Question 1

Draw total fixed cost, total variable cost, and total cost on the same set of axes.

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Question 2

What is meant by marginal revenue?

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Question 3

The president of a company is told that the fixed costs next year will be higher than anticipated. Even so he has told his operations managers that this should not affect their production levels. Comment on this statement.

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Question 4

How is total revenue calculated? If a firm sells 350 units of a product at a price of $8 each, what is the firm's total revenue?

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Question 5

Laura's Cookie Company faces the following cost schedule for making cookies by the dozen:
  Fill in the blanks above.

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Question 6

If marginal costs for a firm are constant would the average total cost curve still have be u-shaped? Explain.

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Question 7

White Paper Company faces the following cost schedule for producing reams of paper:
  Fill in the columns for average fixed cost, average variable cost, average total cost, and marginal cost.

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Question 8

When XYZ Corporation produces 35 units of output its average variable cost is $5. The marginal cost of the 36th unit of output is $7. If the firm chooses to produce the 36th unit of output, what will happen to average variable cost? Explain.

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Question 9

Assume a firm is operating under conditions of pure competition and faces a marginal cost function that is everywhere below its average total cost. If the firm is producing where marginal revenue equals marginal cost will it be possible for it to make an economic profit? Explain.

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Question 10

It is common to see convenience stores open 24 hours a day even though many times late at night or in the early hours of the morning there are very few customers. What can explain this seemingly odd behavior?

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Question 11

What is the relationship between average total cost and marginal cost?

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Question 12

What is the relationship between average total cost, average variable cost, and average fixed cost? If average total cost is $5.76 and average fixed cost is $1.35, what is the level of average variable cost?

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Question 13

Draw average variable cost, average total cost, and marginal cost on the same set of axes.

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Question 14

Martin's Barber Shop faces the following schedule for producing haircuts:
  Fill in the columns for average fixed cost, average variable cost, average total cost, and marginal cost.

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Question 15

How is it possible for marginal cost to equal to the slope of either the total variable cost function or the total cost function?

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Question 16

When Little Furniture Company produces 100 chairs - its average variable cost is $25. The marginal cost of the 101st chair is $22. If the firm chooses to produce the 101st chair, what will happen to average variable cost? Explain.

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Question 17

The market for light bulbs is perfectly competitive and can be represented by the following market demand and supply curves:  Draw the demand curve as seen by one firm in the light bulb industry. Explain the shape of this curve.

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Question 18

When Peter's Pizza Company produces 50 pizzas, its average total cost is $8. The marginal cost of the 51st pizza is $7. If the firm chooses to produce the 51st pizza, what will happen to average total cost? Explain.

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Question 19

How is average total cost calculated? If the total cost of producing 190 units of output is $355, what is the average total cost?

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Quiz 8: Short-Run Costs and Output Decisions