Question 1

Figure 11-7  Figure 11-7 shows the cost structure for a firm.
-Refer to Figure 11-7. When output level is 100, what is the total cost of production?
A) $20
B) $1,000
C) $1,200
D) $2,000

Accepted Answer

The answer of Figure 11-7  Figure 11-7 shows the...

Question 2

As output increases, average fixed cost gets smaller and smaller.

Accepted Answer

Average fixed cost is calculated by dividing fixed cost by output. As output increases, the same fixed cost is spread over a larger output, resulting in a smaller average fixed cost.

Question 3

In a diagram showing the average total cost and average variable cost curves, the minimum point of the average total cost is
A) at the same level of output as the minimum point of the average variable cost.
B) at a larger level of output than the minimum point of the average variable cost.
C) at a lower level of output than the minimum point of the average variable cost.
D) at the same level of output as the maximum of the total product curve.

Accepted Answer

The answer of In a diagram showing the average total...

Question 4

Figure 11-6  Figure 11-6 contains information about the short-run cost structure of a firm.
-Refer to Figure 11-6. In the figure above, which letter represents the marginal cost curve?
A) A
B) B
C) C
D) D

Accepted Answer

The answer of Figure 11-6  Figure 11-6 contains information...

Question 5

Figure 11-7  Figure 11-7 shows the cost structure for a firm.
-Refer to Figure 11-7. When the output level is 100 units, average fixed cost is
A) $10.
B) $8.
C) $5.
D) This cannot be determined from the diagram.

Accepted Answer

To calculate average fixed cost, we need to divide total fixed cost by the output level. At an output level of 100 units, the total fixed cost is $800 (as seen in the diagram). Therefore, average fixed cost is $8 ($800 divided by 100 units).

Question 6

Figure 11-6  Figure 11-6 contains information about the short-run cost structure of a firm.
-Refer to Figure 11-6. In the figure above, which letter represents the average total cost curve?
A) A
B) B
C) C
D) D

Accepted Answer

The average total cost curve is represented by curve B, which is U-shaped and intersects both the marginal cost and average variable cost curves at their minimum points.

Question 7

As output increases, the distance between average total cost and average variable cost increases.

Accepted Answer

As output increases, the distance between average total cost and average variable cost decreases. This is because as output increases, fixed costs are spread over a larger number of units, causing average total cost to decrease, while average variable cost remains relatively constant. Therefore, the gap between the two decreases.

Question 8

As the level of output increases, what happens to the value of average fixed cost, and what happens to the difference between the value of average total cost and average variable cost?

Accepted Answer

The answer of As the level of output increases, what...

Question 9

Which of the following is true at the output level where average total cost is at its minimum?
A) Marginal cost equals average total cost.
B) Average variable cost equals fixed cost.
C) Marginal cost equals average variable cost.
D) Average total cost equals average fixed cost.

Accepted Answer

The answer of Which of the following is true at...

Question 10

Figure 11-9 
-Refer to Figure 11-9 above to solve the following problems.
a. Calculate the fixed cost of production.
b. Calculate the average total cost of production when the firm produces 20 units of output.
c. Calculate the average variable cost of production when the firm produces 20 units of output.
d. Calculate the average fixed cost of production when the firm produces 20 units of output.
e. Calculate the average fixed cost of production when the firm produces 15 units of output.
f. If the firm increases output from 15 to 20 units what is the marginal cost of output?

Accepted Answer

The answer of Figure 11-9 
-Refer to Figure 11-9 above...

Question 11

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays
A) diminishing returns.
B) economies of scale.
C) diseconomies of scale.
D) declining fixed costs.

Accepted Answer

Economies of scale occur when a firm's average cost of production decreases as it increases its scale of production by doubling its inputs. This suggests that the firm is experiencing cost savings due to increased efficiency, specialization and improved technology.

Question 12

All of the following cost curves are U-shaped except one. Which curve is not U-shaped?
A) the marginal cost curve
B) the average fixed cost curve
C) the average total cost curve
D) the average variable cost curve

Accepted Answer

The average fixed cost curve is not U-shaped because fixed costs do not change with the quantity of output produced. Therefore, the curve starts high and slopes downward as output increases, but then levels off and remains constant at the minimum possible fixed cost.

Question 13

Figure 11-8 
-Refer to Figure 11-8 above to answer the following questions.
a. Identify the curves in the diagram.
A ________________________________________
B ________________________________________
C ________________________________________
b. What is the numerical value of fixed cost when the quantity of output = 10?
c. What is the numerical value of variable cost when the quantity of output = 10?
d. What is the numerical value of total cost when the quantity of output = 10?
e. What is the numerical value of average fixed cost when the quantity of output = 10?
f. What is the numerical value of average total cost when the quantity of output = 10?
g. On the graph identify the area that represents the total variable cost of production when the quantity of output = 10.
h. On the graph identify the area that represents the fixed cost of production when the quantity of output = 10.

Accepted Answer

The answer of Figure 11-8 
-Refer to Figure 11-8 above...

Question 14

Suppose the total cost of producing 40,000 flash drives is $120,000, and the fixed cost is $30,000.
a. What is the variable cost?
b. When output is 40,000, what are the average variable cost and the average fixed cost?
c. Assuming the cost curves have the usual shape, is the dollar difference between the average total cost and the average variable cost greater when the output is 40,000 flash drives or when the output is 60,000 flash drives? Explain.

Accepted Answer

The answer of Suppose the total cost of producing 40,000...

Question 15

Explain how the listed events (a-d) would affect the following at Hilton Hotels.
i. Marginal cost
ii. Average variable cost
iii. Average fixed cost
iv. Average total cost
a. Hilton decides on an across-the-board 5 percent increase in executive salaries.
b. Hilton decides to eliminate all print advertising.
c. Hilton signs a new contract with the Culinary Workers Union that requires the company to increase wages for all its kitchen workers.
d. The federal government starts to levy a $5 room tax on all hotel rooms.

Accepted Answer

The answer of Explain how the listed events (a-d) would...

Question 16

Average total cost is equal to average variable cost minus average fixed cost.

Accepted Answer

Average total cost is equal to the sum of average variable cost and average fixed cost. Therefore, the statement is false.

Question 17

A firm's short-run average total cost curve is parallel to its short-run average variable cost curve.

Accepted Answer

The answer of A firm's short-run average total cost curve...

Question 18

Long-run cost curves are U-shaped because
A) of the law of demand.
B) of the law of diminishing returns.
C) of economies and diseconomies of scale.
D) of the law of supply.

Accepted Answer

Long-run cost curves are U-shaped because of economies and diseconomies of scale. In the beginning, the curve slopes downwards due to economies of scale, meaning that as firms increase in size, they become more efficient, and average costs decrease. However, beyond a certain level, the curve starts to slope upwards due to diseconomies of scale, meaning that as firms continue to grow in size, they become less efficient, and average costs increase. This creates a U-shaped curve. The law of demand and supply, as well as the law of diminishing returns, may impact the shape of the curve to some extent, but they are not the primary reasons for the U-shape of the long-run cost curve.

Question 19

Use the general relationship between marginal and average values to explain why a marginal cost curve must intersect an average total cost curve and an average variable cost curve at their minimum points.

Accepted Answer

The answer of Use the general relationship between marginal and...

Question 20

Figure 11-7  Figure 11-7 shows the cost structure for a firm.
-Refer to Figure 11-7. If output is 100 units, what is the fixed cost of production?
A) $8
B) $800
C) $1,000
D) This cannot be determined from the diagram.

Accepted Answer

The fixed cost is the same regardless of the level of output, which is represented by the horizontal line. At an output of 100 units, the total cost is $1,800 and the variable cost is $1,000. Therefore, the fixed cost must be $800 ($1,800 - $1,000 = $800).

Quiz 11: Technology, Production, and Costs

Figure 11-7 Figure 11-7 shows the cost structure for a firm. -Refer to Figure 11-7. When output level is 100, what is the total cost of production?

As output increases, average fixed cost gets smaller and smaller.

In a diagram showing the average total cost and average variable cost curves, the minimum point of the average total cost is

Figure 11-6 Figure 11-6 contains information about the short-run cost structure of a firm. -Refer to Figure 11-6. In the figure above, which letter represents the marginal cost curve?

Figure 11-7 Figure 11-7 shows the cost structure for a firm. -Refer to Figure 11-7. When the output level is 100 units, average fixed cost is

Figure 11-6 Figure 11-6 contains information about the short-run cost structure of a firm. -Refer to Figure 11-6. In the figure above, which letter represents the average total cost curve?

As output increases, the distance between average total cost and average variable cost increases.

As the level of output increases, what happens to the value of average fixed cost, and what happens to the difference between the value of average total cost and average variable cost?

Which of the following is true at the output level where average total cost is at its minimum?

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays

All of the following cost curves are U-shaped except one. Which curve is not U-shaped?

Average total cost is equal to average variable cost minus average fixed cost.

A firm's short-run average total cost curve is parallel to its short-run average variable cost curve.

Long-run cost curves are U-shaped because

Use the general relationship between marginal and average values to explain why a marginal cost curve must intersect an average total cost curve and an average variable cost curve at their minimum points.

Figure 11-7 Figure 11-7 shows the cost structure for a firm. -Refer to Figure 11-7. If output is 100 units, what is the fixed cost of production?