Question 1

The following figure represents the short-run total cost function for the Fidget Company,which produces widgets.The equation for the total cost function is:

Accepted Answer

A)  TC = 100. 
B)  TC = 10Q. 
C)  TC = 5Q2. 
D)  TC = 100Q. 
E)  TC = 100 + 5Q2. 
A)  TC = 100. 
B)  TC = 10Q. 
C)  TC = 5Q2. 
D)  TC = 100Q. 
E)  TC = 100 + 5Q2.

Question 2

The long-run average cost curve slopes upward if there are:

Accepted Answer

A)  some factors without diminishing marginal returns. 
B)  diseconomies of scope in the management of multiplant operations. 
C)  economies of scale. 
D)  diseconomies of scale. 
E)  no factors without diminishing marginal returns. 
A)  some factors without diminishing marginal returns. 
B)  diseconomies of scope in the management of multiplant operations. 
C)  economies of scale. 
D)  diseconomies of scale. 
E)  no factors without diminishing marginal returns.

Question 3

When average total cost is at its minimum:

Accepted Answer

A)  average variable cost is declining with increases in output. 
B)  average variable cost plus average fixed cost is declining with increases in output. 
C)  average total cost is equal to average variable cost. 
D)  marginal cost is equal to average variable cost. 
E)  marginal cost is equal to average total cost. 
A)  average variable cost is declining with increases in output. 
B)  average variable cost plus average fixed cost is declining with increases in output. 
C)  average total cost is equal to average variable cost. 
D)  marginal cost is equal to average variable cost. 
E)  marginal cost is equal to average total cost.

Question 4

The following figure represents the short-run total cost function for the Fidget Company,which produces widgets.The fixed costs are:

Accepted Answer

A)  FC = $100. 
B)  FC = 10Q. 
C)  FC = 5Q2. 
D)  FC = $500. 
E)  not estimable from the information given. 
A)  FC = $100. 
B)  FC = 10Q. 
C)  FC = 5Q2. 
D)  FC = $500. 
E)  not estimable from the information given.

Question 5

Wagner Machine Tool produces output according to Q = 4(KL)1/2,where K is the amount of capital used and L is the amount of labor employed.Capital costs $2 per unit,and Wagner is constrained in the short run to use 16 units of capital.If labor costs $8 per unit,Wagner's minimized short-run marginal cost at an output of 48 is:

Accepted Answer

A)  $3.00. 
B)  $3.50. 
C)  $4.00. 
D)  $4.50. 
E)  $5.00. 
A)  $3.00. 
B)  $3.50. 
C)  $4.00. 
D)  $4.50. 
E)  $5.00.

Question 6

Loco Pony Adventures rents clowns and ponies for children's birthday parties.If the annual total cost of furnishing entertainment is given by TC = 0.5Q2 + 25Q + 1,000,the average variable cost of catering to 30 birthday parties is:

Accepted Answer

A)  $25.00. 
B)  $25.50. 
C)  $26.50. 
D)  $30.00. 
E)  $40.00. 
A)  $25.00. 
B)  $25.50. 
C)  $26.50. 
D)  $30.00. 
E)  $40.00.

Question 7

The following figure represents the short-run total cost function for the Fidget Company,which produces widgets.When output is 25,average fixed cost is:

Accepted Answer

A)  $4. 
B)  $25. 
C)  $625. 
D)  $3,125. 
E)  none of the above. 
A)  $4. 
B)  $25. 
C)  $625. 
D)  $3,125. 
E)  none of the above.

Question 8

A short-run average cost curve is tangent to the long-run average cost curve at the quantity where:

Accepted Answer

A)  the fixed plant size would have been optimal. 
B)  short-run marginal cost is minimized. 
C)  short-run marginal cost is equal to average cost. 
D)  short-run average cost is minimized. 
E)  long-run average cost is minimized. 
A)  the fixed plant size would have been optimal. 
B)  short-run marginal cost is minimized. 
C)  short-run marginal cost is equal to average cost. 
D)  short-run average cost is minimized. 
E)  long-run average cost is minimized.

Question 9

Hedge Fun is a landscaping firm that specializes in topiary.It contracts with the owners of 140 local homes and provides its service at an annual fee of $1,300.Its average variable cost is $900,and its annual fixed cost is $28,000.What is the degree of operating leverage?

Accepted Answer

A)  0.5. 
B)  1. 
C)  1.5. 
D)  2. 
E)  2.5. 
A)  0.5. 
B)  1. 
C)  1.5. 
D)  2. 
E)  2.5.

Question 10

The addition to total cost resulting from the addition of the last unit of output is known as:

Accepted Answer

A)  marginal product. 
B)  average product. 
C)  average variable cost. 
D)  average total cost. 
E)  marginal cost. 
A)  marginal product. 
B)  average product. 
C)  average variable cost. 
D)  average total cost. 
E)  marginal cost.

Question 11

Teal Talkies,a manufacturer of designer cell phones,has determined that its total cost of production is TC = 1,000 + 500Q -1 + 15Q2.At 5 units of output,the firm's average cost is:

Accepted Answer

A)  $330. 
B)  $130. 
C)  $200. 
D)  $295. 
E)  $300. 
A)  $330. 
B)  $130. 
C)  $200. 
D)  $295. 
E)  $300.

Question 12

Framjam Sports Equipment produces basketballs at its factory in Kentucky and soccer balls at its factory in Illinois.At its current annual rate of production,the cost of producing basketballs is $70,000 and the cost of producing soccer balls is $45,000.If the firm consolidates production at a single location,the annual cost of production will be $100,000.What is the degree of economies of scope in this case?

Accepted Answer

A)  15. 
B)  0.25. 
C)  0.15. 
D)  0.85. 
E)  None of the above. 
A)  15. 
B)  0.25. 
C)  0.15. 
D)  0.85. 
E)  None of the above.

Question 13

Ramblin' Randy's Dude Ranch's daily total cost of accommodating overnight guests is given by TC = 100 + 5Q.On the basis of this information,the average fixed cost,when there are 25 overnight guests,is:

Accepted Answer

A)  $4. 
B)  $5. 
C)  $6. 
D)  $7. 
E)  $9. 
A)  $4. 
B)  $5. 
C)  $6. 
D)  $7. 
E)  $9.

Question 14

The weekly total cost of baking pies at Tasty Tortes is given by TC = 0.01Q1.5.Tasty's marginal cost of producing 10,000 pies a week is:

Accepted Answer

A)  $1.00. 
B)  $1.50. 
C)  $2.00. 
D)  $2.50. 
E)  $4.50. 
A)  $1.00. 
B)  $1.50. 
C)  $2.00. 
D)  $2.50. 
E)  $4.50.

Question 15

Average fixed cost is equal to the:

Accepted Answer

A)  difference between marginal cost and average variable cost. 
B)  difference between marginal cost and average total cost. 
C)  difference between average total cost and average variable cost. 
D)  total fixed cost divided by the minimum efficient scale. 
E)  total variable cost divided by the minimum efficient scale. 
A)  difference between marginal cost and average variable cost. 
B)  difference between marginal cost and average total cost. 
C)  difference between average total cost and average variable cost. 
D)  total fixed cost divided by the minimum efficient scale. 
E)  total variable cost divided by the minimum efficient scale.

Question 16

Long-run average cost equals long-run marginal cost whenever:

Accepted Answer

A)  the production function exhibits constant returns to scale. 
B)  fixed costs are zero. 
C)  no factor always has increasing marginal returns. 
D)  the cost of capital is near zero. 
E)  long-run marginal cost is at its minimum. 
A)  the production function exhibits constant returns to scale. 
B)  fixed costs are zero. 
C)  no factor always has increasing marginal returns. 
D)  the cost of capital is near zero. 
E)  long-run marginal cost is at its minimum.

Question 17

The opportunity cost of a firm's inputs:

Accepted Answer

A)  depends on who supplies them to the firm. 
B)  includes implicit costs but does not include explicit costs. 
C)  includes explicit costs but does not include implicit costs. 
D)  should not concern anyone but economists. 
E)  is the value of the inputs in their most highly valued alternative use. 
A)  depends on who supplies them to the firm. 
B)  includes implicit costs but does not include explicit costs. 
C)  includes explicit costs but does not include implicit costs. 
D)  should not concern anyone but economists. 
E)  is the value of the inputs in their most highly valued alternative use.

Question 18

If total cost is given by TC = 10Q - 5Q2 + 0.1Q3,then average cost is minimized at units of output.

Accepted Answer

A)  0.5. 
B)  0.01. 
C)  50. 
D)  25. 
E)  0.1. 
A)  0.5. 
B)  0.01. 
C)  50. 
D)  25. 
E)  0.1.

Question 19

If total cost is given by TC = a + bQ - cQ2 + dQ3,then marginal cost is minimized at units of output.

Accepted Answer

A)  Q* = a/2d 
B)  Q* = b/2d 
C)  Q* = c/2d 
D)  Q* = b/3d 
E)  Q* = c/3d 
A)  Q* = a/2d 
B)  Q* = b/2d 
C)  Q* = c/2d 
D)  Q* = b/3d 
E)  Q* = c/3d

Question 20

An example of implicit costs is the:

Accepted Answer

A)  bad-debt liabilities arising out of excessive sales on credit. 
B)  wages paid to the owners' children. 
C)  opportunity cost of owner-supplied capital and labor that is not recognized by accountants. 
D)  prices paid for purchased inputs. 
E)  the alternative uses for money that could be borrowed. 
A)  bad-debt liabilities arising out of excessive sales on credit. 
B)  wages paid to the owners' children. 
C)  opportunity cost of owner-supplied capital and labor that is not recognized by accountants. 
D)  prices paid for purchased inputs. 
E)  the alternative uses for money that could be borrowed.

The following figure represents the short-run total cost function for the Fidget Company,which produces widgets.The equation for the total cost function is:

The long-run average cost curve slopes upward if there are:

When average total cost is at its minimum:

The following figure represents the short-run total cost function for the Fidget Company,which produces widgets.The fixed costs are:

Loco Pony Adventures rents clowns and ponies for children's birthday parties.If the annual total cost of furnishing entertainment is given by TC = 0.5Q² + 25Q + 1,000,the average variable cost of catering to 30 birthday parties is:

The following figure represents the short-run total cost function for the Fidget Company,which produces widgets.When output is 25,average fixed cost is:

A short-run average cost curve is tangent to the long-run average cost curve at the quantity where:

Hedge Fun is a landscaping firm that specializes in topiary.It contracts with the owners of 140 local homes and provides its service at an annual fee of $1,300.Its average variable cost is $900,and its annual fixed cost is $28,000.What is the degree of operating leverage?

The addition to total cost resulting from the addition of the last unit of output is known as:

Teal Talkies,a manufacturer of designer cell phones,has determined that its total cost of production is TC = 1,000 + 500Q^-1 + 15Q².At 5 units of output,the firm's average cost is:

Ramblin' Randy's Dude Ranch's daily total cost of accommodating overnight guests is given by TC = 100 + 5Q.On the basis of this information,the average fixed cost,when there are 25 overnight guests,is:

The weekly total cost of baking pies at Tasty Tortes is given by TC = 0.01Q^1.5.Tasty's marginal cost of producing 10,000 pies a week is:

Average fixed cost is equal to the:

Long-run average cost equals long-run marginal cost whenever:

The opportunity cost of a firm's inputs:

If total cost is given by TC = 10Q - 5Q² + 0.1Q³,then average cost is minimized at units of output.

If total cost is given by TC = a + bQ - cQ² + dQ³,then marginal cost is minimized at units of output.

An example of implicit costs is the:

Introduction

Demand Theory

Consumer Behavior and Rational Choice

Estimating Demand Functions

Production Theory

Perfect Competition

Monopoly and Monopolistic Competition

Managerial Use of Price Discrimination

Bundling and Intrafirm Pricing

Oligopoly

Game Theory

Auctions

Risk Analysis

Principalagent Issues and Managerial Compensation

Adverse Selection

Government and Business

Optimization Techniques

Appendix Problems

Filters

Exam 6: The Analysis of Costs

The following figure represents the short-run total cost function for the Fidget Company,which produces widgets.The equation for the total cost function is:

The long-run average cost curve slopes upward if there are:

When average total cost is at its minimum:

The following figure represents the short-run total cost function for the Fidget Company,which produces widgets.The fixed costs are:

Loco Pony Adventures rents clowns and ponies for children's birthday parties.If the annual total cost of furnishing entertainment is given by TC = 0.5Q2 + 25Q + 1,000,the average variable cost of catering to 30 birthday parties is:

The following figure represents the short-run total cost function for the Fidget Company,which produces widgets.When output is 25,average fixed cost is:

A short-run average cost curve is tangent to the long-run average cost curve at the quantity where:

Hedge Fun is a landscaping firm that specializes in topiary.It contracts with the owners of 140 local homes and provides its service at an annual fee of $1,300.Its average variable cost is $900,and its annual fixed cost is $28,000.What is the degree of operating leverage?

The addition to total cost resulting from the addition of the last unit of output is known as:

Teal Talkies,a manufacturer of designer cell phones,has determined that its total cost of production is TC = 1,000 + 500Q -1 + 15Q2.At 5 units of output,the firm's average cost is:

Ramblin' Randy's Dude Ranch's daily total cost of accommodating overnight guests is given by TC = 100 + 5Q.On the basis of this information,the average fixed cost,when there are 25 overnight guests,is:

The weekly total cost of baking pies at Tasty Tortes is given by TC = 0.01Q1.5.Tasty's marginal cost of producing 10,000 pies a week is:

Average fixed cost is equal to the:

Long-run average cost equals long-run marginal cost whenever:

The opportunity cost of a firm's inputs:

If total cost is given by TC = 10Q - 5Q2 + 0.1Q3,then average cost is minimized at units of output.

If total cost is given by TC = a + bQ - cQ2 + dQ3,then marginal cost is minimized at units of output.

An example of implicit costs is the:

Introduction

Demand Theory

Consumer Behavior and Rational Choice

Estimating Demand Functions

Production Theory

Perfect Competition

Monopoly and Monopolistic Competition

Managerial Use of Price Discrimination

Bundling and Intrafirm Pricing

Oligopoly

Game Theory

Auctions

Risk Analysis

Principalagent Issues and Managerial Compensation

Adverse Selection

Government and Business

Optimization Techniques

Appendix Problems

Filters

Loco Pony Adventures rents clowns and ponies for children's birthday parties.If the annual total cost of furnishing entertainment is given by TC = 0.5Q² + 25Q + 1,000,the average variable cost of catering to 30 birthday parties is:

Teal Talkies,a manufacturer of designer cell phones,has determined that its total cost of production is TC = 1,000 + 500Q^-1 + 15Q².At 5 units of output,the firm's average cost is:

The weekly total cost of baking pies at Tasty Tortes is given by TC = 0.01Q^1.5.Tasty's marginal cost of producing 10,000 pies a week is:

If total cost is given by TC = 10Q - 5Q² + 0.1Q³,then average cost is minimized at units of output.

If total cost is given by TC = a + bQ - cQ² + dQ³,then marginal cost is minimized at units of output.