Question 1

Firms choose their level of fixed cost in the long run based on the amount of output that they expect to produce.

Accepted Answer

A) True 
 B)False

Question 2

Use the following to answer questions :  
-(Figure: A Firm's Cost Curves)Use Figure: A Firm's Cost Curves.The curve X represents the firm's _____ cost curve.

Accepted Answer

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

Question 3

When marginal cost is ABOVE average variable cost,average variable cost must be:

Accepted Answer

A)  at its minimum. 
B)  at its maximum. 
C)  greater than average total cost. 
D)  rising. 
A)  at its minimum. 
B)  at its maximum. 
C)  greater than average total cost. 
D)  rising.

Question 4

Use the following to answer questions :  
-(Figure: A Firm's Cost Curves)Use Figure: A Firm's Cost Curves.The curve labeled W represents the firm's _____ cost curve.

Accepted Answer

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

Question 5

The short-run average total cost curve is U-shaped because at low output levels the spreading effect of falling average fixed costs dominates the diminishing returns effect,while at high output levels the reverse is true.

Accepted Answer

A) True 
 B)False

Question 6

Use the following to answer questions : $$\begin{array}{l}
\text { Table: Costs of Birthday Cakes }\
\begin{array} { c c } 
\hline \text { Quantity of cakes } & \text { Variable cost, } \boldsymbol { V C } \
\hline 0 & 0 \
1 & 15 \
2 & 25 \
3 & 30 \
4 & 38 \
5 & 50 \
6 & 70 \
\hline
\end{array}
\end{array}$$
-(Table: Costs of Birthday Cakes)Use Table: Costs of Birthday Cakes.Assume that fixed costs are $10.What is the marginal cost of the second cake?

Accepted Answer

A)  $5 
B)  $10 
C)  $25 
D)  $35 
A)  $5 
B)  $10 
C)  $25 
D)  $35

Question 7

Which statement is FALSE?

Accepted Answer

A)  When the marginal product of labour is upward sloping,the marginal cost curve is upward sloping. 
B)  The average fixed cost curve is downward sloping and approaches the horizontal axis as output increases. 
C)  The marginal cost curve intersects the average variable cost curve at the minimum of the average variable cost. 
D)  When the marginal cost curve is above the average cost curve,the average cost curve is upward sloping. 
A)  When the marginal product of labour is upward sloping,the marginal cost curve is upward sloping. 
B)  The average fixed cost curve is downward sloping and approaches the horizontal axis as output increases. 
C)  The marginal cost curve intersects the average variable cost curve at the minimum of the average variable cost. 
D)  When the marginal cost curve is above the average cost curve,the average cost curve is upward sloping.

Question 8

Use the following to answer questions : $$\begin{array}{l}
\text { Table: Cost Data }\
\begin{array} { c c c } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { of Output }
\end{array} & \begin{array} { c } 
\text { Variable Cost } \
( \boldsymbol { V C } )
\end{array} & \begin{array} { c } 
\text { Total Cost } \
( \boldsymbol { T C } )
\end{array} \
\hline 0 & 0 & 50 \
1 & 50 & 100 \
2 & 70 & 120 \
3 & 100 & 150 \
4 & 140 & 190 \
5 & 190 & 240 \
6 & 250 & 300 \
7 & 320 & 370 \
\hline
\end{array}
\end{array}$$
-(Table: Cost Data)Use Table: Cost Data.The marginal cost of producing the fifth purse is:

Accepted Answer

A)  $60. 
B)  $50. 
C)  $35. 
D)  $20. 
A)  $60. 
B)  $50. 
C)  $35. 
D)  $20.

Question 9

Use the following to answer questions : $$\begin{array}{l}
\text { Table: Cakes }\
\begin{array} { c c c } 
\hline \begin{array} { l } 
\text { Number of } \
\text { mixers }
\end{array} & \begin{array} { c } 
\text { Fixed } \
\text { Costs }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Variable Cost }
\end{array} \
\hline 1 & \$ 1,000 & \$ 10 \
2 & 1,500 & 7 \
3 & 2,500 & 4
\end{array}
\end{array}$$
-(Table: Cakes)Use Table: Cakes.Pat is opening a bakery to make and sell special birthday cakes.She is trying to decide how many mixers to purchase.Her estimated fixed and average variable costs if she purchases 1,2,or 3 mixers are shown in the table.Assume that average variable costs do not vary with the quantity of output.If Pat purchases 3 mixers and bakes 200 cakes per day,what is her average total cost?

Accepted Answer

A)  $50.00 
B)  $12.50 
C)  $16.50 
D)  $800.00 
A)  $50.00 
B)  $12.50 
C)  $16.50 
D)  $800.00

Question 10

For most restaurants,the average total cost curve _____ at _____ levels of output,then _____ at _____ levels.

Accepted Answer

A)  falls;low;rises;high 
B)  rises;low;falls;high 
C)  rises;high;rises;low 
D)  falls;high;falls;low 
A)  falls;low;rises;high 
B)  rises;low;falls;high 
C)  rises;high;rises;low 
D)  falls;high;falls;low

Question 11

Use the following to answer questions :
Figure: The Marginal Product of Labour    
-(Figure: Marginal Product of Labour)Use Figure: The Marginal Product of Labour.The total product for three workers is _____ kilograms.

Accepted Answer

A)  51 
B)  45 
C)  39 
D)  15 
A)  51 
B)  45 
C)  39 
D)  15

Question 12

A planning period during which all of a firm's resources are variable is the _____ run.

Accepted Answer

A)  long 
B)  fixed 
C)  short 
D)  nominal 
A)  long 
B)  fixed 
C)  short 
D)  nominal

Question 13

The idea of diminishing returns to an input in production suggests that,if a local university adds more custodians,the marginal product of labour for the custodial staff will:

Accepted Answer

A)  increase at an increasing rate. 
B)  increase at a decreasing rate. 
C)  decrease. 
D)  not change. 
A)  increase at an increasing rate. 
B)  increase at a decreasing rate. 
C)  decrease. 
D)  not change.

Question 14

In the long run:

Accepted Answer

A)  all inputs are fixed. 
B)  inputs are neither variable nor fixed. 
C)  at least one input is variable and one input is fixed. 
D)  all inputs are variable. 
A)  all inputs are fixed. 
B)  inputs are neither variable nor fixed. 
C)  at least one input is variable and one input is fixed. 
D)  all inputs are variable.

Question 15

Use the following to answer questions :  
-(Figure: Short-Run Costs)Use Figure: Short-Run Costs.B is the _____ cost curve.

Accepted Answer

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

Question 16

Use the following to answer questions : $$\begin{array}{l}
\text { Table: Costs of Birthday Cakes }\
\begin{array} { c c } 
\hline \text { Quantity of cakes } & \text { Variable cost, } \boldsymbol { V C } \
\hline 0 & 0 \
1 & 15 \
2 & 25 \
3 & 30 \
4 & 38 \
5 & 50 \
6 & 70 \
\hline
\end{array}
\end{array}$$
-(Table: Costs of Birthday Cakes)Use Table: Costs of Birthday Cakes.Assume that fixed costs are $10.What is the average variable cost of two cakes?

Accepted Answer

A)  $40.00 
B)  $35.00 
C)  $25.00 
D)  $12.50 
A)  $40.00 
B)  $35.00 
C)  $25.00 
D)  $12.50

Question 17

Use the following to answer questions : $$\begin{array}{l}
\text { Table: Cakes }\
\begin{array} { c c c } 
\hline \begin{array} { l } 
\text { Number of } \
\text { mixers }
\end{array} & \begin{array} { c } 
\text { Fixed } \
\text { Costs }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Variable Cost }
\end{array} \
\hline 1 & \$ 1,000 & \$ 10 \
2 & 1,500 & 7 \
3 & 2,500 & 4
\end{array}
\end{array}$$
-(Table: Cakes)Use Table: Cakes.Pat is opening a bakery to make and sell special birthday cakes.She is trying to decide how many mixers to purchase.Her estimated fixed and average variable costs if she purchases 1,2,or 3 mixers are shown in the table.Assume that average variable costs do not vary with the quantity of output.If Pat purchases 3 mixers and bakes 100 cakes per day,what is her average total cost?

Accepted Answer

A)  $4 
B)  $25 
C)  $29 
D)  $625 
A)  $4 
B)  $25 
C)  $29 
D)  $625

Question 18

If the marginal cost of the first sports jersey is $21,the marginal cost of the second sports jersey is $40,and the marginal cost of the third jersey is $17,what is the total variable cost of producing three jerseys?

Accepted Answer

A)  $26 
B)  $78 
C)  $17 
D)  $61 
A)  $26 
B)  $78 
C)  $17 
D)  $61

Question 19

If marginal cost is LESS than average total cost,then _____ cost is _____.

Accepted Answer

A)  average total;increasing 
B)  average total;decreasing 
C)  marginal;necessarily increasing 
D)  marginal;necessarily decreasing 
A)  average total;increasing 
B)  average total;decreasing 
C)  marginal;necessarily increasing 
D)  marginal;necessarily decreasing

Question 20

Suppose the marginal cost curve in the short run first decreases and then increases.If marginal cost is decreasing,_____ must be _____ and _____ must be _____.

Accepted Answer

A)  marginal product;increasing;average fixed cost;zero 
B)  average variable cost;decreasing;average fixed cost;increasing 
C)  average total cost;increasing;marginal cost;decreasing 
D)  marginal product;increasing;average variable cost;decreasing 
A)  marginal product;increasing;average fixed cost;zero 
B)  average variable cost;decreasing;average fixed cost;increasing 
C)  average total cost;increasing;marginal cost;decreasing 
D)  marginal product;increasing;average variable cost;decreasing

Exam 11: Behind the Supply Curve- Inputs and Costs

Firms choose their level of fixed cost in the long run based on the amount of output that they expect to produce.

Use the following to answer questions : -(Figure: A Firm's Cost Curves)Use Figure: A Firm's Cost Curves.The curve X represents the firm's _____ cost curve.

When marginal cost is ABOVE average variable cost,average variable cost must be:

Use the following to answer questions : -(Figure: A Firm's Cost Curves)Use Figure: A Firm's Cost Curves.The curve labeled W represents the firm's _____ cost curve.

The short-run average total cost curve is U-shaped because at low output levels the spreading effect of falling average fixed costs dominates the diminishing returns effect,while at high output levels the reverse is true.

Use the following to answer questions : Table: Costs of Birthday Cakes Quantity of cakes Variable cost, 0 0 1 15 2 25 3 30 4 38 5 50 6 70 -(Table: Costs of Birthday Cakes)Use Table: Costs of Birthday Cakes.Assume that fixed costs are $10.What is the marginal cost of the second cake?

Which statement is FALSE?

Use the following to answer questions : Table: Cost Data Quantity of Output Variable Cost ( ) Total Cost ( ) 0 0 50 1 50 100 2 70 120 3 100 150 4 140 190 5 190 240 6 250 300 7 320 370 -(Table: Cost Data)Use Table: Cost Data.The marginal cost of producing the fifth purse is:

For most restaurants,the average total cost curve _____ at _____ levels of output,then _____ at _____ levels.

Use the following to answer questions : Figure: The Marginal Product of Labour -(Figure: Marginal Product of Labour)Use Figure: The Marginal Product of Labour.The total product for three workers is _____ kilograms.

A planning period during which all of a firm's resources are variable is the _____ run.

The idea of diminishing returns to an input in production suggests that,if a local university adds more custodians,the marginal product of labour for the custodial staff will:

In the long run:

Use the following to answer questions : -(Figure: Short-Run Costs)Use Figure: Short-Run Costs.B is the _____ cost curve.

Use the following to answer questions : Table: Costs of Birthday Cakes Quantity of cakes Variable cost, 0 0 1 15 2 25 3 30 4 38 5 50 6 70 -(Table: Costs of Birthday Cakes)Use Table: Costs of Birthday Cakes.Assume that fixed costs are $10.What is the average variable cost of two cakes?

If the marginal cost of the first sports jersey is $21,the marginal cost of the second sports jersey is $40,and the marginal cost of the third jersey is $17,what is the total variable cost of producing three jerseys?

If marginal cost is LESS than average total cost,then _____ cost is _____.

Suppose the marginal cost curve in the short run first decreases and then increases.If marginal cost is decreasing,_____ must be _____ and _____ must be _____.

First Principles

Economic Models

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, risk, and Private Information

Graphs in Economics

Consumer Preferences

Indifference Curve Analysis

Filters

For most restaurants,the average total cost curve ___ at _ levels of output,then _ at ___ levels.

If marginal cost is LESS than average total cost,then _ cost is _.

Suppose the marginal cost curve in the short run first decreases and then increases.If marginal cost is decreasing,___ must be _ and _ must be ___.