Question 1

MC increases because

Accepted Answer

A) MC naturally increases as the firm nears capacity. 
B) labor is paid overtime wages when volume increases. 
C) in the short run,MC always increases. 
D) the law of diminishing returns takes effect. 
A) MC naturally increases as the firm nears capacity. 
B) labor is paid overtime wages when volume increases. 
C) in the short run,MC always increases. 
D) the law of diminishing returns takes effect.

Question 2

When a firm increased its output by one unit,its AC decreased.This implies that

Accepted Answer

A) MC < AC. 
B) MC = AC. 
C) MC < AFC. 
D) the law of diminishing returns has not yet taken effect. 
A) MC < AC. 
B) MC = AC. 
C) MC < AFC. 
D) the law of diminishing returns has not yet taken effect.

Question 3

When a firm increased its output by one unit,its AFC decreased.This is an indication that

Accepted Answer

A) the law of diminishing returns has taken effect. 
B) MC < AFC. 
C) AVC < AFC. 
D) the firm is spreading out its total fixed cost. 
A) the law of diminishing returns has taken effect. 
B) MC < AFC. 
C) AVC < AFC. 
D) the firm is spreading out its total fixed cost.

Question 4

The relationship between MC and AC can best be described as

Accepted Answer

A) when AC increases,MC starts to increase. 
B) when MC increases,AC starts to increase. 
C) when MC decreases,AC decreases. 
D) when MC exceeds AC,AC increases. 
A) when AC increases,MC starts to increase. 
B) when MC increases,AC starts to increase. 
C) when MC decreases,AC decreases. 
D) when MC exceeds AC,AC increases.

Question 5

For each of the following cost functions,find MC,AC,and AVC.
a.TC = 20,000 + 10 Q
b.TC = 18,000 + Q + 0.2 Q2

Accepted Answer

a.MC = 10 AC = (20,0

Question 6

Which of the following is the best example of economies of scope?

Accepted Answer

A) Coca-Cola expands its global operations to sub-Sahara Africa. 
B) Alcohol for car fuel is produced from corn. 
C) Amazon.com decides to rent out its Web site to independent e-commerce companies. 
D) A company reduces its cost by getting bigger discounts for bulk purchases. 
A) Coca-Cola expands its global operations to sub-Sahara Africa. 
B) Alcohol for car fuel is produced from corn. 
C) Amazon.com decides to rent out its Web site to independent e-commerce companies. 
D) A company reduces its cost by getting bigger discounts for bulk purchases.

Question 7

Which of the following relationships is correct?

Accepted Answer

A) When marginal product starts to decrease,marginal cost starts to decrease. 
B) When marginal cost starts to increase,average cost starts to increase. 
C) When marginal cost starts to increase,average variable cost starts to increase. 
D) When marginal product starts to decrease,marginal cost starts to increase. 
A) When marginal product starts to decrease,marginal cost starts to decrease. 
B) When marginal cost starts to increase,average cost starts to increase. 
C) When marginal cost starts to increase,average variable cost starts to increase. 
D) When marginal product starts to decrease,marginal cost starts to increase.

Question 8

Changes in the short-run total costs result from changes in only

Accepted Answer

A) variable costs. 
B) fixed costs. 
C) zero. 
D) total fixed costs. 
A) variable costs. 
B) fixed costs. 
C) zero. 
D) total fixed costs.

Question 9

The method of estimating long-run costs in which knowledgeable professionals familiar with production facilities and processes calculate optimal combination of inputs to produce given quantities and then estimate costs is known as

Accepted Answer

A) engineering cost estimating. 
B) the survivorship method. 
C) regression analysis. 
D) None of the above 
A) engineering cost estimating. 
B) the survivorship method. 
C) regression analysis. 
D) None of the above

Question 10

Which of the following cost functions will exhibit both decreasing and increasing marginal costs?

Accepted Answer

A) a cubic cost function 
B) a quadratic cost function 
C) a linear cost function 
D) All of the above 
A) a cubic cost function 
B) a quadratic cost function 
C) a linear cost function 
D) All of the above

Question 11

The following table shows the relationship between output and number of workers in the short run.If the wage is $50/day,find marginal cost of production.
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Number of } \
\text { Workers }
\end{array} & \text { Output } \
\hline 0 & 0 \
\hline 1 & 50 \
\hline 2 & 110 \
\hline 3 & 300 \
\hline 4 & 450 \
\hline 5 & 590 \
\hline 6 & 665 \
\hline 7 & 700 \
\hline 8 & 725 \
\hline 9 & 740 \
\hline 10 & 735 \
\hline
\end{array}$$

Accepted Answer

Number of Workers Output MP_L MC

Question 12

Which of the following relationships implies that a firm's short-run cost function is linear?

Accepted Answer

A) MC = AC 
B) MC = AVC 
C) AC = AFC + AVC 
D) MC > AC 
A) MC = AC 
B) MC = AVC 
C) AC = AFC + AVC 
D) MC > AC

Question 13

Costs of production that change with the rate of output are

Accepted Answer

A) sunk costs. 
B) opportunity costs. 
C) fixed costs. 
D) variable costs. 
A) sunk costs. 
B) opportunity costs. 
C) fixed costs. 
D) variable costs.

Question 14

Which level indicates the point of maximum economic efficiency?

Accepted Answer

A) lowest point on AC curve 
B) lowest point on AVC curve 
C) lowest point on MC curve 
D) None of the above 
A) lowest point on AC curve 
B) lowest point on AVC curve 
C) lowest point on MC curve 
D) None of the above

Question 15

Assuming the existence of economies of scale,if a firm finds that it can reduce its unit cost by decreasing its scale of production,it means that

Accepted Answer

A) it has too much production capacity relative to its demand. 
B) it should try to produce less. 
C) the law of diminishing returns has not taken effect. 
D) it has too much fixed overhead relative to its variable cost. 
A) it has too much production capacity relative to its demand. 
B) it should try to produce less. 
C) the law of diminishing returns has not taken effect. 
D) it has too much fixed overhead relative to its variable cost.

Question 16

Average fixed cost is

Accepted Answer

A) AC minus AVC. 
B) TC divided by Q. 
C) AVC minus MC. 
D) TC minus TVC. 
A) AC minus AVC. 
B) TC divided by Q. 
C) AVC minus MC. 
D) TC minus TVC.

Question 17

Which of the following cost relationships is not true?

Accepted Answer

A) AFC = AC - MC 
B) TVC = TC - TFC 
C) The change in TVC/the change in Q = MC 
D) The change in TC/ the change in Q = MC 
A) AFC = AC - MC 
B) TVC = TC - TFC 
C) The change in TVC/the change in Q = MC 
D) The change in TC/ the change in Q = MC

Question 18

Short-run cost functions are estimated using

Accepted Answer

A) time-series regression analysis. 
B) cross-sectional regression analysis. 
C) nominal cost data. 
D) present value cost data. 
A) time-series regression analysis. 
B) cross-sectional regression analysis. 
C) nominal cost data. 
D) present value cost data.

Question 19

Economic profit equals accounting profit minus

Accepted Answer

A) explicit costs. 
B) implicit costs. 
C) fixed costs. 
D) variable costs. 
A) explicit costs. 
B) implicit costs. 
C) fixed costs. 
D) variable costs.

Question 20

The results of many empirical studies of short-run cost functions have shown that total costs conform to

Accepted Answer

A) a quadratic total cost function. 
B) a power cost function. 
C) a linear cost function. 
D) a cubic cost function. 
A) a quadratic total cost function. 
B) a power cost function. 
C) a linear cost function. 
D) a cubic cost function.

MC increases because

When a firm increased its output by one unit,its AC decreased.This implies that

When a firm increased its output by one unit,its AFC decreased.This is an indication that

The relationship between MC and AC can best be described as

For each of the following cost functions,find MC,AC,and AVC. a.TC = 20,000 + 10 Q b.TC = 18,000 + Q + 0.2 Q²

Which of the following is the best example of economies of scope?

Which of the following relationships is correct?

Changes in the short-run total costs result from changes in only

The method of estimating long-run costs in which knowledgeable professionals familiar with production facilities and processes calculate optimal combination of inputs to produce given quantities and then estimate costs is known as

Which of the following cost functions will exhibit both decreasing and increasing marginal costs?

The following table shows the relationship between output and number of workers in the short run.If the wage is $50/day,find marginal cost of production. Number of Workers Output 0 0 1 50 2 110 3 300 4 450 5 590 6 665 7 700 8 725 9 740 10 735

Which of the following relationships implies that a firm's short-run cost function is linear?

Costs of production that change with the rate of output are

Which level indicates the point of maximum economic efficiency?

Assuming the existence of economies of scale,if a firm finds that it can reduce its unit cost by decreasing its scale of production,it means that

Average fixed cost is

Which of the following cost relationships is not true?

Short-run cost functions are estimated using

Economic profit equals accounting profit minus

The results of many empirical studies of short-run cost functions have shown that total costs conform to

Introduction

The Firm and Its Goals

Supply and Demand

Demand Elasticity

Demand Estimation and Forecasting Appendices 5A and 5B

The Theory and Estimation of Production Appendices 6A,6B,and 6C

Pricing and Output Decisions: Perfect Competition and Monopoly Appendices 8A and 8B

Pricing and Output Decisions: Monopolistic Competition and Oligopoly

Special Pricing Practices

Game Theory and Asymmetric Information

Capital Budgeting and Risk

The Multinational Corporation in a Global Setting

Government and Industry: Challenges and Opportunities for Todays Manager

The Global Soft Drink Industry

Filters

Exam 7: The Theory and Estimation of Cost Appendices 7A,7B,and 7C

MC increases because

When a firm increased its output by one unit,its AC decreased.This implies that

When a firm increased its output by one unit,its AFC decreased.This is an indication that

The relationship between MC and AC can best be described as

For each of the following cost functions,find MC,AC,and AVC. a.TC = 20,000 + 10 Q b.TC = 18,000 + Q + 0.2 Q2

Which of the following is the best example of economies of scope?

Which of the following relationships is correct?

Changes in the short-run total costs result from changes in only

The method of estimating long-run costs in which knowledgeable professionals familiar with production facilities and processes calculate optimal combination of inputs to produce given quantities and then estimate costs is known as

Which of the following cost functions will exhibit both decreasing and increasing marginal costs?

The following table shows the relationship between output and number of workers in the short run.If the wage is $50/day,find marginal cost of production. Number of Workers Output 0 0 1 50 2 110 3 300 4 450 5 590 6 665 7 700 8 725 9 740 10 735

Which of the following relationships implies that a firm's short-run cost function is linear?

Costs of production that change with the rate of output are

Which level indicates the point of maximum economic efficiency?

Assuming the existence of economies of scale,if a firm finds that it can reduce its unit cost by decreasing its scale of production,it means that

Average fixed cost is

Which of the following cost relationships is not true?

Short-run cost functions are estimated using

Economic profit equals accounting profit minus

The results of many empirical studies of short-run cost functions have shown that total costs conform to

Introduction

The Firm and Its Goals

Supply and Demand

Demand Elasticity

Demand Estimation and Forecasting Appendices 5A and 5B

The Theory and Estimation of Production Appendices 6A,6B,and 6C

Pricing and Output Decisions: Perfect Competition and Monopoly Appendices 8A and 8B

Pricing and Output Decisions: Monopolistic Competition and Oligopoly

Special Pricing Practices

Game Theory and Asymmetric Information

Capital Budgeting and Risk

The Multinational Corporation in a Global Setting

Government and Industry: Challenges and Opportunities for Todays Manager

The Global Soft Drink Industry

Filters

For each of the following cost functions,find MC,AC,and AVC. a.TC = 20,000 + 10 Q b.TC = 18,000 + Q + 0.2 Q²