Question 1

A firm has a fixed cost of $1,000, a total cost of $1,050 when one unit of output is produced, and a total variable cost of $80 when two units of output are produced.
-At two units of output this firm's total fixed cost is:

Accepted Answer

A)   $770.
B)   $920.
C)   $1,000.
D)   $1,080.

Question 2

Which of the following causes economies of scale?

Accepted Answer

A)   The use of specialized inputs.
B)   Quantity discounts on some resources that the firm buys.
C)   Individual managers' abilities to focus all of their attention on specific tasks.
D)   All of the above.

Question 3

-On the basis of these figures, which of the following statements is true?

Accepted Answer

A)   The firm in Figure A operates in the long run.
B)   Figure B represents total cost in the short run.
C)   Figure C represents total variable cost in the short run.
D)   Figure D represents total cost in the short run.

Question 4

-In the 500 through 700 unit range of output this firm is experiencing:

Accepted Answer

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

Question 5

Average total cost is equal to total cost divided by output.

Accepted Answer

A) True 
 B)False

Question 6

-The marginal cost of the second unit of output is:

Accepted Answer

A)   $100.
B)   $250.
C)   $350.
D)   -$250.

Question 7

To an economist, the long run refers to a time period:

Accepted Answer

A)   of one year or longer.
B)   during which all factors of production are owned by the firm.
C)   during which all factors of production are variable in amount.
D)   during which some factors of production are variable in amount.

Question 8

Each of the following is an argument offered - either yes or no - in "Application 12.2: Do Wellness Programs Lower Costs for Employers" except:

Accepted Answer

A)   Wellness programs are successful and the government should mandate that employers offer them.
B)   Healthy employees are more productive and have less absenteeism.
C)   People who are truly interested in wellness will expend their own money on fitness and other programs.
D)   Productivity gains could outweigh the costs of providing wellness programs.

Question 9

The total cost of production when output is zero is $100. The average total cost at one unit of output is $150. According to this information:

Accepted Answer

A)   the marginal cost of the first unit of output is $50.
B)   the total cost when one unit of output is produced is $150.
C)   the total variable cost when one unit of output is produced is $50.
D)   all of the above are true.

Question 10

Technology is best defined as:

Accepted Answer

A)   all production methods and processes that increase a firm's profit.
B)   the body of knowledge that exists about production and its processes.
C)   the purchase of new machinery and equipment to replace old machinery and equipment.
D)   new machinery and processes that cause the disappearance of old machinery and processes.

Question 11

Diminishing returns can be avoided by increasing the use of variable factors of production.

Accepted Answer

A) True 
 B)False

Question 12

A profit-maximizing firm would choose the production method that:

Accepted Answer

A)   uses the smallest number of inputs.
B)   provides the desired output at the lowest cost.
C)   does not require the use of any high-priced inputs.
D)   all of the above.

Question 13

Which of the following is NOT calculated for the long run?

Accepted Answer

A)   Fixed cost.
B)   Variable cost.
C)   Marginal cost.
D)   Average total cost.

Question 14

Which of the following figures best illustrates the relationship between average total cost and marginal cost?

Accepted Answer

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

Question 15

What causes short-run average variable cost to decrease and then increase as output increases, and why does the difference between short-run average variable cost and average total cost get smaller as output increases?

Accepted Answer

In the short run, average variable cost ...

Question 16

Short-run costs behave as they do because of:

Accepted Answer

A)   the Law of Diminishing Returns.
B)   the Law of Supply.
C)   economies and diseconomies of scale.
D)   learning by doing.

Question 17

Why does average total cost increase when marginal cost is greater than average total cost?

Accepted Answer

The only way for an average cost to rise...

Question 18

The long run differs from the short run in that:

Accepted Answer

A)   fixed costs occur in the short run, but not in the long run.
B)   all factors of production are variable in the long run, but not in the short run.
C)   total cost is zero when output is zero in the long run, but not in the short run.
D)   all of the above.

Question 19

Which of the following statements is FALSE?

Accepted Answer

A)   Technology affects the design of machinery and processes such as inventory control.
B)   Technological change can bring more efficient ways of production and distribution.
C)   Sometimes businesses maximize profit by keeping older, less efficient technology.
D)   While technology drives new methods of production, it has little impact on profit.

Question 20

-When nothing is produced, the firm's total fixed cost and total variable cost are, respectively:

Accepted Answer

A)   zero and $800.
B)   $400 and $400.
C)   $800 and zero.
D)   $800 and $400.

Exam 12: Production and the Costs of Production

A firm has a fixed cost of $1,000, a total cost of $1,050 when one unit of output is produced, and a total variable cost of $80 when two units of output are produced. -At two units of output this firm's total fixed cost is:

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Which of the following figures best illustrates the relationship between average total cost and marginal cost?

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Short-run costs behave as they do because of:

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-When nothing is produced, the firm's total fixed cost and total variable cost are, respectively:

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-On the basis of these figures, which of the following statements is true?

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Which of the following statements is FALSE?

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Which of the following causes economies of scale?

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-In the 500 through 700 unit range of output this firm is experiencing:

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A profit-maximizing firm would choose the production method that:

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The total cost of production when output is zero is $100. The average total cost at one unit of output is $150. According to this information:

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Diminishing returns can be avoided by increasing the use of variable factors of production.

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Why does average total cost increase when marginal cost is greater than average total cost?

Correct AnswerverifiedThe only way for an average cost to rise...View AnswerShow Answer

Each of the following is an argument offered - either yes or no - in "Application 12.2: Do Wellness Programs Lower Costs for Employers" except:

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To an economist, the long run refers to a time period:

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-The marginal cost of the second unit of output is:

Correct AnswerverifiedShow Answer

The long run differs from the short run in that:

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Average total cost is equal to total cost divided by output.

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Technology is best defined as:

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What causes short-run average variable cost to decrease and then increase as output increases, and why does the difference between short-run average variable cost and average total cost get smaller as output increases?

Correct AnswerverifiedIn the short run, average variable cost ...View AnswerShow Answer

Which of the following is NOT calculated for the long run?

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The only way for an average cost to rise...
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In the short run, average variable cost ...
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Correct Answer
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