Question 1

Marginal cost is total variable cost divided by output.

Accepted Answer

A) True 
 B)False

Question 2

Refer to the information provided in Figure 8.5 below to answer the questions that follow.   Figure 8.5
-Refer to Figure 8.5. If three ovens are produced, average variable costs are

Accepted Answer

A)  $166.67. 
B)  $83.33. 
C)  $500. 
D)  $1,500. 
A)  $166.67. 
B)  $83.33. 
C)  $500. 
D)  $1,500.

Question 3

Refer to the information provided in Figure 8.9 below to answer the questions that follow.   Figure 8.9
-Refer to Figure 8.9. If this farmer is producing the profit maximizing level of output, her profit is

Accepted Answer

A)  $0. 
B)  $1,000. 
C)  $2,000. 
D)  $3,000. 
A)  $0. 
B)  $1,000. 
C)  $2,000. 
D)  $3,000.

Question 4

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 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. Curve 2 is Outdoor Equipment's

Accepted Answer

A)  marginal cost curve. 
B)  average variable cost curve. 
C)  average total cost curve. 
D)  average fixed cost curve. 
A)  marginal cost curve. 
B)  average variable cost curve. 
C)  average total cost curve. 
D)  average fixed cost curve.

Question 6

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 7

If a perfectly competitive firm is currently producing where P = MC and MC = ATC, then the firm will earn ________ profits.

Accepted Answer

A)  positive 
B)  zero 
C)  negative 
D)  above normal 
A)  positive 
B)  zero 
C)  negative 
D)  above normal

Question 8

Refer to the information provided in Table 8.5 below to answer the following questions.
Table 8.5 $$\begin{array} { c l l l l } 
\begin{array} { c } 
\text { Number of } \
\text { Fruit Baskets }
\end{array} & \text { TFC } & \text { TVC } & \text { TC } & \text { MC } \
\hline 0 & \$ 50 & \$ 0 & \$ 50 & - - \
1 & 50 & 10 & 60 & 10 \
2 & 50 & 15 & 65 & 5 \
3 & 50 & 21 & 71 & 6 \
4 & 50 & 31 & 81 & 10 \
5 & 50 & 46 & 96 & 15 \
6 & 50 & 68 & 118 & 22
\end{array}$$
-Refer to Table 8.5. Assume that fruit baskets are sold in a perfectly competitive market. The market price of a fruit basket is $15. To maximize profits, Exotic Fruit should sell ________ fruit baskets and their profit is ________.

Accepted Answer

A)  zero; $0 
B)  two; -$35 
C)  three; -$26 
D)  five; -$21 
A)  zero; $0 
B)  two; -$35 
C)  three; -$26 
D)  five; -$21

Question 9

Refer to the information provided in Figure 8.8 below to answer the questions that follow.   Figure 8.8
-Refer to Figure 8.8. What is the total cost of producing the profit maximizing level of output?

Accepted Answer

A)  $9 
B)  $1,000 
C)  $5,600 
D)  $9,000 
A)  $9 
B)  $1,000 
C)  $5,600 
D)  $9,000

Question 10

The main decision for a profit maximizing perfectly competitive firm is not what ________ but what ________.

Accepted Answer

A)  level of output to produce; price to charge 
B)  price to charge; level of output to produce 
C)  level of output to produce; total revenue to achieve 
D)  price to charge; total cost to achieve 
A)  level of output to produce; price to charge 
B)  price to charge; level of output to produce 
C)  level of output to produce; total revenue to achieve 
D)  price to charge; total cost to achieve

Question 11

Perfectly competitive industries are characterized by a homogeneous product.

Accepted Answer

A) True 
 B)False

Question 12

If a profit maximizing firm is currently producing where MR = MC, it should

Accepted Answer

A)  increase output so that marginal revenue is less than marginal cost. 
B)  decrease output so that marginal revenue will be greater than marginal cost and the firm's profit will increase. 
C)  not change because it is already maximizing profit. 
D)  exit the industry. 
A)  increase output so that marginal revenue is less than marginal cost. 
B)  decrease output so that marginal revenue will be greater than marginal cost and the firm's profit will increase. 
C)  not change because it is already maximizing profit. 
D)  exit the industry.

Question 13

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 marginal cost of the sixth microwave oven is

Accepted Answer

A)  $83.33. 
B)  $116.67. 
C)  $200. 
D)  $1200. 
A)  $83.33. 
B)  $116.67. 
C)  $200. 
D)  $1200.

Question 14

A perfectly competitive firm will earn positive economic profits in the range of output for which the firm's price is ________ its minimum average total cost.

Accepted Answer

A)  below 
B)  above 
C)  equal to 
D)  below its marginal cost and 
A)  below 
B)  above 
C)  equal to 
D)  below its marginal cost and

Question 15

Wheat is produced in a perfectly competitive market. Market demand for wheat increases. This will cause the individual wheat 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

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

Accepted Answer

A) True 
 B)False

Question 17

Wilbur's Widgets, a widget company, produces 100 widgets. Its average fixed cost is $5 and its total variable cost is $300. What is the total cost of producing 100 widgets?

Accepted Answer

A)  $300 
B)  $305 
C)  $500 
D)  $800 
A)  $300 
B)  $305 
C)  $500 
D)  $800

Question 18

If marginal cost is above average variable cost, then

Accepted Answer

A)  average variable cost is increasing. 
B)  marginal cost must be decreasing. 
C)  average variable cost is constant. 
D)  average variable cost is decreasing. 
A)  average variable cost is increasing. 
B)  marginal cost must be decreasing. 
C)  average variable cost is constant. 
D)  average variable cost is decreasing.

Question 19

Refer to the information provided in Table 8.1 below to answer the questions that follow.
Table 8.1 $$\begin{array} { l c c c } 
\text { Produce } & \begin{array} { c } 
\text { Using } \
\text { Techniques }
\end{array} & \begin{array} { c } 
\text { Units of Variable } \
\text { K }
\end{array} & \begin{array} { c } 
\text { Inputs } \
\text { L }
\end{array} \
\hline \text { 1 unit of output } & & & \
& \text { A } & 8 & 8 \
& \text { B } & 4 & 12 \
2 \text { units of output } & & & \
& \text { A } & 14 & 12 \
& \text { B } & 8 & 20 \
3 \text { units of output } & & & \
& \text { A } & 16 & 12 \
& \text { B } & 12 & 22
\end{array}$$
-Refer to Table 8.1. In the short run, if the price of labor (L) is $5 per unit, the price of capital (K) is $10 per unit, and firms attempt to minimize costs, then this firm's total cost of producing one unit of output is

Accepted Answer

A)  $100. 
B)  $120. 
C)  $220. 
D)  indeterminate from this information. 
A)  $100. 
B)  $120. 
C)  $220. 
D)  indeterminate from this information.

Question 20

Refer to the information provided in Table 8.3 below to answer the questions that follow.
Table 8.3 $$\begin{array}{l}
\begin{array} { lllll} 
 \text {Number of Earrings }&TVC&MC&AVC&TFC&TC&AFC&ATC\
\hline0&\
1&20\2&&10&&&&30\3&&&&&110\4&&&20\5&&&&&180
\end{array}
\end{array}$$
-Refer to Table 8.3. The marginal cost of the fourth unit is ________ and the average total cost of four units is ________.

Accepted Answer

A)  $10; $30 
B)  $20; $45 
C)  $30; $35 
D)  indeterminate from the given information 
A)  $10; $30 
B)  $20; $45 
C)  $30; $35 
D)  indeterminate from the given information

Marginal cost is total variable cost divided by output.

Refer to the information provided in Figure 8.5 below to answer the questions that follow. Figure 8.5 -Refer to Figure 8.5. If three ovens are produced, average variable costs are

Refer to the information provided in Figure 8.9 below to answer the questions that follow. Figure 8.9 -Refer to Figure 8.9. If this farmer is producing the profit maximizing level of output, her profit is

Total variable costs

Refer to the information provided in Figure 8.6 below to answer the questions that follow. Figure 8.6 -Refer to Figure 8.6. Curve 2 is Outdoor Equipment's

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

If a perfectly competitive firm is currently producing where P = MC and MC = ATC, then the firm will earn ________ profits.

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8. What is the total cost of producing the profit maximizing level of output?

The main decision for a profit maximizing perfectly competitive firm is not what but what .

Perfectly competitive industries are characterized by a homogeneous product.

If a profit maximizing firm is currently producing where MR = MC, it should

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 marginal cost of the sixth microwave oven is

A perfectly competitive firm will earn positive economic profits in the range of output for which the firm's price is ________ its minimum average total cost.

Wheat is produced in a perfectly competitive market. Market demand for wheat increases. This will cause the individual wheat farmer's marginal revenue to and their profit maximizing level of output to .

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

Wilbur's Widgets, a widget company, produces 100 widgets. Its average fixed cost is $5 and its total variable cost is $300. What is the total cost of producing 100 widgets?

If marginal cost is above average variable cost, then

Refer to the information provided in Table 8.3 below to answer the questions that follow. Table 8.3 Number of Earrings TVC MC AVC TFC TC AFC ATC 0 1 20 2 10 30 3 110 4 20 5 180 -Refer to Table 8.3. The marginal cost of the fourth unit is and the average total cost of four units is .

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

Marginal cost is total variable cost divided by output.

Refer to the information provided in Figure 8.5 below to answer the questions that follow. Figure 8.5 -Refer to Figure 8.5. If three ovens are produced, average variable costs are

Refer to the information provided in Figure 8.9 below to answer the questions that follow. Figure 8.9 -Refer to Figure 8.9. If this farmer is producing the profit maximizing level of output, her profit is

Total variable costs

Refer to the information provided in Figure 8.6 below to answer the questions that follow. Figure 8.6 -Refer to Figure 8.6. Curve 2 is Outdoor Equipment's

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

If a perfectly competitive firm is currently producing where P = MC and MC = ATC, then the firm will earn ________ profits.

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8. What is the total cost of producing the profit maximizing level of output?

The main decision for a profit maximizing perfectly competitive firm is not what ________ but what ________.

Perfectly competitive industries are characterized by a homogeneous product.

If a profit maximizing firm is currently producing where MR = MC, it should

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 marginal cost of the sixth microwave oven is

A perfectly competitive firm will earn positive economic profits in the range of output for which the firm's price is ________ its minimum average total cost.

Wheat is produced in a perfectly competitive market. Market demand for wheat increases. This will cause the individual wheat farmer's marginal revenue to ________ and their profit maximizing level of output to ________.

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

Wilbur's Widgets, a widget company, produces 100 widgets. Its average fixed cost is $5 and its total variable cost is $300. What is the total cost of producing 100 widgets?

If marginal cost is above average variable cost, then

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

The main decision for a profit maximizing perfectly competitive firm is not what but what .

Wheat is produced in a perfectly competitive market. Market demand for wheat increases. This will cause the individual wheat farmer's marginal revenue to and their profit maximizing level of output to .