Question 1

The long run is a period of time:

Accepted Answer

A)  that is too short to change the size of a firm's plant.
B)  that is long enough to permit changes in all the firm's inputs, both fixed and variable.
C)  in which production occurs beyond one year.
D)  in which production occurs beyond five years.

Question 2

For a typical firm,the long-run average total cost curve:

Accepted Answer

A)  is a tangent to the minimum point of each possible short-run average total cost curve.
B)  is a tangent to each possible short-run average total cost curve at one point.
C)  intersects each possible short-run average total cost curve at two points.
D)  passes through the minimum points of all possible short-run average total cost curves.

Question 3

Exhibit 6-1: The production function
 
-In Exhibit 6-1,the marginal product of labour is equal to zero at point:

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.

Question 4

Exhibit 6-5 Cost schedule for a firm
 
-In Exhibit 6-5,by filling in the blanks it can be determined that the marginal cost of the third unit of output is:

Accepted Answer

A)  $0.
B)  $200.
C)  $700.
D)  $1200.
E)  $2000.

Question 5

Exhibit 6-6 Cost schedule for firm X
 
-As shown in Exhibit 6-6,the average total cost of producing 5 units is:

Accepted Answer

A)  $0.
B)  $27.
C)  $50.
D)  $100.

Question 6

ATC can be calculated as follows:

Accepted Answer

A)  AFC*AVC or TC*Q
B)  AFC-AVC or TC/Q
C)  AFC+AVC or TC*Q
D)  AFC+AVC or TC/Q

Question 7

Total variable cost:

Accepted Answer

A)  is added to the total fixed cost.
B)  consists of costs that are never zero.
C)  only relates to the costs of variable inputs.
D)  does not change.

Question 8

The shape of the MC curve is inversely related to the shape of the marginal product curve.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 6-8 Cost schedule for producing pizzas
 
-By filling in the blanks in Exhibit 6-8,the ATC of 4 pizzas is shown to be equal to:

Accepted Answer

A)  $9.50.
B)  $10.00.
C)  $19.50.
D)  $40.00.
E)  $78.00.

Question 10

Exhibit 6-5 Cost schedule for a firm
 
-In Exhibit 6-5,by filling in the blanks it can be determined that the fixed costs for the 2nd unit are

Accepted Answer

A)  $0.
B)  $200.
C)  $900.
D)  $1000.
E)  $3000.

Question 11

The law of diminishing marginal returns causes a firm's short-run marginal cost curve to be U-shaped.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 6-6 Cost schedule for firm X
 
-As shown in Exhibit 6-6,the average fixed cost of producing the fifth unit is:

Accepted Answer

A)  $0.
B)  $20.
C)  $25.
D)  $100.

Question 13

Which of the following statements is true?

Accepted Answer

A)  Economic profit equals accounting profit plus implicit costs.
B)  The short run is any period of time in which there is at least one fixed input.
C)  A fixed input is any resource for which the quantity can change during the period under consideration.
D)  In the long run there are no implicit costs.

Question 14

Which of the following statements is true?

Accepted Answer

A)  TC = TFC - TVC.
B)  AVC = TC/Q.
C)  TFC = TC - TVC.
D)  MC equals the change in ATC divided by the change in Q.

Question 15

Exhibit 6-10 Long-run average cost
 
-If the firm represented in Exhibit 6-10 is operating with a plant whose size corresponds to short-run average total cost curve A,the level of output that would minimise its short-run average total cost is:

Accepted Answer

A)  500 units per week.
B)  1000 units per week.
C)  1500 units per week.
D)  2000 units per week.

Question 16

Exhibit 6-5 Cost schedule for a firm
 
-In Exhibit 6-5,by filling in the blanks it can be determined that the marginal cost of the first unit of output is:

Accepted Answer

A)  $200.
B)  $700.
C)  $900.
D)  $1000.
E)  $3000.

Question 17

Marginal-average rule states that:

Accepted Answer

A)  when marginal cost is above average cost, average cost will fall.
B)  when marginal cost is above average cost, average cost will remain constant.
C)  when marginal cost is below average cost, average cost will fall.
D)  when marginal cost is below average cost, average cost will rise.

Question 18

Exhibit 6-4 Workers and output data
 
-In Exhibit 6-4,the marginal product of the third worker is:

Accepted Answer

A)  0.
B)  5.
C)  10.
D)  12.
E)  20.

Question 19

Total fixed costs:

Accepted Answer

A)  vary as output varies.
B)  are zero when the output is zero.
C)  are the costs that do not vary with the output.
D)  are the costs that increase with output.

Question 20

The marginal cost:

Accepted Answer

A)  rises as the marginal product of a variable input rises if the wage rate is constant.
B)  declines as the marginal product of a variable input rises if the wage rate is constant.
C)  declines as the marginal product of a variable input rises if the wage rate is increasing.
D)  declines as the marginal product of a variable input rises if the wage rate is decreasing.

Exam 6: Production costs

For a typical firm,the long-run average total cost curve:

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Exhibit 6-8 Cost schedule for producing pizzas -By filling in the blanks in Exhibit 6-8,the ATC of 4 pizzas is shown to be equal to:

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Exhibit 6-6 Cost schedule for firm X -As shown in Exhibit 6-6,the average fixed cost of producing the fifth unit is:

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ATC can be calculated as follows:

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Which of the following statements is true?

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Exhibit 6-10 Long-run average cost -If the firm represented in Exhibit 6-10 is operating with a plant whose size corresponds to short-run average total cost curve A,the level of output that would minimise its short-run average total cost is:

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The long run is a period of time:

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Exhibit 6-5 Cost schedule for a firm -In Exhibit 6-5,by filling in the blanks it can be determined that the marginal cost of the third unit of output is:

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The marginal cost:

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The law of diminishing marginal returns causes a firm's short-run marginal cost curve to be U-shaped.

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Exhibit 6-4 Workers and output data -In Exhibit 6-4,the marginal product of the third worker is:

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The shape of the MC curve is inversely related to the shape of the marginal product curve.

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Exhibit 6-5 Cost schedule for a firm -In Exhibit 6-5,by filling in the blanks it can be determined that the marginal cost of the first unit of output is:

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Which of the following statements is true?

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Exhibit 6-5 Cost schedule for a firm -In Exhibit 6-5,by filling in the blanks it can be determined that the fixed costs for the 2nd unit are

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Marginal-average rule states that:

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Exhibit 6-6 Cost schedule for firm X -As shown in Exhibit 6-6,the average total cost of producing 5 units is:

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Total variable cost:

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Exhibit 6-1: The production function -In Exhibit 6-1,the marginal product of labour is equal to zero at point:

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Total fixed costs:

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