 $\text {Number of}$

$\begin{array}{llllllll}
\text {Earrings}&\text { TVC}&\text { MC }&\text {AVC}&\text { TFC }&\text {TC}&\text { AFC}&\text { ATC}\
\hline0 & & & & 
&100 & \
1 & & 50 & & & \
2 & & & & & &&95 \
3 & & & 46.67 & & \
4 & & & & &300 & \
5 & 270 & & &\
\hline
\end{array}$

-Refer to Table 8.2. If Sherry produces five pairs of earrings, her total costs are

Accepted Answer

A)  $320. 
B)  $360. 
C)  $370. 
D)  $400. 
A)  $320. 
B)  $360. 
C)  $370. 
D)  $400.

Exam 8: Short-Run Costs and Output Decisions

One formula for ________ is TVC/q.

Refer to the information provided in Figure 8.11 below to answer the question(s) that follow. Figure 8.11 -Refer to the Figure 8.11. Assuming wool is a perfectly competitive industry, the demand curve faced by each wool producer is ________ starting at $3.00 per pound.

If the average variable cost curve is below the marginal cost curve, then

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 ________.

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 four drones are produced, average fixed costs are

The marginal revenue curve for a perfectly competitive firm will be downward sloping.

If an individual perfectly competitive firm charges a price below the industry equilibrium price, it will

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

The ________ part of a perfectly competitive firm's marginal cost curve is the firm's short-run supply curve.

Refer to the information provided in Table 8.6 below to answer the question(s) that follow. Table 8.6 Number of\text {Number of}Number of Earrings TVC MC AVC TFC TC AFC ATC 0 1 10 2 5 15 3 55 4 10 5 90 -Refer to Table 8.6. From the information in the given table,

Wilbur's Widgets, a widget company, produces 100 widgets. Its average fixed cost is $6 and its total variable cost is $400. The total cost of producing 100 widgets is

Which of the following is the closest example of a perfectly competitive market?

Profit-maximizing firms want to maximize the difference between

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

Total variable costs

If a firm's total costs are $100 when 10 units of output are produced and $103 when 11 units of output are produced, the marginal cost of the 11th unit is

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

________ marginal returns implies ________ marginal costs.

Refer to the information provided in Table 8.2 below to answer the question(s) that follow. Table 8.2 Number of\text {Number of}Number of Earrings TVC MC AVC TFC TC AFC ATC 0 100 1 50 2 95 3 46.67 4 300 5 270 -Refer to Table 8.2. If Sherry produces five pairs of earrings, her total costs are

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

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 .

Refer to the information provided in Table 8.6 below to answer the question(s) that follow. Table 8.6 $\text {Number of}$ Earrings TVC MC AVC TFC TC AFC ATC 0 1 10 2 5 15 3 55 4 10 5 90 -Refer to Table 8.6. From the information in the given table,

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

marginal returns implies marginal costs.

Refer to the information provided in Table 8.2 below to answer the question(s) that follow. Table 8.2 $\text {Number of}$ Earrings TVC MC AVC TFC TC AFC ATC 0 100 1 50 2 95 3 46.67 4 300 5 270 -Refer to Table 8.2. If Sherry produces five pairs of earrings, her total costs are