Question 1

If marginal cost is less than average variable cost,

Accepted Answer

When marginal cost is less than average variable cost, it means that the cost of producing one more unit is lower than the average cost of producing all units so far. This suggests that as more units are produced, the average variable cost is falling.

Question 2

If a firm has a fixed cost of $200,000,and a variable cost of $130,000 at an output of one,how much is marginal cost at an output of one?

Accepted Answer

Marginal cost represents the change in total cost that results from producing one additional unit of output.

At an output of one, the total cost is the sum of the fixed cost and variable cost:

Total Cost = Fixed Cost + Variable Cost 
Total Cost = $200,000 + $130,000 
Total Cost = $330,000

To calculate the marginal cost at an output of one, we can find the total cost of producing two units and subtract the total cost of producing one unit:

Marginal Cost = (Total Cost of Two Units - Total Cost of One Unit) / (Two Units - One Unit)

Total Cost of Two Units = Fixed Cost + (2 x Variable Cost) 
Total Cost of Two Units = $200,000 + (2 x $130,000) 
Total Cost of Two Units = $460,000

Total Cost of One Unit = Fixed Cost + Variable Cost 
Total Cost of One Unit = $200,000 + $130,000 
Total Cost of One Unit = $330,000

Marginal Cost = ($460,000 - $330,000) / (2 - 1) 
Marginal Cost = $130,000

Therefore, the marginal cost at an output of one is $130,000.

Question 3

-The ATC curve is

Accepted Answer

The answer of 
-The ATC curve is
...

Question 4

-The ATC curve is curve

Accepted Answer

The answer of 
-The ATC curve is curve
...

Question 5

Statement I: In the short run a firm has two options: stay in business or go out of business.
Statement II: In the short run there are no fixed costs.

Accepted Answer

The answer of Statement I: In the short run a...

Question 6

Statement I: Average variable cost can be found by dividing output by variable cost.
Statement II: At an output of zero,total cost is always equal to fixed cost.

Accepted Answer

Statement I is false because average variable cost is found by dividing variable cost by output, not the other way around. 
Statement II is true because when output is zero, there are no variable costs and total cost equals fixed cost.

Question 7

Statement I: Average total cost can be found by dividing output by total cost.
Statement II: At one unit of output marginal cost is always zero.

Accepted Answer

Statement I is false because average total cost is found by dividing total cost by output, not the other way around. 
Statement II is false because marginal cost can be zero, but it is not always zero at one unit of output.

Question 8

-The MC curve is curve

Accepted Answer

The MC curve is a W-shaped curve.

Question 9

Statement I: Shutting down and going out of business mean exactly the same thing.
Statement II: A firm will shut down if variable cost is greater than total revenue.

Accepted Answer

Statement I is false because while "shutting down" may result in going out of business, the two phrases do not have the exact same meaning. "Shutting down" can also refer to a temporary closure or suspension of operations. Statement II is true because a firm will shut down if it cannot cover its variable costs with its total revenue, as continuing to operate would mean losing money for every unit produced.

Question 10

-The AVC curve is curve

Accepted Answer

The answer of 
-The AVC curve is curve
...

Question 11

Statement I: In the short run,output can be varied by changing the size of factories.
Statement II: The MC curve intersects the AVC and ATC curves at their minimum points most of the time.

Accepted Answer

The answer of Statement I: In the short run,output can...

Question 12

As diseconomies of scale begin to outweigh the economies of scale,

Accepted Answer

When diseconomies of scale start to outweigh the economies of scale, it means that as the firm expands its production, it starts experiencing inefficiencies and increased costs. This could be due to issues such as increased communication problems, management difficulties, and coordination challenges. As a result, the long-run average cost (LRAC) curve, which shows how the average cost of production changes as the firm expands its production over the long run, starts to slope upward. This means that the firm's cost per unit of output increases as it expands its production, making it less efficient and potentially less profitable.

Question 13

$$\begin{array} { c c c c c c c } 
& \text { Variable } & \text { Total } & & & & \text { Marginal } \
\text { Output } & \text { Cost } & \text { Cost } & \text { AFC } & \text { AVC } & \text { ATC } & \text { Cost } \
1 & 400 & & & & & \
2 & 700 & & & & & \
3 & 1,000 & & & & & \
4 & 1,400 & & & & &
\end{array}$$ Use the above table and assume a fixed cost of $1000.
-At an output of 2,ATC is

Accepted Answer

ATC (Average Total Cost) is calculated by dividing the total cost by the quantity of output. At an output of 2, the total cost is the sum of variable cost at that output level and fixed cost. The variable cost at an output of 2 is $700, and the fixed cost is $1000, making the total cost $1700. Therefore, ATC = $1700 / 2 = $850.

Question 14

When marginal cost is less than average variable cost,average variable cost is falling.
Statement II: As output rises,average fixed cost declines.

Accepted Answer

Statement I is true as marginal cost is the additional cost of producing one more unit of output and when it is less than the average variable cost, it means that the cost of producing one more unit is less than the average cost of producing all the units. This can only happen when the average variable cost is falling.
Statement II is also true as average fixed cost is the fixed cost per unit of output produced. As output increases, the fixed cost is spread over more units, hence leading to a decline in average fixed cost.

Question 15

-The AFC curve is curve

Accepted Answer

The answer of 
-The AFC curve is curve
...

Question 16

-The MC curve is

Accepted Answer

The answer of 
-The MC curve is
...

Question 17

-The AVC curve is curve

Accepted Answer

The AVC (Average Variable Cost) curve typically has a U-shape due to initially decreasing average variable costs with increased production, followed by increasing costs as diminishing returns set in. Curve Y is likely to represent this shape.

Question 18

If variable cost is $15 million,fixed cost is $14 million,and total revenues are $13 million,in the short run the firm will _____ and in the long run the firm will ____.

Accepted Answer

In the short run, if total revenues do not cover variable costs, the firm should shut down to minimize losses. Here, since total revenues ($13 million) are less than variable costs ($15 million), the firm should shut down in the short run. In the long run, if total revenues do not cover the sum of variable and fixed costs ($15 million + $14 million = $29 million), the firm cannot cover its total costs and will go out of business.

Question 19

If marginal cost is less than average total cost,

Accepted Answer

If marginal cost is less than average total cost, it means that the next unit produced is adding less to the average total cost than the previous units. Therefore, the average total cost is falling.

Question 20

-The AFC curve is

Accepted Answer

The AFC (Average Fixed Cost) curve is typically represented by a downward-sloping curve that approaches zero as output increases, which matches the description of curve J. This is because fixed costs are spread over a larger number of units as production increases, causing the average fixed cost per unit to decrease.

Quiz 20: Cost

If marginal cost is less than average variable cost,

If a firm has a fixed cost of $200,000,and a variable cost of $130,000 at an output of one,how much is marginal cost at an output of one?

-The ATC curve is

-The ATC curve is curve

Statement I: In the short run a firm has two options: stay in business or go out of business. Statement II: In the short run there are no fixed costs.

Statement I: Average variable cost can be found by dividing output by variable cost. Statement II: At an output of zero,total cost is always equal to fixed cost.

Statement I: Average total cost can be found by dividing output by total cost. Statement II: At one unit of output marginal cost is always zero.

-The MC curve is curve

Statement I: Shutting down and going out of business mean exactly the same thing. Statement II: A firm will shut down if variable cost is greater than total revenue.

-The AVC curve is curve

Statement I: In the short run,output can be varied by changing the size of factories. Statement II: The MC curve intersects the AVC and ATC curves at their minimum points most of the time.

As diseconomies of scale begin to outweigh the economies of scale,

When marginal cost is less than average variable cost,average variable cost is falling. Statement II: As output rises,average fixed cost declines.

-The AFC curve is curve

-The MC curve is

-The AVC curve is curve

If variable cost is $15 million,fixed cost is $14 million,and total revenues are $13 million,in the short run the firm will _ and in the long run the firm will .

If marginal cost is less than average total cost,

-The AFC curve is