Question 1

Refer to the information provided in Figure 8.6 below to answer the question(s) 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.

Question 2

If marginal cost is between average variable cost and average total cost, then

Accepted Answer

A)  both average variable cost and average total cost are increasing. 
B)  both average variable cost and average total cost are decreasing. 
C)  average variable cost is increasing and average total cost is decreasing. 
D)  average variable cost is decreasing and average total cost is increasing.

Question 3

Refer to the information provided in Figure 8.7 below to answer the question(s) that follow.  Figure 8.7
-Refer to Figure 8.7. If Buffy gives 17 perms per day, her daily profit is

Accepted Answer

A)  $3. 
B)  $51. 
C)  $153. 
D)  $204.

Question 4

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

Accepted Answer

A)  $25. 
B)  $41.67. 
C)  $50. 
D)  $66.67.

Question 5

________ marginal returns implies ________ marginal costs.

Accepted Answer

A)  Diminishing; decreasing 
B)  Increasing; increasing 
C)  Diminishing; increasing 
D)  Increasing; constant

Question 6

Short-run costs that depend on the level of output are

Accepted Answer

A)  total fixed cost only. 
B)  total variable costs only. 
C)  total costs only. 
D)  both total variable costs and total costs.

Question 7

If the average variable cost curve is below the marginal cost curve, then

Accepted Answer

A)  marginal costs must be decreasing. 
B)  marginal costs must be increasing. 
C)  marginal costs can be either increasing or decreasing. 
D)  average variable costs must be decreasing.

Question 8

Marginal costs reflect changes in variable costs.

Accepted Answer

A) True 
 B)False

Question 9

If a firm's total costs are $100 when 10 units of output are produced and $103 when 11 units of output are produced, the marginal cost of the 11th unit is

Accepted Answer

A)  $1. 
B)  $3. 
C)  $5. 
D)  $9.36.

Question 10

Refer to the information provided in Figure 8.8 below to answer the question(s) that follow.  Figure 8.8
-Refer to Figure 8.8. At the market price of $8 per bushel, if this farmer produces the profit-maximizing level of soybeans, the profit would be

Accepted Answer

A)  $0. 
B)  $2,800. 
C)  $5,600. 
D)  $8,000.

Question 11

Any firm's total revenue equals

Accepted Answer

A)  MR × q. 
B)  P × q. 
C)  P/q. 
D)  MR/q.

Question 12

Amy spends $5,000 on remodeling a storefront that she then opens as a take-out deli. Business has not been very successful, and she needs an additional $1,000 to keep the deli open. Which of the following is true?

Accepted Answer

A)  The $5,000 Amy spent on remodeling represents a part of the total variable cost of her business. 
B)  The $5,000 Amy spent is a fixed cost of her business. 
C)  The $1,000 represents her marginal costs of production. 
D)  The $1,000 Amy needs to keep the deli open represents her total fixed costs.

Question 13

Diminishing marginal returns implies

Accepted Answer

A)  decreasing average variable costs. 
B)  decreasing marginal costs. 
C)  increasing marginal costs. 
D)  decreasing average fixed costs.

Question 14

Refer to the information provided in Table 8.5 below to answer the question(s) that follow.
Table 8.5
 
-Refer to Table 8.5. If Phoebe produces five swords, her total costs are

Accepted Answer

A)  $160. 
B)  $180. 
C)  $185. 
D)  $200.

Question 15

Refer to the information provided in Figure 8.4 below to answer the question(s) that follow.  Figure 8.4
-Refer to Figure 8.4. If twelve microwave ovens are produced, Micro Oven's total costs are

Accepted Answer

A)  $300. 
B)  $500. 
C)  $800. 
D)  $1,300.

Question 16

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

Accepted Answer

A)  positive 
B)  negative 
C)  zero 
D)  Any of the above answers could be correct.

Question 17

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.

Question 18

If the marginal cost curve is above the average variable cost curve, then

Accepted Answer

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

Question 19

As output decreases, average fixed costs

Accepted Answer

A)  decrease. 
B)  initially decrease and then increase. 
C)  remain constant. 
D)  increase.

Question 20

Perfectly competitive firms

Accepted Answer

A)  sell identical products. 
B)  are price makers. 
C)  are large relative to the size of the market. 
D)  All of the above are correct.

Exam 8: Short-Run Costs and Output Decisions

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

If marginal cost is between average variable cost and average total cost, then

Refer to the information provided in Figure 8.7 below to answer the question(s) that follow. Figure 8.7 -Refer to Figure 8.7. If Buffy gives 17 perms per day, her daily profit is

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

marginal returns implies marginal costs.