15) When marginal cost is positive, total cost is ________ as output increases.
A) increasing
B) decreasing
C) constant
D) negative
E) undefined
16) If total fixed cost increases, which of the following will NOT change?
A) total cost
B) average fixed cost
C) marginal cost
D) average total cost
E) ALL costs increase when total fixed cost increases.
17) Scott owns a law-enforcement training operation in Boise, Idaho. He employs three trainers.
The last trainer Scott hired increased Scott’s total cost by $466 per week even though the trainer
brought in only one new client. Hence Scott’s
A) total variable cost equals $466.
B) marginal cost of the last client equals $466.
C) marginal cost of the last worker equals $233.
D) total variable cost equals $233.
E) total fixed cost of the last client equals $466.
Labor
(workers)
Output
(bikes)
Total fixed
costs
(dollars)
Total
variable cost
(dollars)
Total cost
(dollars)
0
0
200
1
20
100
2
50
3
60
4
64
18) The table above gives costs at Jan’s Bike Shop. Unfortunately, Jan’s record keeping has been
spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production.
What is the total cost of producing 50 bikes?
A) $100
B) $200
C) $300
D) $400
E) $500
19) The table above gives costs at Jan’s Bike Shop. Unfortunately, Jan’s record keeping has been
spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production.
What is the total fixed cost of producing 64 bikes?
A) $200
B) $300
C) $400
D) $500
E) $600
20) The table above gives costs at Jan’s Bike Shop. Unfortunately, Jan’s record keeping has been
spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production.
What is the total variable cost of producing 60 bikes?
A) $200
B) $300
C) $400
D) $500
E) None of the above answers are correct.
21) The Jerry-Berry Ice Cream Shoppe’s total cost schedule is in the above table. Based on the
table, which of the following is correct?
A) The total fixed cost is $1.
B) The average fixed cost of 1 gallon is $1.00.
C) The average variable cost of 2 gallons of ice cream is $1.00 per gallon.
D) Only answer A and answer B are correct.
E) Answer A, answer B, and answer C are correct.
22) The Jerry-Berry Ice Cream Shoppe’s total cost schedule is in the above table. Based on the
table, the marginal cost of producing the fourth gallon of ice cream is
A) $2.
B) $3.
C) $5.
D) $8.
E) $32.
23) Paulette owns a pizza parlor. Her total cost schedule is in the above table. Her total fixed cost
is equal to
A) $20.
B) $35.
C) $79.
D) $85.
E) Some amount but more information is needed to determine her fixed cost.
24) Paulette owns a pizza parlor. Her total cost schedule is in the above table. Her total variable
cost of producing four pizzas per hour is
A) $20.
B) $49.
C) $51.
D) $71.
E) Some amount but more information is needed to determine this total variable cost.
25) Paulette owns a pizza parlor. Her total cost schedule is in the above table. Her marginal cost
of producing the fifth pizza is
A) $8.
B) between $8.01 and $10.00.
C) between $10.01 and $14.00.
D) between $14.01 and $78.00.
E) more than $78.01.
26) In the above figure, curve A is the ________ curve and curve B is the ________ curve.
A) total variable cost; total fixed cost
B) total cost; total fixed cost
C) total fixed cost; total variable cost
D) total cost; total variable cost
E) total variable cost; total cost
27) In the above figure, curve A is the ________ curve and curve C is the ________ curve.
A) total variable cost; total fixed cost
B) total cost; total fixed cost
C) total fixed cost; total variable cost
D) total cost; total variable cost
E) total variable cost; total cost
28) Average variable cost equals
A) fixed cost divided by output.
B) total variable cost divided by output.
C) marginal cost divided by output.
D) marginal cost plus fixed cost.
E) marginal cost multiplied by output.
29) Average total cost is equal to
A) average fixed cost + average variable cost.
B) total cost ÷ quantity.
C) the change in total cost when output changes by one unit.
D) Answer A and answer B are correct.
E) Answer A and answer C are correct.
30) Average total cost equals
A) the change in total cost divided by the change in output.
B) total fixed cost divided by output.
C) average fixed cost plus average variable cost.
D) total cost minus total variable cost.
E) average fixed cost plus average variable cost plus marginal cost.
31) Which of the following always decreases when output increases?
A) total fixed cost
B) marginal cost
C) average variable cost
D) average fixed cost
E) total cost
32) The average fixed cost curve
A) is always positively sloped.
B) is U-shaped.
C) has an upside-down U shape.
D) is always negatively sloped.
E) is horizontal.
33) The total product is 10 units. The average total cost is $30 and the average fixed cost is $10.
What is the amount of the total variable cost?
A) $20
B) $200
C) $300
D) $10
E) It is impossible to determine with the information given.
34) If average variable costs increase as output increases, then
A) total fixed cost must be increasing also.
B) marginal cost must be greater than average variable cost.
C) total cost must be constant.
D) output must be zero.
E) average total cost must be increasing also.
35) An insurance agent rents a building and has a three-year lease. An increase in the rent for the
building increases the agent’s
A) total cost and average variable cost.
B) total variable cost and average variable cost.
C) total fixed cost and total variable cost.
D) total fixed cost and average fixed cost.
E) total variable cost and total cost.
36) The table above shows a total product schedule. Suppose that labor cost $20 per worker and
fixed costs are $60. The total variable cost of producing 80 units equals
A) less than $50.
B) more that $50 and less than $70.
C) more than $70 and less than $90.
D) more than $90 and less than $120.
E) more than $120.
37) The table above shows a total product schedule. Suppose that labor cost $20 per worker and
fixed costs are $60. The total cost of producing 80 units equals
A) less than $5.
B) more than $5 and less than $110.
C) more than $110 and less than $120.
D) more than $120 and less than $150.
E) more than $150.
38) The table above shows a total product schedule. Suppose that labor cost $20 per worker and
fixed costs are $60. The average variable cost of producing 80 units equals ________ per unit.
A) $0.75
B) $1.00
C) $1.75
D) $20
E) $0.25
39) The table above shows a total product schedule. Suppose that labor cost $20 per worker and
fixed costs are $60. The average total cost of producing 80 units equals ________ per unit.
A) $0.75
B) $1.00
C) $1.75
D) $60
E) $0.25
40) Anna owns a dog grooming salon in Brunswick, Georgia. The above table has Anna’s total
product schedule. Anna pays each worker $300 per week and she pays rent of $600 a week for
her salon. These are her only costs. When Anna has a staff of 2 workers, her total cost equals
A) $1,200.
B) $300.
C) $10.00.
D) $12.00.
E) $600.
41) Anna owns a dog grooming salon in Brunswick, Georgia. The above table has Anna’s total
product schedule. Anna pays each worker $300 per week and she pays rent of $600 a week for
her salon. These are her only costs. When Anna has a staff of 2 workers, her average total cost
equals
A) $2,400.
B) $300.
C) $10.00.
D) $12.00.
E) $1,200.
42) Anna owns a dog grooming salon in Brunswick, Georgia. The above table has Anna’s total
product schedule. Anna pays each worker $300 per week and she pays rent of $600 a week for
her salon. These are her only costs. When Anna has a staff of 2 workers, her average variable
cost equals
A) $2,400.
B) $300.
C) $6.00.
D) $10.00.
E) $600.
43) Anna owns a dog grooming salon in Brunswick, Georgia. The above table has Anna’s total
product schedule. Anna pays each worker $300 per week and she pays rent of $600 a week for
her salon. These are her only costs. When Anna has a staff of 2 workers, her average fixed cost
equals
A) $600.
B) $6.00.
C) $7.50.
D) $10.00.
E) $2,400.
44) Anna owns a dog grooming salon in Brunswick, Georgia. The above table has Anna’s total
product schedule. Anna pays each worker $300 per week and she pays rent of $600 a week for
her salon. These are her only costs. When Anna has a staff of 6 workers, her total cost equals
A) $2,400.
B) $300.
C) $7.50.
D) $10.00.
E) $1,800.
45) Anna owns a dog grooming salon in Brunswick, Georgia. The above table has Anna’s total
product schedule. Anna pays each worker $300 per week and she pays rent of $600 a week for
her salon. These are her only costs. When Anna has a staff of 6 workers, her average total cost
equals
A) $2,400.
B) $300.
C) $7.50.
D) $10.00.
E) $4,200.
46) Anna owns a dog grooming salon in Brunswick, Georgia. The above table has Anna’s total
product schedule. Anna pays each worker $300 per week and she pays rent of $600 a week for
her salon. These are her only costs. When Anna has a staff of 6 workers, her average variable
cost equals
A) $2,400.
B) $300.
C) $7.50.
D) $10.00.
E) $1,800.
47) Anna owns a dog grooming salon in Brunswick, Georgia. The above table has Anna’s total
product schedule. Anna pays each worker $300 per week and she pays rent of $600 a week for
her salon. These are her only costs. When Anna has a staff of 6 workers, her average fixed cost
equals
A) $600.
B) $2.50.
C) $7.50.
D) $10.00.
E) $6.00.
Labor
(workers)
Output
(frijoles)
Total cost
(dollars)
0
0
1,000
5
1,000
3,000
10
3,000
5,000
15
4,000
7,000
20
4,500
9,000
48) The above table gives some production and cost information for Flaming Fernando’s, a
restaurant that sells Fiery Frijoles. What is the total fixed cost of producing 4,500 frijoles?
A) $1000
B) $8000
C) $9000
D) $2,000
E) More information is needed to determine the answer.
49) The above table gives some production and cost information for Flaming Fernando’s, a
restaurant that sells Fiery Frijoles. Between what two levels of output does the marginal cost of
producing Fiery Frijoles first begin to rise?
A) 0 and 1000
B) 1000 and 3000
C) 3000 and 4000
D) 4000 and 4500
E) None of the above answers are correct.
50) The above table gives some production and cost information for Flaming Fernando’s, a
restaurant that sells Fiery Frijoles. What is the average variable cost of producing 1,000 frijoles?
A) $1
B) $2
C) $3
D) $3,000
E) More information is needed to determine the answer.
51) The above table gives some production and cost information for Flaming Fernando’s, a
restaurant that sells Fiery Frijoles. What is the average total cost of producing 4,500 frijoles?
A) $2
B) $225
C) $9,000
D) $8,000
E) More information is needed to determine the answer.
52) The production and cost information provided in the table above for Flaming Fernando’s, a
restaurant that sells Fiery Frijoles, is for the
A) short run because there are no variable costs.
B) short run because there is a fixed cost.
C) long run because there are no variable costs.
D) long run because there are no fixed costs.
E) short run and long run because the total cost increases as production increases.
53) The vertical distance between total cost curve and total variable cost curve is equal to
A) average fixed cost.
B) total fixed cost.
C) average variable cost.
D) average total cost.
E) marginal cost.
54) The U-shaped average total cost curve is
A) a result of firms’ wanting to find the output level where cost is at its minimum.
B) unrealistic because average total cost always increases as output increases.
C) the result of average fixed cost falling and decreasing marginal returns as output increases.
D) a result of constant marginal returns.
E) a result of increasing marginal returns.
55) The U-shape of the average variable, average total, and marginal cost curves reflects
A) increasing marginal returns.
B) decreasing marginal returns.
C) both increasing and decreasing marginal returns.
D) decreasing marginal product.
E) the point that implicit costs become a smaller fraction of total cost as output increases.
56) The short-run average total cost, average variable cost, and marginal cost curves are all U–
shaped because of
i. constant total fixed cost.
ii. increasing and then decreasing marginal returns as more labor is hired.
iii. economies and diseconomies of scale as the plant size increases.
A) only i
B) only ii
C) i and iii
D) ii and iii
E) i, ii, and iii
57) In a graph of a typical firm’s AFC, ATC, and AVC curves, the
A) AVC curve lies above the ATC curve.
B) ATC curve lies below the AFC curve.
C) distance between the ATC curve and the AVC curve equals the AFC.
D) distance between the AVC curve and the AFC curve equals the ATC.
E) AVC curve crosses the MC curve at the point where the MC is at its minimum.
58) As we observe the cost curves’ graph, we see that the
A) MC curve intersects the ATC curve at its maximum.
B) MC curve can not be U-shaped.
C) ATC curve always has a negative slope.
D) MC curve intersects the AVC curve and ATC curve at their minimums.
E) MC constantly falls as output increases.
59) In a figure showing the average total cost curve and the average variable cost curve, the
vertical distance between the two curves is equal to the
A) marginal cost.
B) average fixed cost.
C) total fixed cost.
D) total variable cost.
E) average marginal cost.
60) The vertical distance between the total cost curve and the total variable cost curve ________
as output increases and the vertical distance between the average total cost curve and average
variable cost curve ________ as output increases.
A) is constant; decreases
B) decreases; is constant
C) increases; decreases
D) decreases; increases
E) decreases; decreases
61) The marginal cost curve is U-shaped. Over the range of output for which the marginal cost is
falling as output increases, the marginal product is
A) increasing.
B) decreasing.
C) constant.
D) probably changing, but there is no stable relationship between the marginal cost and the
marginal product.
E) not defined.
62) The relationship between the MP and MC curves is
A) over the range where the MP curve has a negative slope, the MC curve also has a negative
slope.
B) there is no predictable relationship.
C) over the range where the MC curve has a positive slope, the MP curve also has a positive
slope.
D) over the range where the MP curve has a positive slope, the MC curve has a negative slope.
E) that the MP is not defined when the MC curve has a negative slope.
63) If marginal cost increases when output increases, then
A) marginal product must decrease when output increases.
B) average fixed cost is constant.
C) total cost is constant.
D) average variable cost must increase when output increases.
E) average total cost must decrease when output increases.
64) If another worker is hired with a marginal product greater than the previously hired worker,
which of the following will be true?
A) total costs will decrease
B) fixed costs will decrease
C) marginal cost will increase
D) marginal cost will decrease
E) average fixed costs will increase