Exam 8: Cost Curves

Consider the relationship between the long-run total cost curve and the marginal and average cost curve. The slope of the total cost curve from the origin to a point on the total cost curve is how you derive the marginal cost curve while the average cost is given by TC/Q.

Suppose a firm produces 50,000 units of output, and determines that its marginal cost is $0.72 and its average total cost is $0.72. At this quantity of output, what is the slope of this firm's long run average total cost curve?

When the price of all inputs increase by the same percentage, the firm's total cost curve will rotate upward by a higher percentage if the firm's production technology exhibits decreasing returns to scale.

When marginal cost is below average total cost, average total cost is falling.

Let the average variable cost of production be $20 when 10 units are produced in the first year. In the second year, after the second 10 units have been produced, the average variable cost of production is $12. The slope of the experience curve for this firm is:

A constant elasticity cost function:

Economies of scale imply that economies of experience must exist.

Suppose a firm's total cost curve can be written $T C ( Q ) = Q - .5 Q ^ { 2 } + Q ^ { 3 }$ , with marginal cost $M C ( Q ) = 1 - Q + 3 Q ^ { 2 }$ . This cost function exhibits:

When the price of all inputs increase by the same percentage, the firm's total cost curve will rotate upward by the same percentage.

Suppose that a firm's total costs of production are 0 at an output of zero, 10 at an output of 1, 20 at an output of 2 units, 30 at an output of three units, 35 at an output of four units and 37 at an output of five units. At which number of units is average cost minimized?

Suppose for a particular production function, the cost-minimizing level of labor is $L = 2 Q$ and the cost-minimizing level of capital is $K = 5 Q$ . If $w = 5$ and $r = 2$ , the long-run total cost curve is:

Suppose that a firm's long-run total cost curve can be expressed as $T C = 10 Q ^ { 2 } + 20 Q$ . This firm's long-run average total cost curve can be expressed as

Which of the following factors may explain diseconomies of scale?

Economies of scope are higher the more specialized a firm is in production.

Consider the relationship between the long-run total cost curve and the marginal and average cost curve. Marginal cost is MC/Q while average cost is TC/Q.

Minimum efficient scale is:

Suppose that a firm's long-run total cost curve can be expressed as $T C ( Q ) = 100 Q$ . This firm's long-run marginal cost curve can be expressed as:

Suppose $Q = \sqrt { \bar { K } L }$ in the short-run. The firm's short-run variable cost curve is:

Suppose $Q = \sqrt { \bar { K } } L$ in the short-run. The firm's short-run fixed cost curve is:

Marginal cost is: