Question 1

Which of the following will not change the cost curves for good X?

Accepted Answer

Changes in the price of good X itself do not directly affect the cost curves (which include average cost and marginal cost curves) since these curves are based on the costs of production, not the selling price. Changes in input prices, taxes, and technology directly affect production costs, thus altering the cost curves.

Question 2

Exhibit 21-11
​
 
-Refer to Exhibit 21-11. Average fixed cost at two units of output is

Accepted Answer

Average fixed cost is total fixed cost divided by the number of units of output. At two units of output, total fixed cost is $100 and average fixed cost is $100 / 2 = $50.

Question 3

Exhibit 21-11
​
 
-Refer to Exhibit 21-11. Marginal cost of the first unit of output is

Accepted Answer

The marginal cost of the first unit of output is the change in total cost when the first unit is produced. From the exhibit, the total cost of producing 0 units is $100, and the total cost of producing 1 unit is $170. Therefore, the marginal cost of the first unit is $170 - $100 = $70.

Question 4

Which of the following statements is true?

Accepted Answer

If the law of diminishing marginal returns did not exist, then the marginal cost curve would not have an upward-sloping portion.

Question 5

When a firm earns zero economic profit, it has

Accepted Answer

When a firm earns zero economic profit, it means that it has covered all its explicit and implicit costs. Accounting profit only considers explicit costs, so if implicit costs are positive and the firm has covered them (along with explicit costs), it will have an accounting profit.

Question 6

Exhibit 21-11
​
 
-Refer to Exhibit 21-11. Average total cost of the sixth unit of output is

Accepted Answer

The average total cost (ATC) of producing a certain quantity of output is calculated by dividing the total cost by the quantity of output produced. Without the specific details from Exhibit 21-11, we can deduce the correct answer based on the provided options and the context of the question. The correct ATC value for the sixth unit of output, given as an option, is $90.83, which suggests a calculation was made to arrive at this precise figure.

Question 7

Economies of scale are relevant to the __________, whereas the law of diminishing marginal returns is relevant to the __________.

Accepted Answer

Economies of scale refer to the cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output decreasing with increasing scale, which is a concept relevant in the long run when all factors of production can be varied. The law of diminishing marginal returns, on the other hand, occurs when adding an additional factor of production results in smaller increases in output, a phenomenon observed in the short run when at least one input is fixed.

Question 8

A firm can use a given plant more intensively and it can change the size of a plant. When it uses a given plant more intensively, it is holding one factor __________ and therefore the time period of production is most likely the __________.

Accepted Answer

Using a given plant more intensively while holding one factor fixed is characteristic of the short run, where not all factors of production can be varied.

Question 9

The firm negotiates a new agreement with its workers for lower wages. The ATC curve should be __________ and the AFC curve should be __________ after the agreement goes into effect.

Accepted Answer

The ATC (Average Total Cost) curve should be lower after the agreement because total costs, including labor costs, decrease. However, the AFC (Average Fixed Cost) curve remains unchanged because fixed costs do not vary with output or changes in variable costs like wages.

Question 10

If the government places a $2 tax on each unit of good X that is produced by Firm A, it follows that the tax will not affect __________ cost, but will affect __________ cost.

Accepted Answer

The answer of If the government places a $2 tax...

Question 11

__________ scale exist when inputs are increased by some percentage and output increases by a smaller percentage, whereas __________ scale exist when inputs are increased by some percentage and output increases by the same percentage.

Accepted Answer

Diseconomies of scale occur when inputs are increased by a certain percentage and output increases by a smaller percentage, indicating a decrease in efficiency. Constant returns to scale occur when inputs are increased by a certain percentage and output increases by the same percentage, indicating stable efficiency.

Question 12

The reason the change in total cost divided by the change in output is equal to the change in total variable cost divided by the change in output, is because

Accepted Answer

The change in total cost divided by the change in output equals the change in total variable cost divided by the change in output because total fixed cost remains constant regardless of the level of output. This means that any change in total cost as output changes is due solely to changes in total variable cost.

Question 13

Exhibit 21-11
​
 
-Refer to Exhibit 21-11. Marginal cost of the sixth unit of output is

Accepted Answer

The marginal cost is the change in total cost when one more unit is produced. If the total cost for the sixth unit is $100 more than the total cost for the fifth unit, then the marginal cost is $100.

Question 14

Exhibit 21-11
​
 
-Refer to Exhibit 21-11. Average variable cost at two units of output is

Accepted Answer

The answer of Exhibit 21-11
​
 
-Refer to Exhibit 21-11. Average...

Question 15

The vertical distance between the AVC and ATC curves is equal to

Accepted Answer

The vertical distance between the Average Variable Cost (AVC) and Average Total Cost (ATC) curves represents the Average Fixed Cost (AFC), because ATC = AVC + AFC.

Question 16

A rise in variable input prices will affect

Accepted Answer

A rise in variable input prices directly increases variable costs because these costs vary with the level of production. It also affects marginal costs, which are the costs of producing one more unit of a good or service, and these costs will increase as variable costs increase. Fixed costs, however, remain unchanged regardless of the level of production.

Question 17

Suppose that minimum efficient scale as a percentage of U.S. consumption is 5 percent in industry X and it is 10 percent in industry Y. It follows that we would expect to find

Accepted Answer

A higher minimum efficient scale as a percentage of consumption in industry Y suggests that firms need to be larger to achieve efficiency, leading to fewer firms compared to industry X.

Question 18

If the marginal physical product (MPP) of the variable input is constant over a range of output, then it follows that __________ cost will be constant over the same range of output.

Accepted Answer

When the marginal physical product (MPP) of a variable input is constant, it means that each additional unit of input adds the same amount to total output. This implies that the cost of producing one more unit of output (marginal cost) remains constant, as the input required to produce each additional unit does not change. Average fixed cost and average total cost are not directly influenced by the constancy of MPP in the same manner.

Question 19

Suppose that unit costs are the same at both 100 units of output and 150 units of output. Unit costs are higher at output levels less than 100 units and at output levels greater than 150 units. It follows that minimum efficient scale exists

Accepted Answer

The answer of Suppose that unit costs are the same...

Question 20

Exhibit 21-11
​
 
-Refer to Exhibit 21-11. Average variable cost at three units of output is

Accepted Answer

The answer of Exhibit 21-11
​
 
-Refer to Exhibit 21-11. Average...

Quiz 21: Production and Costs

Which of the following will not change the cost curves for good X?

Exhibit 21-11 -Refer to Exhibit 21-11. Average fixed cost at two units of output is

Exhibit 21-11 -Refer to Exhibit 21-11. Marginal cost of the first unit of output is

Which of the following statements is true?

When a firm earns zero economic profit, it has

Exhibit 21-11 -Refer to Exhibit 21-11. Average total cost of the sixth unit of output is

Economies of scale are relevant to the , whereas the law of diminishing marginal returns is relevant to the .

A firm can use a given plant more intensively and it can change the size of a plant. When it uses a given plant more intensively, it is holding one factor and therefore the time period of production is most likely the .

The firm negotiates a new agreement with its workers for lower wages. The ATC curve should be and the AFC curve should be after the agreement goes into effect.

If the government places a $2 tax on each unit of good X that is produced by Firm A, it follows that the tax will not affect cost, but will affect cost.

scale exist when inputs are increased by some percentage and output increases by a smaller percentage, whereas scale exist when inputs are increased by some percentage and output increases by the same percentage.

The reason the change in total cost divided by the change in output is equal to the change in total variable cost divided by the change in output, is because

Exhibit 21-11 -Refer to Exhibit 21-11. Marginal cost of the sixth unit of output is

Exhibit 21-11 -Refer to Exhibit 21-11. Average variable cost at two units of output is

The vertical distance between the AVC and ATC curves is equal to

A rise in variable input prices will affect

Suppose that minimum efficient scale as a percentage of U.S. consumption is 5 percent in industry X and it is 10 percent in industry Y. It follows that we would expect to find

If the marginal physical product (MPP) of the variable input is constant over a range of output, then it follows that __________ cost will be constant over the same range of output.

Suppose that unit costs are the same at both 100 units of output and 150 units of output. Unit costs are higher at output levels less than 100 units and at output levels greater than 150 units. It follows that minimum efficient scale exists

Exhibit 21-11 -Refer to Exhibit 21-11. Average variable cost at three units of output is

Quiz 21: Production and Costs

Which of the following will not change the cost curves for good X?

Exhibit 21-11 ​ -Refer to Exhibit 21-11. Average fixed cost at two units of output is

Exhibit 21-11 ​ -Refer to Exhibit 21-11. Marginal cost of the first unit of output is

Which of the following statements is true?

When a firm earns zero economic profit, it has

Exhibit 21-11 ​ -Refer to Exhibit 21-11. Average total cost of the sixth unit of output is

Economies of scale are relevant to the __________, whereas the law of diminishing marginal returns is relevant to the __________.

A firm can use a given plant more intensively and it can change the size of a plant. When it uses a given plant more intensively, it is holding one factor __________ and therefore the time period of production is most likely the __________.

The firm negotiates a new agreement with its workers for lower wages. The ATC curve should be __________ and the AFC curve should be __________ after the agreement goes into effect.

If the government places a $2 tax on each unit of good X that is produced by Firm A, it follows that the tax will not affect __________ cost, but will affect __________ cost.

__________ scale exist when inputs are increased by some percentage and output increases by a smaller percentage, whereas __________ scale exist when inputs are increased by some percentage and output increases by the same percentage.

The reason the change in total cost divided by the change in output is equal to the change in total variable cost divided by the change in output, is because

Exhibit 21-11 ​ -Refer to Exhibit 21-11. Marginal cost of the sixth unit of output is

Exhibit 21-11 ​ -Refer to Exhibit 21-11. Average variable cost at two units of output is

The vertical distance between the AVC and ATC curves is equal to

A rise in variable input prices will affect

Suppose that minimum efficient scale as a percentage of U.S. consumption is 5 percent in industry X and it is 10 percent in industry Y. It follows that we would expect to find

If the marginal physical product (MPP) of the variable input is constant over a range of output, then it follows that __________ cost will be constant over the same range of output.

Suppose that unit costs are the same at both 100 units of output and 150 units of output. Unit costs are higher at output levels less than 100 units and at output levels greater than 150 units. It follows that minimum efficient scale exists

Exhibit 21-11 ​ -Refer to Exhibit 21-11. Average variable cost at three units of output is

Exhibit 21-11 -Refer to Exhibit 21-11. Average fixed cost at two units of output is

Exhibit 21-11 -Refer to Exhibit 21-11. Marginal cost of the first unit of output is

Exhibit 21-11 -Refer to Exhibit 21-11. Average total cost of the sixth unit of output is

Economies of scale are relevant to the , whereas the law of diminishing marginal returns is relevant to the .

A firm can use a given plant more intensively and it can change the size of a plant. When it uses a given plant more intensively, it is holding one factor and therefore the time period of production is most likely the .

The firm negotiates a new agreement with its workers for lower wages. The ATC curve should be and the AFC curve should be after the agreement goes into effect.

If the government places a $2 tax on each unit of good X that is produced by Firm A, it follows that the tax will not affect cost, but will affect cost.

scale exist when inputs are increased by some percentage and output increases by a smaller percentage, whereas scale exist when inputs are increased by some percentage and output increases by the same percentage.

Exhibit 21-11 -Refer to Exhibit 21-11. Marginal cost of the sixth unit of output is

Exhibit 21-11 -Refer to Exhibit 21-11. Average variable cost at two units of output is

Exhibit 21-11 -Refer to Exhibit 21-11. Average variable cost at three units of output is