Question 1

The explanation for why marginal cost is positive and rising in the short run is ________ marginal product of labor in the production process.

Accepted Answer

A)  a zero 
B)  a constant 
C)  an increasing 
D)  a diminishing

Question 2

Refer to the information provided in Table 8.8 below to answer the following question(s).
Table 8.8
 $$\begin{array} { c c c c c } 
\begin{array} { c } 
 \text { Number of } \
\text { FruitBaskets }
\end{array} &\text { TFC } & \text { TVC } & \text { TC } & \text { MC } \
\hline 0 & \$ 100 & \$ 0 & \$ 100 & - - \
\hline 1 & 100 & 20 & 120 & 20 \
\hline 2 & 100 & 30 & 130 & 10 \
\hline 3 & 100 & 42 & 142 & 12 \
\hline 4 & 100 & 62 & 162 & 20 \
\hline 5 & 100 & 92 & 192 & 30 \
\hline 6 & 100 & 136 & 236 & 44 \
\hline
\end{array}$$
-Refer to Table 8.8. Assume that Polynesian Fruit sells fruit baskets in a perfectly competitive market. The market price of a fruit basket is $44. To maximize profits, Polynesian Fruit should sell ________ fruit basket(s) and their profit is ________.

Accepted Answer

A)  three; $10 
B)  four; $14 
C)  five; $28 
D)  six; $28

Question 3

Twenty-five students in a class take a test for which the average grade is 75. Then a twenty-sixth student enters the class, takes the same test, and scores 70. The test average grade calculated with 26 students will

Accepted Answer

A)  rise above 75. 
B)  fall below 75. 
C)  change from 75 but the direction is unclear. 
D)  still equal 75.

Question 4

In the short run where total variable cost is ________ at a(n) ________ rate, marginal cost is positive and decreasing.

Accepted Answer

A)  increasing; increasing 
B)  increasing; decreasing 
C)  decreasing; increasing 
D)  decreasing; decreasing

Question 5

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow

Figure 8.5
-Refer to Figure 8.5. If seven drones are produced, average variable costs are

Accepted Answer

A)  $2.86. 
B)  $14.29. 
C)  $20. 
D)  $21.43.

Question 6

Economists usually assume that ________ is a fixed input in the ________ run.

Accepted Answer

A)  labor; short 
B)  capital; short 
C)  labor; long 
D)  capital; long

Question 7

The formula for total fixed cost is

Accepted Answer

A)  TFC = TC + TVC. 
B)  TFC = TVC -TC. 
C)  TFC = TC/TVC. 
D)  TFC = TC -TVC.

Question 8

An individual firm's demand curve in a perfectly competitive market is

Accepted Answer

A)  downward sloping. 
B)  upward sloping. 
C)  perfectly elastic. 
D)  perfectly inelastic.

Question 9

If a firm's total costs are $75 when it produces 10 units of output and $80 when it produces 11 units of output, then the marginal cost of producing the 11th unit is

Accepted Answer

A)  $1. 
B)  $5. 
C)  $8.09. 
D)  $10.

Question 10

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

Question 11

________ are likely a fixed cost of a firm.

Accepted Answer

A)  Wages paid to employees 
B)  The payments for supplies 
C)  Lease payments for office space 
D)  Travel expenses to meet with clients

Question 12

Perfectly competitive firms maximize their profit by producing the output level where P = MR = AVC.

Accepted Answer

A) True 
 B)False

Question 13

Average total cost of producing 100 units of output is $5. If the marginal cost of producing the 101st unit is $6, then average total cost of 101 units is less than $5.

Accepted Answer

A) True 
 B)False

Question 14

Average total cost of producing 100 units of output is $5. If the marginal cost of producing the 101st unit is $4, then average total cost of 101 units is less than $5.

Accepted Answer

A) True 
 B)False

Question 15

The Framing Gallery frames posters and has total fixed costs of $1,000. The Framing Gallery is currently framing ________ posters if its average variable cost is $20 and its average total cost is $30.

Accepted Answer

A)  5 
B)  25 
C)  100 
D)  an indeterminate number of

Question 16

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow

Figure 8.5
-Refer to Figure 8.5. The total fixed costs for Blackstar Drones are

Accepted Answer

A)  $0. 
B)  $50. 
C)  $150. 
D)  indeterminate from this information.

Question 17

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 18

Refer to the information provided in Figure 8.3 below to answer the question(s) that follow.  Figure 8.3
-Refer to Figure 8.3. The marginal cost of the 10th basketball is

Accepted Answer

A)  $2. 
B)  $3. 
C)  $3.05. 
D)  $5.80.

Question 19

Individual firms in perfectly competitive industries decide what price to charge for their output and what quantity of output to produce.

Accepted Answer

A) True 
 B)False

Question 20

Refer to the information provided in Table 8.3 below to answer the question(s) that follow.
Table 8.3 $\text {Number of}$
$\begin{array}{llllllll}
\text {Earrings}&\text { TVC}&\text { MC }&\text {AVC}&\text { TFC }&\text {TC}&\text { AFC}&\text { ATC}\
\hline0 & & & & 
&& \
1 & 20& & & & \
2 & & 10& & & &30& \
3 & & &  & 110&& \
4 & & &20 & & & \
5 & & & &180 &\
\hline
\end{array}$

-Refer to Table 8.3. From the information in the given table,

Accepted Answer

A)  the firm is in the long run. 
B)  the firm eventually experiences diminishing returns to its variable input. 
C)  the marginal cost curve intersects the average total cost curve between 3 and 4 units of output. 
D)  the difference between total cost and total variable cost decreases as output increases.

Exam 8: Short-Run Costs and Output Decisions

The explanation for why marginal cost is positive and rising in the short run is ________ marginal product of labor in the production process.

Twenty-five students in a class take a test for which the average grade is 75. Then a twenty-sixth student enters the class, takes the same test, and scores 70. The test average grade calculated with 26 students will

In the short run where total variable cost is at a(n) rate, marginal cost is positive and decreasing.

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow Figure 8.5 -Refer to Figure 8.5. If seven drones are produced, average variable costs are

Economists usually assume that is a fixed input in the run.

The formula for total fixed cost is

An individual firm's demand curve in a perfectly competitive market is

If a firm's total costs are $75 when it produces 10 units of output and $80 when it produces 11 units of output, then the marginal cost of producing the 11th unit is

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

________ are likely a fixed cost of a firm.

Perfectly competitive firms maximize their profit by producing the output level where P = MR = AVC.

Average total cost of producing 100 units of output is $5. If the marginal cost of producing the 101st unit is $6, then average total cost of 101 units is less than $5.

Average total cost of producing 100 units of output is $5. If the marginal cost of producing the 101st unit is $4, then average total cost of 101 units is less than $5.

The Framing Gallery frames posters and has total fixed costs of $1,000. The Framing Gallery is currently framing ________ posters if its average variable cost is $20 and its average total cost is $30.

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow Figure 8.5 -Refer to Figure 8.5. The total fixed costs for Blackstar Drones are

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 8.3 below to answer the question(s) that follow. Figure 8.3 -Refer to Figure 8.3. The marginal cost of the 10th basketball is

Individual firms in perfectly competitive industries decide what price to charge for their output and what quantity of output to produce.