Question 1

Fixed costs are

Accepted Answer

A)   a production expense that does not vary with output.
B)   a production expense that changes with the quantity of output produced.
C)   equal to total cost divided by the units of output produced.
D)   the amount by which a firm's cost changes if the firm produces one more unit of output.

Question 2

In the long run,fixed costs are

Accepted Answer

A)   sunk.
B)   avoidable.
C)   larger than in the short run.
D)   not included in production decisions.

Question 3

Variable costs are

Accepted Answer

A)   a production expense that does not vary with output.
B)   a production expense that changes with the quantity of output produced.
C)   equal to total cost divided by the units of output produced.
D)   the amount by which a firm's cost changes if the firm produces one more unit of output.

Question 4

Suppose that each worker must use only one shovel to dig a trench,and shovels are useless by themselves.In the long run,the firm will experience

Accepted Answer

A)   increasing returns to scale.
B)   constant returns to scale.
C)   decreasing returns to scale.
D)   The returns to scale cannot be determined from the information provided.

Question 5

Learning by doing is represented by

Accepted Answer

A)   a decrease in the average total cost curve.
B)   an increase in the average total cost curve.
C)   no change in the average total cost curve.
D)   an increase in the average total cost curve and a decrease in the marginal cost curve.

Question 6

In the long run,the expansion path is

Accepted Answer

A)   horizontal.
B)   vertical.
C)   diagonal.
D)   Not enough information.

Question 7

-The long-run average cost curve may initially slope downward due to

Accepted Answer

A)   decreasing average fixed costs.
B)   increasing marginal returns.
C)   economies of scale.
D)   All of the above.

Question 8

An accountant may amortize the expense of a durable good by dividing the total amount spent on the good by the number of years the good is expected to last.An economist may amortize the expense of a durable and never fully account for the total expense.

Accepted Answer

A) True 
 B)False

Question 9

What are the functions for MC and AC if TC = 20q + 10q2?

Accepted Answer

A)   MC = 20q; AC = 10q2
B)   MC = 20 + 20q; AC = 20 + 10q
C)   MC = 20 + 10q; AC = 10 + 10q2
D)   MC = 20 + 20q; AC = 10q

Question 10

What is one possible reason a firm that produces balloons might outsource its accounting department?

Accepted Answer

A)   There are no longer economies of scale.
B)   There are now economies of scope.
C)   There are no longer economies of scope.
D)   There are now economies of scale.

Question 11

If there are diseconomies of scale within a given range of output,which of following is (are) TRUE?

Accepted Answer

A)   The short-run average cost curve must be upward sloping within that range of output.
B)   The long-run average cost curve must be upward sloping within that range of output.
C)   Long-run average cost must equal short-run average cost.
D)   All of the above.

Question 12

In the short run,marginal cost is minimized when

Accepted Answer

A)   MPL is maximized.
B)   MPL equals zero.
C)   APL is maximized.
D)   APL equals zero.

Question 13

If average cost is positive,

Accepted Answer

A)   marginal cost equals average cost.
B)   marginal cost exceeds average cost.
C)   marginal cost is less average cost.
D)   Not enough information is given.

Question 14

Long-run average cost is never greater than short-run average cost because in the long run,

Accepted Answer

A)   capital costs equal zero.
B)   the firm can move to the lowest possible isocost curve.
C)   wages always increase over time.
D)   wages always decrease over time.

Question 15

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.Which of the following statements is TRUE at all levels of production?

Accepted Answer

A)   MC = AVC
B)   MC = AC
C)   MC > AFC
D)   All of the above.

Question 16

Economists proclaim that competitive firms make zero economic profit in the long run.This shows how

Accepted Answer

A)   detached economists are from the real world.
B)   unrealistic economic theory is.
C)   firms cover all their cost, both monetary and non-monetary.
D)   firms cover only monetary cost when economic profits are zero.

Question 17

Which of the following will cause the average cost curve of making cigarettes to shift?

Accepted Answer

A)   a $5 million penalty charged to each cigarette maker
B)   a $1 per pack tax on cigarettes
C)   a $1 an hour wage increase paid to all cigarette production workers
D)   All of the above.

Question 18

If the average cost of producing a good is increasing as a firm produces more of the good,then which of the following must be TRUE?

Accepted Answer

A)   AFC is falling.
B)   AVC is rising.
C)   MC > AVC.
D)   All of the above.

Question 19

Many universities have either a top football program OR a top basketball program.Very few have both.These results suggest the presence of

Accepted Answer

A)   economies of scope.
B)   diseconomies of scope.
C)   returns to scale.
D)   the law of diminishing marginal returns.

Question 20

Economic efficiency entails

Accepted Answer

A)   producing a given amount of output with the most expensive mix of inputs.
B)   producing a given amount of output with the least number of inputs.
C)   producing a given amount of output with the most inputs.
D)   producing a given amount of output with the cheapest mix of inputs.

Exam 7: Costs

-The long-run average cost curve may initially slope downward due to

Correct AnswerverifiedShow Answer

Variable costs are

Correct AnswerverifiedShow Answer

In the long run,the expansion path is

Correct AnswerverifiedShow Answer

If the average cost of producing a good is increasing as a firm produces more of the good,then which of the following must be TRUE?

Correct AnswerverifiedShow Answer

If there are diseconomies of scale within a given range of output,which of following is (are) TRUE?

Correct AnswerverifiedShow Answer

In the long run,fixed costs are

Correct AnswerverifiedShow Answer

An accountant may amortize the expense of a durable good by dividing the total amount spent on the good by the number of years the good is expected to last.An economist may amortize the expense of a durable and never fully account for the total expense.

Correct AnswerverifiedShow Answer

What is one possible reason a firm that produces balloons might outsource its accounting department?

Correct AnswerverifiedShow Answer

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.Which of the following statements is TRUE at all levels of production?

Correct AnswerverifiedShow Answer

Economic efficiency entails

Correct AnswerverifiedShow Answer

Many universities have either a top football program OR a top basketball program.Very few have both.These results suggest the presence of

Correct AnswerverifiedShow Answer

What are the functions for MC and AC if TC = 20q + 10q2?

Correct AnswerverifiedShow Answer

Suppose that each worker must use only one shovel to dig a trench,and shovels are useless by themselves.In the long run,the firm will experience

Correct AnswerverifiedShow Answer

Long-run average cost is never greater than short-run average cost because in the long run,

Correct AnswerverifiedShow Answer

Fixed costs are

Correct AnswerverifiedShow Answer

Which of the following will cause the average cost curve of making cigarettes to shift?

Correct AnswerverifiedShow Answer

Learning by doing is represented by

Correct AnswerverifiedShow Answer

In the short run,marginal cost is minimized when

Correct AnswerverifiedShow Answer

Economists proclaim that competitive firms make zero economic profit in the long run.This shows how

Correct AnswerverifiedShow Answer

If average cost is positive,

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

What are the functions for MC and AC if TC = 20q + 10q²?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified