Question 1

If average variable cost is falling with increasing output,then

Accepted Answer

A)  marginal cost must be less than average variable cost.
B)  marginal cost must be greater than average variable cost.
C)  average fixed cost is rising.
D)  marginal cost must be rising.
E)  marginal cost must be falling.F) A) and B)
G) A) and C)

Question 2

Consider the relationship between the average test score of a class and one student's test score.Suppose there are 10 students with an average test score of 80.Suppose the marginal score is the test score of a new student,Kelly.
(A)If Kelly's score is 90,what will happen to the new average test score of the class?
(B)If Kelly's score is 70,what will happen to the new average test score of the class?
(C)What do your answers to parts (A)and (B)illustrate about the relationship between marginal and average curves in general?

Accepted Answer

(A) If Kelly's score is 90,which is high...

Question 3

Explain the difference between economies of scale and economies of scope.

Accepted Answer

Economies of scale occur when average to...

Question 4

Fixed cost does not vary with the quantity of output that a firm produces.

Accepted Answer

A) True 
 B)False

Question 5

The distance between the average total cost curve and the average variable cost curve decreases as output increases.

Accepted Answer

A) True 
 B)False

Question 6

Explain why average cost is not necessarily rising when marginal cost is rising.

Accepted Answer

Marginal cost first falls,pulling down t...

Question 7

Which of the following typically has a U-shaped curve?

Accepted Answer

A)  Average total cost
B)  Average fixed cost
C)  Fixed cost
D)  Total cost
E)  A production functionF) A) and B)
G) C) and E)

Question 8

If average variable cost is falling,then marginal cost must also be falling.

Accepted Answer

A) True 
 B)False

Question 9

Average product

Accepted Answer

A)  is a standard unit of measure for output.
B)  tells us how much output changes when input changes.
C)  equals Q/L.
D)  is another name for marginal product.
E)  is constant.F) B) and C)
G) None of the above

Question 10

Exhibit 8-11 
-Refer to Exhibit 8-11,which is a long-run average total cost (ATC) schedule.At 3 units of output,the firm's production is in

Accepted Answer

A)  decreasing marginal cost.
B)  increasing marginal product of labor.
C)  constant returns to scale.
D)  economies of scale.
E)  diseconomies of scale.F) All of the above
G) A) and E)

Question 11

Marginal cost is total costs divided by output.

Accepted Answer

A) True 
 B)False

Question 12

The long-run average total cost curve is often bumpy because

Accepted Answer

A)  capital can be varied only in tiny increments.
B)  capital can often be varied only in large increments.
C)  short-run average variable cost curves are bumpy.
D)  short-run average total cost curves are bumpy
E)  capital cannot be increased with labor at the same time.F) None of the above
G) All of the above

Question 13

The shapes of firms' cost curves are important because

Accepted Answer

A)  they tell us whether a firm is profitable or not.
B)  they help us determine how much a firm will produce and even how it will produce it.
C)  cost curves tell us the profitability of the firm.
D)  cost curves give us an idea of what a firm's total revenues will be at different output levels
E)  they help us understand the market that the firm is in.F) A) and B)
G) B) and E)

Question 14

Exhibit 8-2 
-Refer to Exhibit 8-2.At an output quantity of 5 units,the fixed cost is

Accepted Answer

A)  $20.
B)  $100.
C)  $120.
D)  $185.
E)  $326.F) B) and C)
G) A) and E)

Question 15

Fixed costs never decline.

Accepted Answer

A) True 
 B)False

Question 16

A firm is at the breakeven point if its economic profits are greater than zero.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following could be a reason a firm might experience economies of scale?

Accepted Answer

A)  Specialization
B)  Ability to sell in other nations
C)  Inability to use large machinery
D)  Increased bureaucratization
E)  All of theseF) C) and E)
G) B) and C)

Question 18

If total revenue is greater than variable cost but less than total costs,the firm should

Accepted Answer

A)  remain in operation because revenues are sufficient to cover variable costs and some fixed costs.
B)  shut down because revenue is not sufficient to cover all costs.
C)  not make any decisions until it hires an economist.
D)  remain in operation because revenue is sufficient to cover all fixed costs.
E)  shut down because P is less than ATC.F) B) and C)
G) A) and B)

Question 19

In the short run,

Accepted Answer

A)  none of the firm's resources are variable.
B)  at least one of the firm's resources cannot be varied.
C)  the time period always covers one year.
D)  all of the firm's resources are variable.
E)  technically efficient production is not possible.F) A) and D)
G) A) and E)

Question 20

The U-shapes of the long-run and short-run average total cost curves

Accepted Answer

A)  are due to diminishing marginal returns.
B)  occur only in rare circumstances.
C)  have the same cause.
D)  have different causes.
E)  must always occur.F) C) and E)
G) A) and B)

Exam 8: Costs and the Changes at Firms Over Time

If total revenue is greater than variable cost but less than total costs,the firm should

Correct Answer
verified

Explain the difference between economies of scale and economies of scope.

Correct Answer
verified
Economies of scale occur when average to...
View Answer

Which of the following typically has a U-shaped curve?

Correct Answer
verified

Which of the following could be a reason a firm might experience economies of scale?

Correct Answer
verified

Exhibit 8-2 -Refer to Exhibit 8-2.At an output quantity of 5 units,the fixed cost is

Correct Answer
verified

Fixed cost does not vary with the quantity of output that a firm produces.

Correct Answer
verified

The shapes of firms' cost curves are important because

Correct Answer
verified

If average variable cost is falling with increasing output,then

Correct Answer
verified

Fixed costs never decline.

Correct Answer
verified

Exhibit 8-11 -Refer to Exhibit 8-11,which is a long-run average total cost (ATC) schedule.At 3 units of output,the firm's production is in

Correct Answer
verified

The distance between the average total cost curve and the average variable cost curve decreases as output increases.

Correct Answer
verified

Explain why average cost is not necessarily rising when marginal cost is rising.

Correct Answer
verified
Marginal cost first falls,pulling down t...
View Answer

Marginal cost is total costs divided by output.

Correct Answer
verified

The U-shapes of the long-run and short-run average total cost curves

Correct Answer
verified

The long-run average total cost curve is often bumpy because

Correct Answer
verified

In the short run,

Correct Answer
verified

Correct Answer
verified
(A) If Kelly's score is 90,which is high...
View Answer

If average variable cost is falling,then marginal cost must also be falling.

Correct Answer
verified

Average product

Correct Answer
verified

A firm is at the breakeven point if its economic profits are greater than zero.

Correct Answer
verified

Exam 8: Costs and the Changes at Firms Over Time

If total revenue is greater than variable cost but less than total costs,the firm should

Correct AnswerverifiedShow Answer

Explain the difference between economies of scale and economies of scope.

Correct AnswerverifiedEconomies of scale occur when average to...View AnswerShow Answer

Which of the following typically has a U-shaped curve?

Correct AnswerverifiedShow Answer

Which of the following could be a reason a firm might experience economies of scale?

Correct AnswerverifiedShow Answer

Exhibit 8-2 -Refer to Exhibit 8-2.At an output quantity of 5 units,the fixed cost is

Correct AnswerverifiedShow Answer

Fixed cost does not vary with the quantity of output that a firm produces.

Correct AnswerverifiedShow Answer

The shapes of firms' cost curves are important because

Correct AnswerverifiedShow Answer

If average variable cost is falling with increasing output,then

Correct AnswerverifiedShow Answer

Fixed costs never decline.

Correct AnswerverifiedShow Answer

Exhibit 8-11 -Refer to Exhibit 8-11,which is a long-run average total cost (ATC) schedule.At 3 units of output,the firm's production is in

Correct AnswerverifiedShow Answer

The distance between the average total cost curve and the average variable cost curve decreases as output increases.

Correct AnswerverifiedShow Answer

Explain why average cost is not necessarily rising when marginal cost is rising.

Correct AnswerverifiedMarginal cost first falls,pulling down t...View AnswerShow Answer

Marginal cost is total costs divided by output.

Correct AnswerverifiedShow Answer

The U-shapes of the long-run and short-run average total cost curves

Correct AnswerverifiedShow Answer

The long-run average total cost curve is often bumpy because

Correct AnswerverifiedShow Answer

In the short run,

Correct AnswerverifiedShow Answer

Correct Answerverified(A) If Kelly's score is 90,which is high...View AnswerShow Answer

If average variable cost is falling,then marginal cost must also be falling.

Correct AnswerverifiedShow Answer

Average product

Correct AnswerverifiedShow Answer

A firm is at the breakeven point if its economic profits are greater than zero.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Economies of scale occur when average to...
View 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
Marginal cost first falls,pulling down t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
(A) If Kelly's score is 90,which is high...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified