Question 1

The profit-maximizing level for all firms, regardless of industry structure, is the output level where

Accepted Answer

A)  TR = MC. 
B)  P = MC. 
C)  ATC = P. 
D)  MC = MR. 
A)  TR = MC. 
B)  P = MC. 
C)  ATC = P. 
D)  MC = MR. D

Question 2

The law of diminishing marginal returns

Accepted Answer

A)  results in average variable cost (AV
C) , average total cost (AT
C)  ,and marginal cost (M
C)  curves eventually increasing at an increasing rate. 
B)  results in MC but not ATC curves eventually increasing at an increasing rate. 
C)  causes average fixed costs to decline continuously as output increases. 
D)  causes the difference between average total cost and average variable cost to shrink as output increases. 
A)  results in average variable cost (AV
C) , average total cost (AT
C)  ,and marginal cost (M
C)  curves eventually increasing at an increasing rate. 
B)  results in MC but not ATC curves eventually increasing at an increasing rate. 
C)  causes average fixed costs to decline continuously as output increases. 
D)  causes the difference between average total cost and average variable cost to shrink as output increases. A

Question 3

The formula for total fixed cost is

Accepted Answer

A)  TFC = TC + TVC. 
B)  TFC = TVC -TC. 
C)  TFC = TC/TVC. 
D)  TFC = TC -TVC. 
A)  TFC = TC + TVC. 
B)  TFC = TVC -TC. 
C)  TFC = TC/TVC. 
D)  TFC = TC -TVC. D

Question 4

Refer to the information provided in Figure 8.4 below to answer the questions 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)  $33.33. 
B)  $83.33. 
C)  $116.67. 
D)  $200.00. 
A)  $33.33. 
B)  $83.33. 
C)  $116.67. 
D)  $200.00.

Question 5

Refer to the information provided in Figure 8.6 below to answer the questions that follow.   Figure 8.6
-Refer to Figure 8.6. Outdoor Equipment's average variable costs are minimized at the output level

Accepted Answer

A)  where Curves 1 and 2 intersect. 
B)  where Curves 1 and 3 intersect. 
C)  between the intersections of Curves 1 and 2 and Curves 1 and 3. 
D)  indeterminate with the given information. 
A)  where Curves 1 and 2 intersect. 
B)  where Curves 1 and 3 intersect. 
C)  between the intersections of Curves 1 and 2 and Curves 1 and 3. 
D)  indeterminate with the given information.

Question 6

In the short run a firm's lowest cost level of output is the minimum point on its ________ cost curve.

Accepted Answer

A)  average total 
B)  total variable 
C)  average fixed 
D)  marginal 
A)  average total 
B)  total variable 
C)  average fixed 
D)  marginal

Question 7

Refer to the information provided in Table 8.2 below to answer the questions that follow.
Table 8.2 $\begin{array} { c} 
Number of\
Earrings& TVC& MC &AVC& TFC& TC &AFC &ATC\
0 & & & & &100 & \ 1 & & 50 & & & \ 2 & && & & && 95 \ 3 & & & 46.67 & & \ 4 & & & & &300 & \ 5 & 270& & & & & \end{array}$
-Refer to Table 8.2. If Sherry produces zero earrings, her total fixed costs are

Accepted Answer

A)  $0. 
B)  $50. 
C)  $100. 
D)  indeterminate from this information. 
A)  $0. 
B)  $50. 
C)  $100. 
D)  indeterminate from this information.

Question 8

If the average variable cost of the fifth hat is $30, then the total variable cost of five hats is

Accepted Answer

A)  $6. 
B)  $150. 
C)  $1800. 
D)  indeterminate from this information. 
A)  $6. 
B)  $150. 
C)  $1800. 
D)  indeterminate from this information.

Question 9

Refer to the information provided in Table 8.2 below to answer the questions that follow.
Table 8.2 $\begin{array} { c} 
Number of\
Earrings& TVC& MC &AVC& TFC& TC &AFC &ATC\
0 & & & & &100 & \ 1 & & 50 & & & \ 2 & && & & && 95 \ 3 & & & 46.67 & & \ 4 & & & & &300 & \ 5 & 270& & & & & \end{array}$
-Refer to Table 8.2. If Sherry produces four pairs of earrings, her average fixed costs are

Accepted Answer

A)  $4. 
B)  $20. 
C)  $25. 
D)  $100. 
A)  $4. 
B)  $20. 
C)  $25. 
D)  $100.

Question 10

The Lawn Ranger, a landscaping company, has total costs of $5,000 and total fixed costs of $3,000. The Lawn Ranger's total variable costs are

Accepted Answer

A)  $2,000. 
B)  $3,000. 
C)  $5,000. 
D)  indeterminate because the firm's output level is not known. 
A)  $2,000. 
B)  $3,000. 
C)  $5,000. 
D)  indeterminate because the firm's output level is not known.

Question 11

A firm in a perfectly competitive market has no control over price because

Accepted Answer

A)  the government imposes price ceilings on the products produced in perfectly competitive industries. 
B)  there is free entry and exit from the industry. 
C)  every firm's product is a perfect substitute for every other firm's product. 
D)  the market demand for products produced in perfectly competitive industries is perfectly elastic. 
A)  the government imposes price ceilings on the products produced in perfectly competitive industries. 
B)  there is free entry and exit from the industry. 
C)  every firm's product is a perfect substitute for every other firm's product. 
D)  the market demand for products produced in perfectly competitive industries is perfectly elastic.

Question 12

A perfectly competitive firm breaks even at the level of output where

Accepted Answer

A) P > ATC. B) P < ATC. C) P = ATC. D) P = MC. A) P > ATC. B) P < ATC. C) P = ATC. D) P = MC.

Question 13

If a firm is producing where MR > MC,

Accepted Answer

A)  the revenue gained by producing one more unit of output exceeds the cost incurred by doing so. 
B)  the revenue gained by producing one more unit of output equals the cost incurred by doing so. 
C)  the revenue gained by producing one more unit of output is less than the cost incurred by doing so. 
D)  the firm is already maximizing profits because revenue is being increased by more than costs. 
A)  the revenue gained by producing one more unit of output exceeds the cost incurred by doing so. 
B)  the revenue gained by producing one more unit of output equals the cost incurred by doing so. 
C)  the revenue gained by producing one more unit of output is less than the cost incurred by doing so. 
D)  the firm is already maximizing profits because revenue is being increased by more than costs.

Question 14

Refer to the information provided in Figure 8.9 below to answer the questions that follow.   Figure 8.9
-Refer to Figure 8.9. This farmer's profit-maximizing level of output is ________ units of output.

Accepted Answer

A)  100 
B)  350 
C)  500 
D)  700 
A)  100 
B)  350 
C)  500 
D)  700

Question 15

Refer to the information provided in Figure 8.4 below to answer the questions that follow.   Figure 8.4
-Refer to Figure 8.4. The vertical distance AB represents

Accepted Answer

A)  total fixed costs. 
B)  marginal costs. 
C)  average fixed costs. 
D)  average total costs. 
A)  total fixed costs. 
B)  marginal costs. 
C)  average fixed costs. 
D)  average total costs.

Question 16

Both Kate and John own saltwater taffy factories. Kate's factory has low fixed costs and high variable costs. John's factory has high fixed costs and low variable costs. Currently, each factory is producing 1,000 boxes of taffy at the same total cost. Complete the following statement with the correct answer. If each produces

Accepted Answer

A)  less, their costs will be equal. 
B)  more, their costs will be equal. 
C)  more, the costs of Kate's factory will exceed those of John's factory. 
D)  less, the costs of Kate's factory will exceed those of John's factory. 
A)  less, their costs will be equal. 
B)  more, their costs will be equal. 
C)  more, the costs of Kate's factory will exceed those of John's factory. 
D)  less, the costs of Kate's factory will exceed those of John's factory.

Question 17

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

Question 18

Average fixed costs rise continuously as quantity of output rises.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Average total cost

Accepted Answer

A)  measures the spread of overhead across output. 
B)  is the average cost of producing each unit of output. 
C)  is always increasing. 
D)  the sum of fixed cost and average variable cost. 
A)  measures the spread of overhead across output. 
B)  is the average cost of producing each unit of output. 
C)  is always increasing. 
D)  the sum of fixed cost and average variable cost.

The profit-maximizing level for all firms, regardless of industry structure, is the output level where

The law of diminishing marginal returns

The formula for total fixed cost is

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

Refer to the information provided in Figure 8.6 below to answer the questions that follow. Figure 8.6 -Refer to Figure 8.6. Outdoor Equipment's average variable costs are minimized at the output level

In the short run a firm's lowest cost level of output is the minimum point on its ________ cost curve.

Refer to the information provided in Table 8.2 below to answer the questions that follow. Table 8.2 Numberof 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 zero earrings, her total fixed costs are

If the average variable cost of the fifth hat is $30, then the total variable cost of five hats is

Refer to the information provided in Table 8.2 below to answer the questions that follow. Table 8.2 Numberof 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 four pairs of earrings, her average fixed costs are

The Lawn Ranger, a landscaping company, has total costs of $5,000 and total fixed costs of $3,000. The Lawn Ranger's total variable costs are

A firm in a perfectly competitive market has no control over price because

A perfectly competitive firm breaks even at the level of output where

If a firm is producing where MR > MC,

Refer to the information provided in Figure 8.9 below to answer the questions that follow. Figure 8.9 -Refer to Figure 8.9. This farmer's profit-maximizing level of output is ________ units of output.

Refer to the information provided in Figure 8.4 below to answer the questions that follow. Figure 8.4 -Refer to Figure 8.4. The vertical distance AB represents

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

Average fixed costs rise continuously as quantity of output rises.

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

Average total cost

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 Social Choice

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing and Transitional Economies

Filters

Exam 8: Short-Run Costs and Output Decisions

The profit-maximizing level for all firms, regardless of industry structure, is the output level where

The law of diminishing marginal returns

The formula for total fixed cost is

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

Refer to the information provided in Figure 8.6 below to answer the questions that follow. Figure 8.6 -Refer to Figure 8.6. Outdoor Equipment's average variable costs are minimized at the output level

In the short run a firm's lowest cost level of output is the minimum point on its ________ cost curve.

Refer to the information provided in Table 8.2 below to answer the questions that follow. Table 8.2 Numberof 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 zero earrings, her total fixed costs are

If the average variable cost of the fifth hat is $30, then the total variable cost of five hats is

Refer to the information provided in Table 8.2 below to answer the questions that follow. Table 8.2 Numberof 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 four pairs of earrings, her average fixed costs are

The Lawn Ranger, a landscaping company, has total costs of $5,000 and total fixed costs of $3,000. The Lawn Ranger's total variable costs are

A firm in a perfectly competitive market has no control over price because

A perfectly competitive firm breaks even at the level of output where

If a firm is producing where MR > MC,

Refer to the information provided in Figure 8.9 below to answer the questions that follow. Figure 8.9 -Refer to Figure 8.9. This farmer's profit-maximizing level of output is ________ units of output.

Refer to the information provided in Figure 8.4 below to answer the questions that follow. Figure 8.4 -Refer to Figure 8.4. The vertical distance AB represents

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

Average fixed costs rise continuously as quantity of output rises.

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

Average total cost

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 Social Choice

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing and Transitional Economies

Filters

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

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