Question 1

The long run is:

Accepted Answer

A)  long enough to vary the quantities of all factors of production. 
B)  long enough to vary all factors of production except for the amount of capital available. 
C)  more than one month. 
D)  at least one year.

Question 2

The total cost curve is:

Accepted Answer

A)  positively sloped. 
B)  negatively sloped. 
C)  vertical. 
D)  horizontal.

Question 3

Average variable cost is:

Accepted Answer

A)  variable cost per unit multiplied by output. 
B)  total variable cost divided by output. 
C)  the difference between average total cost and total variable cost. 
D)  the difference between total cost and total variable cost.

Question 4

Use the following to answer questions: 
-(Table: Cakes) Look at the 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 one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases three 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

Question 5

The slope of a long-run average total cost curve exhibiting decreasing returns to scale is:

Accepted Answer

A)  zero. 
B)  infinite. 
C)  positive. 
D)  negative.

Question 6

Janet's poodle grooming salon has a total cost curve expressed by the equation TC = 100 + 3Q2, where Q is the quantity of dogs groomed. Given this expression, if Janet grooms five dogs, her total costs will be:

Accepted Answer

A)  $100. 
B)  $175. 
C)  $225. 
D)  $75.

Question 7

The total cost curve gets steeper as output increases because of:

Accepted Answer

A)  increasing returns to the variable input. 
B)  decreasing returns to the variable input. 
C)  increases in fixed cost. 
D)  decreases in overhead costs.

Question 8

Average variable cost is:

Accepted Answer

A)  variable cost per unit multiplied by quantity. 
B)  total variable cost divided by quantity. 
C)  the difference between average total cost and total cost. 
D)  the difference between total cost and total fixed cost.

Question 9

Use the following to answer questions: 
-(Table: Workers and Output) Look at the table Workers and Output. After graduation you achieve your dream of opening an art shop that specializes in selling mud statues. You pay $10 per day on a loan from your uncle, and regardless of how much you produce, you pay $10 per day to each of the workers who make the mud statues. The variable cost of producing 43 statues is:

Accepted Answer

A)  $10. 
B)  $20. 
C)  $40. 
D)  $43.

Question 10

Use the following to answer questions: 
-(Table: Cakes) Look at the 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 one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases one mixer and bakes 200 cakes per day, what is her average total cost?

Accepted Answer

A)  $5 
B)  $15 
C)  $200 
D)  $1,000

Question 11

If a firm has to increase output suddenly to meet an increase in demand, its average total cost will decrease in the short run until it has time to add physical capital.

Accepted Answer

A) True 
 B)False

Question 12

Use the following to answer questions: 
-(Table: Total Cost Data) Look at the table Total Cost Data. What is the total variable cost for this bicycle firm when the firm produces 5 bicycles?

Accepted Answer

A)  $50 
B)  $240 
C)  $60 
D)  $190

Question 13

A business produces 10 pairs of eyeglasses. It incurs $35 in average total cost and $5 in average fixed cost. The average variable cost of producing 10 pairs of eyeglasses is:

Accepted Answer

A)  $30. 
B)  $35. 
C)  $50. 
D)  $300.

Question 14

The long-run average total cost curve is tangent to an infinite number of short-run _____ cost curves.

Accepted Answer

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

Question 15

When Aishe's Bar-B-Que produces 10 pork sandwiches, the total cost is $5. When 11 pork sandwiches are produced, the total cost rises to $6. From this we know that the marginal cost of the eleventh pork sandwich:

Accepted Answer

A)  is equal to the average cost of 11 pork sandwiches. 
B)  is greater than the average cost of 11 pork sandwiches. 
C)  is less than the average cost of 11 pork sandwiches. 
D)  can't be calculated without more information.

Question 16

In economics, the short run is defined as:

Accepted Answer

A)  less than 1 year. 
B)  less than 6 months. 
C)  the period in which some inputs are considered to be fixed in quantity. 
D)  the period in which some inputs are fixed, but it cannot exceed 1 year.

Question 17

Use the following to answer questions:
Figure: Short-Run Costs 
-(Figure: Short-Run Costs) Look at the figure Short-Run Costs. A is the _____ cost curve.

Accepted Answer

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

Question 18

Use the following to answer question: 
-(Table: Output and Marginal Cost) Look at the table Output and Marginal Cost. After graduation you achieve your dream of opening an art shop that specializes in selling mud statues. How many statues should you produce to minimize your average variable costs?

Accepted Answer

A)  two 
B)  three 
C)  four 
D)  five

Question 19

Use the following to answer questions: 
-(Table: Costs of Birthday Cakes) Look at the 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

Question 20

Use the following to answer questions: 
-(Table: Cakes) Look at the 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 one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases two mixers and bakes 400 cakes per day, what is her average fixed cost?

Accepted Answer

A)  $0.02 
B)  $3.75 
C)  $500 
D)  $1,508

Exam 11: Behind the Supply Curve: Inputs and Costs

The long run is:

The total cost curve is:

Average variable cost is:

The slope of a long-run average total cost curve exhibiting decreasing returns to scale is:

Janet's poodle grooming salon has a total cost curve expressed by the equation TC = 100 + 3Q², where Q is the quantity of dogs groomed. Given this expression, if Janet grooms five dogs, her total costs will be:

The total cost curve gets steeper as output increases because of:

Average variable cost is:

If a firm has to increase output suddenly to meet an increase in demand, its average total cost will decrease in the short run until it has time to add physical capital.

Use the following to answer questions: -(Table: Total Cost Data) Look at the table Total Cost Data. What is the total variable cost for this bicycle firm when the firm produces 5 bicycles?

A business produces 10 pairs of eyeglasses. It incurs $35 in average total cost and $5 in average fixed cost. The average variable cost of producing 10 pairs of eyeglasses is:

The long-run average total cost curve is tangent to an infinite number of short-run _____ cost curves.

When Aishe's Bar-B-Que produces 10 pork sandwiches, the total cost is $5. When 11 pork sandwiches are produced, the total cost rises to $6. From this we know that the marginal cost of the eleventh pork sandwich:

In economics, the short run is defined as:

Use the following to answer questions: Figure: Short-Run Costs -(Figure: Short-Run Costs) Look at the figure Short-Run Costs. A is the _____ cost curve.

Use the following to answer question: -(Table: Output and Marginal Cost) Look at the table Output and Marginal Cost. After graduation you achieve your dream of opening an art shop that specializes in selling mud statues. How many statues should you produce to minimize your average variable costs?

Use the following to answer questions: -(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the marginal cost of the second cake?