Question 1

A positively sloped long-run average total cost curve means there are economies of scale.

Accepted Answer

A) True 
 B)False

Question 2

Fixed cost will decrease with increases in output.

Accepted Answer

A) True 
 B)False

Question 3

The curve that best helps a firm determine which output level will maximize profits is the

Accepted Answer

A)   total product curve
B)   marginal product curve
C)   average total cost curve
D)   marginal cost curve
E)   average variable cost curveF) A) and B)
G) A) and C)

Question 4

If changing the quantity produced from 10,000 to 10,001 causes total costs to increase by $15, the marginal cost at 10,000 must be $15.

Accepted Answer

A) True 
 B)False

Question 5

A firm moves from one SRATC curve to another

Accepted Answer

A)   when it changes the number of workers it employs
B)   when it has contractual obligations on its plant and equipment
C)   when it produces more output with the same plant size
D)   in the short run
E)   in the long runF) C) and E)
G) A) and B)

Question 6

-In Exhibit H-8, the total variable cost of producing 3,000 units of output is

Accepted Answer

A)   $0
B)   $1,000
C)   $3,000
D)   $4,000
E)   $5,000F) B) and C)
G) A) and D)

Question 7

Consider a firm that uses only one fixed input and one variable input.
a. Explain how this firm's TC, TVC, and TFC curves will be affected by a government tax on the fixed input.
 b. Explain how this firm's TC, TVC, and TFC curves will be affected by a government tax on the variable input.

Accepted Answer

a. The TFC and TC curves shift up by the...

Question 8

In the description of labor costs associated with fishing, the textbook measures the cost of labor that corresponds with different quantities of fish. Which of the following statements is true?

Accepted Answer

A)   Labor costs for fish production cannot be estimated.
B)   The cost of labor increases at an increasing rate at low levels of output.
C)   Labor costs increase at the same rate over all ranges of output.
D)   At higher levels of output, the cost of labor increases at an increasing rate.
E)   At higher levels of output, the cost of labor decreases at an increasing rate.F) None of the above
G) A) and B)

Question 9

An exterior painting company is contemplating buying a bigger truck and ladder. This is a

Accepted Answer

A)   bad decision because average costs will be higher
B)   good decision because average costs will be lower
C)   long-run decision
D)   short-run decision
E)   bad decision because more fuel will be neededF) C) and D)
G) B) and C)

Question 10

-Exhibit H-1 shows the change in the quantity of pizzas produced as the firm adds more workers to production. The marginal product of the fifth worker is

Accepted Answer

A)   4
B)   18
C)   19
D)   3
E)   1F) C) and E)
G) A) and D)

Question 11

When the average total cost is rising, it must be the case that

Accepted Answer

A)   production must be cut back
B)   fixed cost is not very high
C)   marginal cost is greater than average total cost
D)   average fixed cost exceeds average variable cost
E)   marginal cost is less than average fixed costF) D) and E)
G) None of the above

Question 12

The total variable cost curve increases at a decreasing rate when there are early gains from specialization.

Accepted Answer

A) True 
 B)False

Question 13

Suppose the total cost of producing 50,000 telephones is $500,000. Suppose also that at an output of 30,000, the average total cost is $8 and the marginal cost is $6. What is true about the minimum of the average total cost curve?

Accepted Answer

A)   The minimum of the ATC is greater than $10.
B)   The minimum of the ATC is less than $8.
C)   The minimum of the ATC is between $8 and $10.
D)   The minimum of the ATC can be no bigger than $6.
E)   The minimum of the ATC corresponds to a quantity greater than 50,000.F) A) and E)
G) A) and D)

Question 14

If a firm can double output by doubling the size of its operation, it is subject to

Accepted Answer

A)   economies of scale
B)   diseconomies of scale
C)   constant returns to scale
D)   increasing returns to scale
E)   diminishing returns to scaleF) B) and D)
G) A) and E)

Question 15

Suppose that the average total cost of producing 5,000 Corvettes is $30,000 and the average total cost of producing 10,000 Corvettes is also $30,000. Assuming this cost structure continues to hold, what can you say about the change in General Motors' total cost of Corvette production when they make the 10,001st car?

Accepted Answer

A)   The total cost of production does not change at all.
B)   The total cost of production will increase by the average variable cost of the next car.
C)   The change is negative because there are diseconomies of scale.
D)   There is not enough information to answer this question.
E)   The total cost of production will increase by $30,000.F) All of the above
G) A) and B)

Question 16

Usually, the shape of a firm's total variable cost curve primarily reflects the cost of

Accepted Answer

A)   labor
B)   taxes
C)   energy
D)   depreciation
E)   raw materialsF) A) and E)
G) B) and D)

Question 17

An example of a variable cost to the firm is the

Accepted Answer

A)   monthly rent it pays based on a multiple-year lease
B)   cost of shipping the goods it produces
C)   property taxes it pays
D)   interest payments on a bank loan
E)   entrepreneur's opportunity costF) A) and C)
G) A) and B)

Question 18

The difference between short-run and long-run cost is that in the long run,

Accepted Answer

A)   there are shortages of labor that can restrict output
B)   only labor can be changed to increase or decrease production
C)   fixed factors of production have already been chosen
D)   there are no diseconomies of scale
E)   all factors of production are variableF) C) and E)
G) A) and B)

Question 19

Suppose you're in the trucking business and you purchase a $100,000 truck with a one year loan for the full amount. Ignoring interest payments, what is your fixed cost per month?

Accepted Answer

A)   $10,000
B)   $20,000
C)   $25,000
D)   $12,000
E)   $8,333F) D) and E)
G) None of the above

Question 20

-In Exhibit H-3 the average total cost of 400 units of output is

Accepted Answer

A)   $6.20
B)   $6.10
C)   $6.00
D)   $5.90
E)   $6.30F) B) and C)
G) C) and D)

Exam 8: Costs of Production

A positively sloped long-run average total cost curve means there are economies of scale.

Correct Answer
verified

In the description of labor costs associated with fishing, the textbook measures the cost of labor that corresponds with different quantities of fish. Which of the following statements is true?

Correct Answer
verified

The curve that best helps a firm determine which output level will maximize profits is the

Correct Answer
verified

-Exhibit H-1 shows the change in the quantity of pizzas produced as the firm adds more workers to production. The marginal product of the fifth worker is

Correct Answer
verified

-In Exhibit H-3 the average total cost of 400 units of output is

Correct Answer
verified

Suppose you're in the trucking business and you purchase a $100,000 truck with a one year loan for the full amount. Ignoring interest payments, what is your fixed cost per month?

Correct Answer
verified

Usually, the shape of a firm's total variable cost curve primarily reflects the cost of

Correct Answer
verified

The total variable cost curve increases at a decreasing rate when there are early gains from specialization.

Correct Answer
verified

Fixed cost will decrease with increases in output.

Correct Answer
verified

A firm moves from one SRATC curve to another

Correct Answer
verified

Suppose the total cost of producing 50,000 telephones is $500,000. Suppose also that at an output of 30,000, the average total cost is $8 and the marginal cost is $6. What is true about the minimum of the average total cost curve?

Correct Answer
verified

If a firm can double output by doubling the size of its operation, it is subject to

Correct Answer
verified

An exterior painting company is contemplating buying a bigger truck and ladder. This is a

Correct Answer
verified

An example of a variable cost to the firm is the

Correct Answer
verified

Correct Answer
verified

If changing the quantity produced from 10,000 to 10,001 causes total costs to increase by $15, the marginal cost at 10,000 must be $15.

Correct Answer
verified

Consider a firm that uses only one fixed input and one variable input. a. Explain how this firm's TC, TVC, and TFC curves will be affected by a government tax on the fixed input. b. Explain how this firm's TC, TVC, and TFC curves will be affected by a government tax on the variable input.

Correct Answer
verified
a. The TFC and TC curves shift up by the...
View Answer

The difference between short-run and long-run cost is that in the long run,

Correct Answer
verified

When the average total cost is rising, it must be the case that

Correct Answer
verified

-In Exhibit H-8, the total variable cost of producing 3,000 units of output is

Correct Answer
verified

Exam 8: Costs of Production

A positively sloped long-run average total cost curve means there are economies of scale.

Correct AnswerverifiedShow Answer

In the description of labor costs associated with fishing, the textbook measures the cost of labor that corresponds with different quantities of fish. Which of the following statements is true?

Correct AnswerverifiedShow Answer

The curve that best helps a firm determine which output level will maximize profits is the

Correct AnswerverifiedShow Answer

-Exhibit H-1 shows the change in the quantity of pizzas produced as the firm adds more workers to production. The marginal product of the fifth worker is

Correct AnswerverifiedShow Answer

-In Exhibit H-3 the average total cost of 400 units of output is

Correct AnswerverifiedShow Answer

Suppose you're in the trucking business and you purchase a $100,000 truck with a one year loan for the full amount. Ignoring interest payments, what is your fixed cost per month?

Correct AnswerverifiedShow Answer

Usually, the shape of a firm's total variable cost curve primarily reflects the cost of

Correct AnswerverifiedShow Answer

The total variable cost curve increases at a decreasing rate when there are early gains from specialization.

Correct AnswerverifiedShow Answer

Fixed cost will decrease with increases in output.

Correct AnswerverifiedShow Answer

A firm moves from one SRATC curve to another

Correct AnswerverifiedShow Answer

Suppose the total cost of producing 50,000 telephones is $500,000. Suppose also that at an output of 30,000, the average total cost is $8 and the marginal cost is $6. What is true about the minimum of the average total cost curve?

Correct AnswerverifiedShow Answer

If a firm can double output by doubling the size of its operation, it is subject to

Correct AnswerverifiedShow Answer

An exterior painting company is contemplating buying a bigger truck and ladder. This is a

Correct AnswerverifiedShow Answer

An example of a variable cost to the firm is the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If changing the quantity produced from 10,000 to 10,001 causes total costs to increase by $15, the marginal cost at 10,000 must be $15.

Correct AnswerverifiedShow Answer

Consider a firm that uses only one fixed input and one variable input. a. Explain how this firm's TC, TVC, and TFC curves will be affected by a government tax on the fixed input. b. Explain how this firm's TC, TVC, and TFC curves will be affected by a government tax on the variable input.

Correct Answerverifieda. The TFC and TC curves shift up by the...View AnswerShow Answer

The difference between short-run and long-run cost is that in the long run,

Correct AnswerverifiedShow Answer

When the average total cost is rising, it must be the case that

Correct AnswerverifiedShow Answer

-In Exhibit H-8, the total variable cost of producing 3,000 units of output is

Correct AnswerverifiedShow Answer

Correct Answer
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a. The TFC and TC curves shift up by the...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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