Question 1

The vertical distance between average total cost and average variable cost curves decreases as output increases because

Accepted Answer

A)  it is traditional to draw the curves that way.
B)  marginal cost first falls and then rises.
C)  in geometry,both curves must reach their minimums on the marginal cost curve.
D)  marginal product first rises and then falls.
E)  average fixed cost decreases as output increases.

Question 2

Which of the following statements about average costs is false?

Accepted Answer

A)  The difference between average total cost and average variable cost does not change as output increases.
B)  Average fixed cost decreases as output increases.
C)  Average variable cost first decreases and then increases as output increases.
D)  Average total cost first decreases and then increases as output increases.
E)  The difference between average total cost and average variable cost is average fixed cost.

Question 3

Capital expansion causes the average total cost to decrease at low levels of output but increase at high levels of output.

Accepted Answer

A) True 
 B)False

Question 4

Economies of scale and economies of scope are related and occur for the same reason.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 8-10 
-Refer to Exhibit 8-10.Diseconomies of scale begin when output is at

Accepted Answer

A)  3 units.
B)  4 units.
C)  5 units.
D)  6 units.
E)  7 units.

Question 6

Exhibit 8-7 
-Refer to Exhibit 8-7.If the market price is $90,then the amount of total economic profits for a profit-maximizing,price-taking firm is

Accepted Answer

A)  $0.
B)  -$1,000.
C)  $1,000.
D)  -$3,000.
E)  $3,000.

Question 7

The scale of a firm increases when

Accepted Answer

A)  only one input increases while other inputs remain constant.
B)  one input remains constant while other inputs increase.
C)  some inputs increase while other inputs decrease.
D)  all inputs remain constant.
E)  all inputs increase.

Question 8

A production function relates output to its price.

Accepted Answer

A) True 
 B)False

Question 9

If total revenue is greater than variable costs but less than total costs,a firm should remain in operation because its revenue is sufficient to cover variable costs and some fixed costs.

Accepted Answer

A) True 
 B)False

Question 10

If a competitive firm is losing money in the short run,then it should

Accepted Answer

A)  never shut down in the short run.
B)  shut down only if P is less than ATC.
C)  shut down only if its losses are greater than its fixed costs.
D)  shut down.
E)  shut down only if TR is greater than TVC.

Question 11

An expansion of capital increases fixed costs but does not affect variable costs.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 8-6 
-Refer to Exhibit 8-6.At an output level of 300 units,variable costs equal

Accepted Answer

A)  $1,650.
B)  $1,800.
C)  $450.
D)  $3,000.
E)  $1,350.

Question 13

In the long run,a firm can increase production by

Accepted Answer

A)  increasing variable costs.
B)  increasing capital input.
C)  reducing labor input.
D)  shutting down.
E)  minimizing fixed costs.

Question 14

A merger between two firms producing different products may experience

Accepted Answer

A)  increasing returns.
B)  economies of scale.
C)  economies of scope.
D)  increasing marginal product.
E)  decreasing marginal cost.

Question 15

Exhibit 8-2 
-Refer to Exhibit 8-2.The marginal cost of producing the sixth unit of output is

Accepted Answer

A)  $12.30.
B)  $37.
C)  $54.30.
D)  $67.
E)  $74.

Question 16

Explain what happens to the average total cost curve when capital usage is increased.

Accepted Answer

At relatively low levels of output,avera...

Question 17

Constant returns to scale occur when

Accepted Answer

A)  the marginal cost curve lies below the average cost curve.
B)  the marginal cost curve is increasing at a decreasing rate.
C)  an increase in all resources results in exactly proportionate increases in output.
D)  the long-run average cost curve is declining.
E)  an increase in all resources causes no change in output.

Question 18

Exhibit 8-9 
-Refer to Exhibit 8-9.Calculate the profit if price equals $10 and output is 100 units.

Accepted Answer

$0 Profit ...

Question 19

Constant returns to scale occur when a firm's output remains constant regardless of its input.

Accepted Answer

A) True 
 B)False

Question 20

Consider the weight of the people in a theater.Suppose the first person you notice weighs 160 pounds,the second and third weigh 132 and 108 pounds,respectively.
(A)Graph the average and marginal weight of the three people in the theater,placing weight on the vertical axis and quantity of people on the horizontal axis in the same order that you notice them.
(B)What do you notice about the relationship between marginal and average weight?
(C)Suppose the fourth person coming into the theater weighs 170 pounds.What happens to the average weight?

Accepted Answer

(A) The following graph illustrates the ...

Exam 8: Costs and the Changes at Firms Over Time

Capital expansion causes the average total cost to decrease at low levels of output but increase at high levels of output.

Correct Answer
verified

Explain what happens to the average total cost curve when capital usage is increased.

Correct Answer
verified
At relatively low levels of output,avera...
View Answer

Constant returns to scale occur when a firm's output remains constant regardless of its input.

Correct Answer
verified

Exhibit 8-7 -Refer to Exhibit 8-7.If the market price is $90,then the amount of total economic profits for a profit-maximizing,price-taking firm is

Correct Answer
verified

A merger between two firms producing different products may experience

Correct Answer
verified

In the long run,a firm can increase production by

Correct Answer
verified

The scale of a firm increases when

Correct Answer
verified

If total revenue is greater than variable costs but less than total costs,a firm should remain in operation because its revenue is sufficient to cover variable costs and some fixed costs.

Correct Answer
verified

If a competitive firm is losing money in the short run,then it should

Correct Answer
verified

An expansion of capital increases fixed costs but does not affect variable costs.

Correct Answer
verified

Exhibit 8-6 -Refer to Exhibit 8-6.At an output level of 300 units,variable costs equal

Correct Answer
verified

A production function relates output to its price.

Correct Answer
verified

Exhibit 8-2 -Refer to Exhibit 8-2.The marginal cost of producing the sixth unit of output is

Correct Answer
verified

Economies of scale and economies of scope are related and occur for the same reason.

Correct Answer
verified

Which of the following statements about average costs is false?

Correct Answer
verified

Exhibit 8-10 -Refer to Exhibit 8-10.Diseconomies of scale begin when output is at

Correct Answer
verified

Exhibit 8-9 -Refer to Exhibit 8-9.Calculate the profit if price equals $10 and output is 100 units.

Correct Answer
verified
$0 Profit ...
View Answer

Constant returns to scale occur when

Correct Answer
verified

Correct Answer
verified
(A) The following graph illustrates the ...
View Answer

The vertical distance between average total cost and average variable cost curves decreases as output increases because

Correct Answer
verified

Exam 8: Costs and the Changes at Firms Over Time

Capital expansion causes the average total cost to decrease at low levels of output but increase at high levels of output.

Correct AnswerverifiedShow Answer

Explain what happens to the average total cost curve when capital usage is increased.

Correct AnswerverifiedAt relatively low levels of output,avera...View AnswerShow Answer

Constant returns to scale occur when a firm's output remains constant regardless of its input.

Correct AnswerverifiedShow Answer

Exhibit 8-7 -Refer to Exhibit 8-7.If the market price is $90,then the amount of total economic profits for a profit-maximizing,price-taking firm is

Correct AnswerverifiedShow Answer

A merger between two firms producing different products may experience

Correct AnswerverifiedShow Answer

In the long run,a firm can increase production by

Correct AnswerverifiedShow Answer

The scale of a firm increases when

Correct AnswerverifiedShow Answer

If total revenue is greater than variable costs but less than total costs,a firm should remain in operation because its revenue is sufficient to cover variable costs and some fixed costs.

Correct AnswerverifiedShow Answer

If a competitive firm is losing money in the short run,then it should

Correct AnswerverifiedShow Answer

An expansion of capital increases fixed costs but does not affect variable costs.

Correct AnswerverifiedShow Answer

Exhibit 8-6 -Refer to Exhibit 8-6.At an output level of 300 units,variable costs equal

Correct AnswerverifiedShow Answer

A production function relates output to its price.

Correct AnswerverifiedShow Answer

Exhibit 8-2 -Refer to Exhibit 8-2.The marginal cost of producing the sixth unit of output is

Correct AnswerverifiedShow Answer

Economies of scale and economies of scope are related and occur for the same reason.

Correct AnswerverifiedShow Answer

Which of the following statements about average costs is false?

Correct AnswerverifiedShow Answer

Exhibit 8-10 -Refer to Exhibit 8-10.Diseconomies of scale begin when output is at

Correct AnswerverifiedShow Answer

Exhibit 8-9 -Refer to Exhibit 8-9.Calculate the profit if price equals $10 and output is 100 units.

Correct Answerverified$0 Profit ...View AnswerShow Answer

Constant returns to scale occur when

Correct AnswerverifiedShow Answer

Correct Answerverified(A) The following graph illustrates the ...View AnswerShow Answer

The vertical distance between average total cost and average variable cost curves decreases as output increases because

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
At relatively low levels of output,avera...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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$0 Profit ...
View Answer

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Correct Answer
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(A) The following graph illustrates the ...
View Answer

Correct Answer
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