Question 1

Exhibit 21-11  Refer to Exhibit 21-11. Average total cost of the sixth unit of output is
A)$50.
B)$100.
C)$300.
D)$90.83.

Accepted Answer

The average total cost of the sixth unit of output can be found by dividing the total cost of producing 6 units ($545) by the quantity of output (6). This gives an average total cost of $90.83 per unit. Therefore, the best choice is D.

Question 2

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.
A)marginal
B)average fixed
C)average total
D)fixed

Accepted Answer

When the marginal physical product (MPP) is constant, the marginal cost (MC) remains constant because MC is inversely related to MPP.

Question 3

The long-run average total cost (LRATC)curve shows the
A)lowest average variable cost at which the firm can produce any given level of output.
B)lowest unit cost at which the firm can produce any given level of output.
C)highest average fixed cost at which the firm can produce any given level of output.
D)lowest marginal cost at which the firm can produce any given level of output.

Accepted Answer

The LRATC curve shows the lowest unit cost at which the firm can produce any given level of output in the long run. This includes both variable and fixed costs, and represents the most efficient level of production for the firm.

Question 4

A rise in variable input prices will affect _____________ costs, but not ______________ costs
A)fixed; variable
B)variable and marginal; fixed
C)fixed; marginal
D)fixed; marginal and variable

Accepted Answer

Variable input prices affect variable costs, which are costs that change with the level of output. Fixed costs, on the other hand, do not change with the level of output.

Question 5

When a firm earns zero economic profit, it has
A)not covered all its explicit costs.
B)not covered all its implicit costs.
C)not earned enough to stay in business.
D)definitely earned an accounting profit if implicit costs are positive.

Accepted Answer

Zero economic profit means the firm has covered both its explicit and implicit costs, which implies it has earned an accounting profit if implicit costs are positive.

Question 6

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.
A)variable; fixed
B)marginal; variable
C)average fixed; average variable
D)marginal; fixed

Accepted Answer

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

Question 7

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.
A)lower; lower
B)lower; unchanged
C)higher; higher
D)lower; higher
E)unchanged; lower

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 8

The vertical distance between the AVC and ATC curves is equal to
A)marginal cost.
B)average fixed cost.
C)accounting profit.
D)economic profit.

Accepted Answer

The answer of The vertical distance between the AVC and...

Question 9

Exhibit 21-11  Refer to Exhibit 21-11. Average variable cost at two units of output is
A)$50.
B)$60.
C)$100.
D)$110.
E)There is not enough information provided to answer this question.

Accepted Answer

Average variable cost is calculated by dividing total variable cost by the level of output. At two units of output, the total variable cost is $120 and dividing by 2 gives an average variable cost of $60.

Question 10

Exhibit 21-11  Refer to Exhibit 21-11. Average fixed cost at two units of output is
A)$50.
B)$60.
C)$100.
D)$110.
E)There is not enough information provided to answer this question.

Accepted Answer

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

Question 11

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
A)total variable cost rises as output rises.
B)of the law of diminishing marginal returns.
C)total fixed cost does not change as output changes.
D)total cost does not change as output changes.

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 12

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 __________.
A)fixed; short run
B)fixed; long run
C)more important than another; long run
D)more important than another; short run

Accepted Answer

When a firm uses a given plant more intensively, it is holding one factor fixed (the plant). Therefore, the time period of production is most likely the short run.

Question 13

__________ 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.
A)Economies of; diseconomies of
B)Constant returns to; economies of
C)Diseconomies of; constant returns to
D)Diseconomies of; economies of

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 14

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
A)somewhere between 100 and 150 units.
B)at 100 units.
C)at 150 units.
D)at less than 100 units.
E)at greater than 150 units.

Accepted Answer

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

Question 15

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
A)fewer firms in industry Y than X.
B)fewer firms in industry X than Y.
C)bigger firms in industry Y than X.
D)bigger firms in industry X than Y.

Accepted Answer

The minimum efficient scale is larger in industry Y (10%) than in industry X (5%), indicating that industry Y requires larger production to achieve efficiency, leading to fewer firms in industry Y.

Question 16

Which of the following will not change the cost curves for good X?
A)a change in the price good X
B)a change in input prices necessary for the production of good X
C)a change in taxes paid by the producers of good X
D)a change in technology in the production of good X

Accepted Answer

Changes in the price of good X will not affect the cost curves, as they are related to the production process and the costs incurred by the producer. Changes in input prices, taxes or technology will affect the cost curves, as they will impact the production process and the costs of producing the good.

Question 17

Which of the following statements is true?
A)At a high level of output, AFC is zero.
B)If the law of diminishing marginal returns did not exist, then the marginal cost curve would not have an upward-sloping portion.
C)The marginal cost curve cuts the average fixed cost curve at its minimum.
D)There are no fixed costs in the short run.

Accepted Answer

The law of diminishing marginal returns states that as more and more units of a variable input are added to a fixed input, the marginal product of the variable input will eventually decrease. This means that producing additional units of output will require more and more of the variable input, causing the marginal cost to increase. Therefore, if the law of diminishing marginal returns did not exist, the marginal cost curve would be flat or downward-sloping, rather than having an upward-sloping portion. The other statement choices are incorrect.

Question 18

Exhibit 21-11  Refer to Exhibit 21-11. Marginal cost of the first unit of output is
A)$170.
B)$150.
C)$70.
D)$90.83.

Accepted Answer

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

Question 19

Exhibit 21-11  Refer to Exhibit 21-11. Marginal cost of the sixth unit of output is
A)$100.
B)$150.
C)$90.
D)$90.83.

Accepted Answer

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

Question 20

Economies of scale are relevant to the __________, whereas the law of diminishing marginal returns is relevant to the __________.
A)long run; short run
B)short run; long run
C)industry; firm
D)firm; industry
E)firm in the short run; industry in the long run

Accepted Answer

Economies of scale refer to the long-run average cost of production, whereas the law of diminishing marginal returns refers to the short-run production process. Therefore, the correct answer is A) long run; short run.

Quiz 8: Production and Costs

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

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.

The long-run average total cost (LRATC) curve shows the

A rise in variable input prices will affect _ costs, but not __ costs

When a firm earns zero economic profit, it has

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.

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.

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

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 fixed cost at two units of output is

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

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 .

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.

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

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

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

Which of the following statements is true?

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. Marginal 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 .