Deck 7: Production and Costs

Question 1

Which statement is true?

A)Marginal cost intersects the maximum of AVC from below.
B)Marginal cost intersects the minimum of AVC from below.
C)Marginal cost intersects the minimum of AFC from below.
D)The difference between AVC and ATC is AFC for every level of output.
E)b and d are both true.

Answer 1

b and d are both true.

Question 2

Which statement is FALSE?

A)A firm cannot experience both economies of scale and diminishing marginal product.
B)A firm's long-run average costs can be increasing, decreasing or remain unchanged as output increases.
C)A firm has no fixed costs in the long run.
D)Long-run average total costs are decreasing as output increases if a firm is experiencing economies of scale.

Answer 2

A firm cannot experience both economies of scale and diminishing marginal product.

Question 3

In the long run:

A)A firm can vary all but one of its factors of production.
B)A firm can vary all of its inputs in the production process.
C)A firm cannot vary any inputs in the production process.
D)All of the above.
E)None of the above.

Answer 3

A firm can vary all of its inputs in the production process.

Question 4

A short-run production function at some point becomes flatter due to:

A)Decreasing returns to scale.
B)Increasing returns to scale.
C)The fact that a firm has to hire poorer quality workers as production increases.
D)Diminishing marginal product.
E)None of the above.

Question 5

Which statement is true?

A)Long-run average costs are the same or more than short-run average costs.
B)Long-run average costs are increasing due to diminishing marginal product.
C)Long-run average costs are the lower envelope of short-run average cost curves.
D)Long-run average costs equal long-run marginal costs for every level of output.
E)None of the above.

Question 6

A firm has a short-run cost function of TC(q) = 100 + 2q + 3q².What is the firm's fixed costs?

A)3q².
B)2q
C)It depends on the level of q
D)80
E)100

Question 7

A firm's short-run MC curve:

A)Is eventually upwards sloping due to diminishing marginal product.
B)Is downward sloping due to increasing returns to scale.
C)Is eventually upward sloping due to decreasing returns to scale.
D)Is flat due to constant returns to scale.
E)None of the above.

Question 8

In the short run:

A)At least one factor of production cannot be varied.
B)A firm has only one factor of production.
C)A firm can vary all inputs in the production process.
D)A firm cannot vary any input in the production process.
E)None of the above.

Question 9

Which statement is true?

A)Marginal cost always lies below ATC for every level of output.
B)Marginal cost intersects the maximum of ATC from below
C)Marginal cost intersects the minimum of AFC from below.
D)Marginal cost intersects the minimum of ATC from below.
E)None of the above.

Question 10

A firm has a short-run cost function of TC(q) = 100 + 2q + 3q².What is the firm's MC?

A)MC = 2 +6q
B)MC = 2
C)MC = 3q
D)MC = 6q
E)None of the above.