Question 1

If the total cost function is TC = Q3 - 6Q2 + 14Q + 75, would you expect the bottom of the ATC curve to be greater than, less than, or equal to 3?

Accepted Answer

Greater than 3. MC intersects AVC at its...

Question 2

Markets characterized by declining long-run average costs are often referred to as

Accepted Answer

A)  perfect competition.
B)  diseconomies of scale.
C)  natural monopolies.
D)  nonprofit organizations. C

Question 3

Once we enter the region of diminishing returns, total variable cost

Accepted Answer

A)  increases at a decreasing rate.
B)  increases at an increasing rate.
C)  decreases at a decreasing rate.
D)  decreases at an increasing rate.

Question 4

The variable cost of zero units of output is equal to

Accepted Answer

A)  total cost.
B)  total fixed cost.
C)  zero.
D)  one.

Question 5

When costs are at a minimum,

Accepted Answer

A)  the ratio of the MPL/MPK 
B)  MPL = MPK.
C)  the extra output we get from the last dollar spent on an input must be the same for all inputs.
D)  Price L = Price K.

Question 6

A firm that is trying to produce a given level of output Q0 at the lowest possible cost will

Accepted Answer

A)  select the input combination at which an isocost line is tangent to the Q0 isoquant.
B)  select the input combination at which an isocost line is above the Q0 isoquant.
C)  select the input combination at which an isocost line is below the Q0 isoquant.
D)  choose to produce at a level where variable costs are less than or equal to fixed costs.

Question 7

Let TC(Q)  = 10 + Q; MC equals

Accepted Answer

A)  10.
B)  1.
C)  11.
D)  It cannot be determined from the information given B

Question 8

When marginal cost is less than average total cost, ______ as output increases.

Accepted Answer

A)  average total cost must be increasing
B)  average variable cost must be decreasing
C)  average fixed cost must be increasing
D)  average total cost must be decreasing

Question 9

If the total cost function is TC = 10Q3 - 50Q2 + 1000Q + 500, what is the equation for AFC?

Accepted Answer

Question 10

If the variable cost curve is a straight line, then the

Accepted Answer

A)  marginal cost curve will be U-shaped.
B)  marginal cost curve may be U-shaped.
C)  marginal cost curve will be horizontal.
D)  marginal cost curve is upward sloping.

Question 11

The vertical distance between the average variable cost and average total cost curves

Accepted Answer

A)  is everywhere equal to total fixed costs.
B)  is everywhere equal to marginal cost.
C)  increases at a decreasing rate.
D)  decreases as quantity increases.

Question 12

The vertical distance between the average total cost and the average variable cost curves at any level of output will always be

Accepted Answer

A)  variable cost.
B)  average fixed cost.
C)  fixed cost less variable cost.
D)  total cost less fixed cost.

Question 13

The vertical distance between the total variable cost and total cost curves

Accepted Answer

A)  is everywhere equal to zero.
B)  is everywhere equal to marginal cost.
C)  is everywhere equal to total fixed cost.
D)  increases at a decreasing rate.

Question 14

Average fixed cost

Accepted Answer

A)  is a horizontal line.
B)  increases steadily as output increases.
C)  decreases steadily as output increases.
D)  exhibits diminishing returns.

Question 15

Let the TC curve be given by the equation TC(Q)  = 6Q. The FC curve can be expressed as

Accepted Answer

A)  6.
B)  6Q.
C)  0.
D)  It cannot be determined with the information given

Question 16

When marginal cost is greater than average total cost,

Accepted Answer

A)  average total cost must be increasing with output.
B)  average variable cost must be decreasing with output.
C)  average fixed cost must be increasing with output.
D)  marginal cost must be increasing with output. A

Question 17

Which statement is false?

Accepted Answer

A)  Short-run cost assumes a fixed capital size, while long-run cost includes all possible capital levels in determining cost.
B)  Short-run total cost can never be less than long-run total cost at any given output level.
C)  Long-run marginal cost never intersects long-run average cost as long as increasing returns to scale are present.
D)  Short run ATC and long run ATC are never equal except at the minimum point on the long run ATC curve.

Question 18

If the total variable cost curve is a straight line then the

Accepted Answer

A)  total cost curve will also be a straight line.
B)  total cost curve may or may not be a straight line.
C)  marginal cost function is downward sloping.
D)  marginal cost function is upward sloping.

Question 19

The total cost curve

Accepted Answer

A)  is a horizontal line.
B)  increases at a decreasing rate due to diminishing returns.
C)  is parallel to the total fixed cost curve.
D)  is parallel to and above the total variable cost curve.

Question 20

Let the TC curve be given by the equation TC(Q)  = 10 + 5Q. The average variable cost can be expressed as

Accepted Answer

A)  10.
B)  (10/Q)  + 5.
C)  10 + (5/Q) .
D)  It cannot be determined.

Exam 9: Costs

If the total cost function is TC = Q3 - 6Q2 + 14Q + 75, would you expect the bottom of the ATC curve to be greater than, less than, or equal to 3?

Correct AnswerverifiedGreater than 3. MC intersects AVC at its...View AnswerShow Answer

Markets characterized by declining long-run average costs are often referred to as

Correct AnswerverifiedC

Once we enter the region of diminishing returns, total variable cost

Correct AnswerverifiedShow Answer

The variable cost of zero units of output is equal to

Correct AnswerverifiedShow Answer

When costs are at a minimum,

Correct AnswerverifiedShow Answer

A firm that is trying to produce a given level of output Q0 at the lowest possible cost will

Correct AnswerverifiedShow Answer

Let TC(Q) = 10 + Q; MC equals

Correct AnswerverifiedB

When marginal cost is less than average total cost, ______ as output increases.

Correct AnswerverifiedShow Answer

If the total cost function is TC = 10Q3 - 50Q2 + 1000Q + 500, what is the equation for AFC?

Correct AnswerverifiedShow Answer

If the variable cost curve is a straight line, then the

Correct AnswerverifiedShow Answer

The vertical distance between the average variable cost and average total cost curves

Correct AnswerverifiedShow Answer

The vertical distance between the average total cost and the average variable cost curves at any level of output will always be

Correct AnswerverifiedShow Answer

The vertical distance between the total variable cost and total cost curves

Correct AnswerverifiedShow Answer

Average fixed cost

Correct AnswerverifiedShow Answer

Let the TC curve be given by the equation TC(Q) = 6Q. The FC curve can be expressed as

Correct AnswerverifiedShow Answer

When marginal cost is greater than average total cost,

Correct AnswerverifiedA

Which statement is false?

Correct AnswerverifiedShow Answer

If the total variable cost curve is a straight line then the

Correct AnswerverifiedShow Answer

The total cost curve

Correct AnswerverifiedShow Answer

Let the TC curve be given by the equation TC(Q) = 10 + 5Q. The average variable cost can be expressed as

Correct AnswerverifiedShow Answer

If the total cost function is TC = Q³ - 6Q² + 14Q + 75, would you expect the bottom of the ATC curve to be greater than, less than, or equal to 3?

Correct Answer
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Greater than 3. MC intersects AVC at its...
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C

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A firm that is trying to produce a given level of output Q₀ at the lowest possible cost will

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B

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If the total cost function is TC = 10Q³ - 50Q² + 1000Q + 500, what is the equation for AFC?

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A

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