Question 1

The short-run average total cost curve eventually begins to increase at an increasing rate because of

Accepted Answer

The short-run average total cost curve begins to increase at an increasing rate due to diminishing returns, which occur when adding more of one factor of production (e.g., labor) to a fixed amount of another factor (e.g., capital) results in smaller increases in output.

Question 2

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow.  Figure 8.6
-Refer to Figure 8.6. Average variable cost is represented by

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 3

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow.  Figure 8.6
-Refer to Figure 8.6. Curve 2 is Outdoor Equipment's

Accepted Answer

Curve 2 represents the average variable cost (AVC) curve. This is because it starts from the origin and initially decreases, reaching a minimum before increasing as output increases, which is characteristic of AVC curves due to economies of scale and the law of diminishing returns.

Question 4

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow.  Figure 8.6
-Refer to Figure 8.6. Outdoor Equipmentʹs ________ are minimized at the output level where curves 1 and 3 intersect.

Accepted Answer

At the output level where the marginal cost curve (curve 1) intersects the average total cost curve (curve 3), average total costs are minimized. This is a fundamental principle of microeconomics, indicating the most efficient scale of production for minimizing costs.

Question 5

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow.  Figure 8.6
-Refer to Figure 8.6. Average fixed cost is represented by

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 6

Average total cost

Accepted Answer

Average total cost is the average cost of producing each unit of output.

Question 7

The law of diminishing marginal returns

Accepted Answer

The law of diminishing marginal returns implies that as more units of a variable input are added to fixed inputs, the additional output from each new unit of input eventually decreases. This leads to an increase in marginal cost, which in turn causes both AVC and ATC to eventually increase at an increasing rate.

Question 8

If marginal cost is below average total cost, average total cost will

Accepted Answer

When marginal cost is below average total cost, it pulls the average total cost down, causing it to decrease.

Question 9

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow.  Figure 8.6
-Refer to Figure 8.6. Marginal cost is represented by

Accepted Answer

Marginal cost is the change in total cost that results from producing one additional unit of output. In Figure 8.6, curve 1 shows the total cost of producing different quantities of output. The slope of curve 1 at any point is equal to the marginal cost of producing that quantity of output. Therefore, curve 1 represents the marginal cost.

Question 10

The average variable cost of producing ice cream sundaes are minimized when 100 sundaes are produced. The total cost of producing 100 sundaes is $500. If fixed cost of production is $200, what is the marginal cost of producing the 100th sundae?

Accepted Answer

The answer of The average variable cost of producing ice...

Question 11

The Framing Gallery frames posters. The Framing Gallery has total fixed costs of $500. The Framing Gallery's average variable cost is $20 and its average total cost is $25. The Framing Gallery is currently framing

Accepted Answer

The answer of The Framing Gallery frames posters. The Framing...

Question 12

Average variable cost and average total costs get closer together as output increases because

Accepted Answer

As output increases, the fixed costs (which do not change with the level of output) are spread over more units of production, causing the average fixed cost to decrease. Since average total cost is the sum of average variable cost and average fixed cost, as the average fixed cost decreases with increased output, the difference between average total cost and average variable cost narrows.

Question 13

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow.  Figure 8.6
-Refer to Figure 8.6. Outdoor Equipment's average variable costs are minimized at the output level

Accepted Answer

Average variable cost is minimized at the output level where the AVC curve intersects the MC curve.

Question 14

At the point where marginal cost equals average total cost, average total cost will be

Accepted Answer

When marginal cost equals average total cost, average total cost is at its minimum. This is because the marginal cost curve intersects the average total cost curve at its lowest point, indicating the most efficient scale of production.

Question 15

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow.  Figure 8.6
-Refer to Figure 8.6. The vertical distance AB is Outdoor Equipment's

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 16

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow.  Figure 8.6
-Refer to Figure 8.6. Curve 3 is Outdoor Equipment's

Accepted Answer

Curve 3 is the average total cost curve, which typically shows the total cost per unit of output, including both fixed and variable costs.

Question 17

A firm is producing output less than the output associated with the minimum point on the firm's short run average variable cost curve. At this level of output the firm uses its fixed capital input ________ and its variable labor input ________.

Accepted Answer

When a firm is producing output less than the output associated with the minimum point on the firm's short-run average variable cost curve, it is not operating at its most efficient level. This means both its fixed capital input and its variable labor input are being used at a level higher than the lowest average cost, as the firm has not reached the scale of production where these inputs are utilized most efficiently.

Question 18

In the short run a firm's lowest cost level of output is the minimum point on its ________ cost curve.

Accepted Answer

In the short run, a firm's lowest cost level of output is the minimum point on its average total cost curve. This point represents the most efficient scale of production where average total costs are minimized.

Question 19

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow.  Figure 8.6
-Refer to Figure 8.6. Curve 1 is Outdoor Equipment's

Accepted Answer

Curve 1 is Outdoor Equipment's marginal cost curve because it shows the change in total cost that results from producing one additional unit of output.

Question 20

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow.  Figure 8.6
-Refer to Figure 8.6. Average total cost is represented by

Accepted Answer

Average total cost is typically represented by a U-shaped curve due to economies and diseconomies of scale, which matches the description of curve 3.

Quiz 8: Short-Run Costs and Output Decisions

The short-run average total cost curve eventually begins to increase at an increasing rate because of

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow. Figure 8.6 -Refer to Figure 8.6. Average variable cost is represented by

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow. Figure 8.6 -Refer to Figure 8.6. Curve 2 is Outdoor Equipment's

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow. Figure 8.6 -Refer to Figure 8.6. Outdoor Equipmentʹs ________ are minimized at the output level where curves 1 and 3 intersect.

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow. Figure 8.6 -Refer to Figure 8.6. Average fixed cost is represented by

Average total cost

The law of diminishing marginal returns

If marginal cost is below average total cost, average total cost will

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow. Figure 8.6 -Refer to Figure 8.6. Marginal cost is represented by

The average variable cost of producing ice cream sundaes are minimized when 100 sundaes are produced. The total cost of producing 100 sundaes is $500. If fixed cost of production is $200, what is the marginal cost of producing the 100th sundae?

The Framing Gallery frames posters. The Framing Gallery has total fixed costs of $500. The Framing Gallery's average variable cost is $20 and its average total cost is $25. The Framing Gallery is currently framing

Average variable cost and average total costs get closer together as output increases because

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow. Figure 8.6 -Refer to Figure 8.6. Outdoor Equipment's average variable costs are minimized at the output level

At the point where marginal cost equals average total cost, average total cost will be

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow. Figure 8.6 -Refer to Figure 8.6. The vertical distance AB is Outdoor Equipment's

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow. Figure 8.6 -Refer to Figure 8.6. Curve 3 is Outdoor Equipment's

A firm is producing output less than the output associated with the minimum point on the firm's short run average variable cost curve. At this level of output the firm uses its fixed capital input and its variable labor input .

In the short run a firm's lowest cost level of output is the minimum point on its ________ cost curve.

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow. Figure 8.6 -Refer to Figure 8.6. Curve 1 is Outdoor Equipment's

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow. Figure 8.6 -Refer to Figure 8.6. Average total cost is represented by