Question 1

Briefly describe the spectrum of competitive situations faced by firms in markets.

Accepted Answer

Firms face different competitive situati...

Question 2

____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.

Accepted Answer

A)   Diminishing variable returns
B)   Diminishing average returns
C)   Diminishing marginal returns
D)   Diminishing marginal costs

Question 3

Briefly explain what is meant by the term "variable costs" and provide three examples of same.

Accepted Answer

Variable costs are a firm's costs that a...

Question 4

In the US economy, nearly half of all the workers employed by private firms work at

Accepted Answer

A)   18,000 firms with fewer than 100 employees.
B)   18,000 large firms that employ more than 500 workers.
C)   26,000 firms with fewer than 100 employees.
D)   26,000 large firms that employ more than 300 workers.

Question 5

The marginal cost curve is generally ______________, because diminishing marginal returns implies that additional units are ________________________.

Accepted Answer

A)   downward-sloping; more costly to produce
B)   upward-sloping; more costly to produce
C)   downward-sloping; less costly to produce
D)   upward-sloping; less costly to produce

Question 6

A situation known as _____________________ occurs when all production inputs are allowed to expand, but that expansion does not result in much of a change in the average cost of production.

Accepted Answer

A)   returns to scale
B)   economies of scale
C)   constant returns to scale
D)   diminishing marginal returns

Question 7

Briefly describe the short-run perspective of a firm's total costs. Provide a brief explanation of what a production technology refers to and explain how production technology relates to a firm's long-run perspective.

Accepted Answer

In a short-run perspective, a firm’s tot...

Question 8

If a comparison between average cost and price reveals whether a firm is earning profits, then a comparison between average variable cost and price reveals

Accepted Answer

A)   that if the market price exceeds average cost, profits will be positive.
B)   that if the market price is below average cost, then profits will be negative.
C)   total revenues are the quantity produced multiplied by the price.
D)   whether the firm is earning profit if fixed costs are left out of the calculation.

Question 9

The economies-of-scale curve is a long-run average cost curve, because

Accepted Answer

A)   it allows all factors of production to change.
B)   fixed costs cannot be changed.
C)   only variable costs are allowed to change.
D)   only marginal costs are allowed to change

Question 10

If a firm is experiencing _____________________, then as the quantity of output rises, the average cost of production rises.

Accepted Answer

A)   decreasing returns to scale
B)   consent returns to scale
C)   economies of scale
D)   increasing returns to scale

Question 11

Which of the following should typically be ignored because spending has already been made and cannot be changed?

Accepted Answer

A)   variable costs
B)   sunk costs
C)   marginal costs
D)   average marginal costs

Question 12

In microeconomics, the term _____________________ is synonymous with economies of scale.

Accepted Answer

A)   diminishing marginal returns
B)   increasing returns to scale
C)   decreasing returns to scale
D)   constant returns to scale

Question 13

Briefly explain what is meant by the term "fixed costs" and provide three examples of same. What determines a firm's level of fixed costs?

Accepted Answer

Fixed costs are expenditures that must b...

Question 14

-Refer to the graph shown above. Based on the information illustrated in the graph, which of the following is correct?

Accepted Answer

A)   marginal cost line must intersect the average cost line at the middle point of the average cost curve
B)   marginal cost of production is below the average cost for producing previous units
C)   producing one more unit is reducing average costs overall
D)   producing a marginal unit is increasing average costs overall

Question 15

-The graph above illustrates the total cost function for GoodieCookie Co. How are the company's fixed costs represented in this graph?

Accepted Answer

A)   by adding up the fixed costs
B)   at any vertical axis point where the total cost curve never equals zero
C)   as the point where the total cost curve touches the vertical axis
D)   by adding up the variable costs

Question 16

The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls.

Accepted Answer

A)   diminishing marginal returns
B)   marginal cost output
C)   economies of scale
D)   diseconomies of scale

Question 17

Briefly discuss average costs, including how they are calculated, how they are typically appear on a graph, and what they relate to profitability.

Accepted Answer

Average cost is calculated by taking tot...

Question 18

Briefly discuss marginal costs, including an explanation of how they are calculated; any condition that is typical to them, and what makes knowing them useful.

Accepted Answer

Marginal costs are calculated by taking ...

Question 19

According to the definition of profit, if a profit-maximizing firm will always attempt to produce its desired level of output at the lowest possible cost, then it will

Accepted Answer

A)   do so regardless of what type of competition exists in a market.
B)   take a long-run perspective on costs, when such costs cannot be adjusted.
C)   take a short-run perspective on labor costs which cannot be immediately changed.
D)   breakdown its cost structure according to short-run adjustments.

Question 20

The _____________________ curve will always lie below the curve for average cost because average cost includes _____________ in the numerator of the calculation.

Accepted Answer

A)   marginal cost; total costs
B)   marginal cost; fixed costs
C)   average variable cost; fixed costs
D)   average variable cost; total costs

Exam 7: Cost and Industry Structure

The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls.

Correct AnswerverifiedShow Answer

-Refer to the graph shown above. Based on the information illustrated in the graph, which of the following is correct?

Correct AnswerverifiedShow Answer

The economies-of-scale curve is a long-run average cost curve, because

Correct AnswerverifiedShow Answer

Briefly describe the spectrum of competitive situations faced by firms in markets.

Correct AnswerverifiedFirms face different competitive situati...View AnswerShow Answer

Which of the following should typically be ignored because spending has already been made and cannot be changed?

Correct AnswerverifiedShow Answer

Briefly explain what is meant by the term "variable costs" and provide three examples of same.

Correct AnswerverifiedVariable costs are a firm's costs that a...View AnswerShow Answer

Briefly explain what is meant by the term "fixed costs" and provide three examples of same. What determines a firm's level of fixed costs?

Correct AnswerverifiedFixed costs are expenditures that must b...View AnswerShow Answer

The _____________________ curve will always lie below the curve for average cost because average cost includes _____________ in the numerator of the calculation.

Correct AnswerverifiedShow Answer

Briefly discuss marginal costs, including an explanation of how they are calculated; any condition that is typical to them, and what makes knowing them useful.

Correct AnswerverifiedMarginal costs are calculated by taking ...View AnswerShow Answer

A situation known as _____________________ occurs when all production inputs are allowed to expand, but that expansion does not result in much of a change in the average cost of production.

Correct AnswerverifiedShow Answer

If a comparison between average cost and price reveals whether a firm is earning profits, then a comparison between average variable cost and price reveals

Correct AnswerverifiedShow Answer

In the US economy, nearly half of all the workers employed by private firms work at

Correct AnswerverifiedShow Answer

If a firm is experiencing _____________________, then as the quantity of output rises, the average cost of production rises.

Correct AnswerverifiedShow Answer

Briefly describe the short-run perspective of a firm's total costs. Provide a brief explanation of what a production technology refers to and explain how production technology relates to a firm's long-run perspective.

Correct AnswerverifiedIn a short-run perspective, a firm’s tot...View AnswerShow Answer

The marginal cost curve is generally ______________, because diminishing marginal returns implies that additional units are ________________________.

Correct AnswerverifiedShow Answer

In microeconomics, the term _____________________ is synonymous with economies of scale.

Correct AnswerverifiedShow Answer

According to the definition of profit, if a profit-maximizing firm will always attempt to produce its desired level of output at the lowest possible cost, then it will

Correct AnswerverifiedShow Answer

____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.

Correct AnswerverifiedShow Answer

Briefly discuss average costs, including how they are calculated, how they are typically appear on a graph, and what they relate to profitability.

Correct AnswerverifiedAverage cost is calculated by taking tot...View AnswerShow Answer

-The graph above illustrates the total cost function for GoodieCookie Co. How are the company's fixed costs represented in this graph?

Correct AnswerverifiedShow Answer

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Firms face different competitive situati...
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Correct Answer
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Variable costs are a firm's costs that a...
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Fixed costs are expenditures that must b...
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The _________ curve will always lie below the curve for average cost because average cost includes _ in the numerator of the calculation.

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Marginal costs are calculated by taking ...
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Correct Answer
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Correct Answer
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Correct Answer
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In a short-run perspective, a firm’s tot...
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The marginal cost curve is generally , because diminishing marginal returns implies that additional units are __________.

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Correct Answer
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Correct Answer
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Average cost is calculated by taking tot...
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Correct Answer
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