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171. Refer to Figure 13-5. Curve D is increasing because
a.
of diminishing marginal product.
b.
of increasing marginal product.
c.
marginal product first increases, then decreases.
d.
marginal product first decreases, then increases.
172. Refer to Figure 13-5. Curve A is always declining because
a.
of diminishing marginal product.
b.
we are dividing fixed costs by higher and higher levels of output.
c.
marginal product first increases, then decreases.
d.
marginal product first decreases, then increases.
173. Refer to Figure 13-5. Curve D intersects curve C
a.
where the firm maximizes profit.
b.
at the minimum of average fixed cost.
c.
at the efficient scale.
d.
where fixed costs equal variable costs.
Figure 13-6
174. Refer to Figure 13-6. Which of the following can be inferred from the figure above?
(i)
Marginal cost is increasing at all levels of output.
(ii)
Marginal product is increasing at low levels of output.
(iii)
Marginal product is decreasing at high levels of output.
a.
(i) and (ii) only
b.
(ii) and (iii) only
c.
(i) and (iii) only
d.
(ii) only
175. Refer to Figure 13-6. Why doesn’t the total cost curve begin at the origin (the point 0,0)?
a.
because variable costs are positive when output is zero
b.
because fixed costs are positive when output is zero
c.
because the firm is producing at the efficient scale
d.
because the firm is maximizing profits
Figure 13-7
176. Refer to Figure 13-7. Which of the figures represents the total cost curve for a typical firm?
a.
Figure 1
b.
Figure 2
c.
Figure 3
d.
Figure 4
177. Refer to Figure 13-7. Which of the figures represents the marginal cost curve for a typical firm?
a.
Figure 1
b.
Figure 2
c.
Figure 3
d.
Figure 4
178. Refer to Figure 13-7. Which of the figures represents the production function for a typical firm?
a.
Figure 1
b.
Figure 2
c.
Figure 3
d.
Figure 4
Figure 13-8
179. Refer to Figure 13-8. The efficient scale of production occurs at which quantity?
a.
A
b.
B
c.
C
d.
D
180. Refer to Figure 13-8. Quantity C represents the output level where the firm
a.
maximizes profits.
b.
minimizes total costs.
c.
produces at the efficient scale.
d.
minimizes marginal costs.
181. Refer to Figure 13-8. Quantity B represents the output level where the firm
a.
maximizes profits.
b.
minimizes average variable costs.
c.
produces at the efficient scale.
d.
minimizes marginal costs.
182. Refer to Figure 13-8. Which of the following statements is correct?
a.
Marginal cost is rising for quantities higher than D because marginal cost is higher than average total cost.
b.
Average variable cost is declining for quantities less than B because marginal cost is lower than average
variable cost.
c.
Marginal cost is minimized at B because at that quantity, marginal cost equals average variable cost.
d.
All of the above are correct.
183. Refer to Figure 13-8. Which of the following statements is correct?
a.
Average total cost is rising for quantities higher than D because marginal cost is higher than average total cost.
b.
Average variable cost is declining for quantities less than B because marginal cost is lower than average
variable cost.
c.
Average variable cost is minimized at B because at that quantity, marginal cost equals average variable cost.
d.
All of the above are correct.
184. If marginal cost is equal to average total cost, then
a.
marginal cost is minimized.
b.
average total cost is minimized.
c.
average variable cost is minimized.
d.
marginal cost is zero.
185. Which of the following statements is correct?
a.
If marginal cost is rising, then average total cost is rising.
b.
If marginal cost is rising, then average variable cost is rising.
c.
If average variable cost is rising, then marginal cost is minimized.
d.
If average total cost is rising, then marginal cost is greater than average total cost.
186. The average fixed cost curve
a.
always declines with increased levels of output.
b.
always rises with increased levels of output.
c.
declines as long as it is above marginal cost.
d.
declines as long as it is below marginal cost.
187. Average total cost is very high when a small amount of output is produced because
a.
average variable cost is high.
b.
average fixed cost is high.
c.
marginal cost is high.
d.
marginal product is high.
188. When marginal cost is less than average total cost,
a.
marginal cost must be falling.
b.
average variable cost must be falling.
c.
average total cost is falling.
d.
average total cost is rising.
189. When marginal cost exceeds average total cost,
a.
average fixed cost must be rising.
b.
average total cost must be rising.
c.
average total cost must be falling.
d.
marginal cost must be falling.
190. Average total cost is increasing whenever
a.
total cost is increasing.
b.
marginal cost is increasing.
c.
marginal cost is less than average total cost.
d.
marginal cost is greater than average total cost.
191. Marginal cost is equal to average total cost when
a.
average variable cost is falling.
b.
average fixed cost is rising.
c.
marginal cost is at its minimum.
d.
average total cost is at its minimum.
192. If marginal cost is below average total cost, then average total cost
a.
is constant.
b.
is falling.
c.
is rising.
d.
may rise or fall depending on the size of fixed costs.
193. At all levels of production higher than the point where the marginal cost curve crosses the average variable cost
curve, average variable cost
a.
rises.
b.
remains unaffected.
c.
falls.
d.
All of the above are possible depending on the shape of the marginal cost curve.
194. Which of the following statements about costs is correct?
a.
When marginal cost is less than average total cost, average total cost is rising.
b.
The total cost curve is U-shaped.
c.
As the quantity of output increases, marginal cost eventually rises.
d.
All of the above are correct.
195. Whenever marginal cost is greater than average total cost,
a.
average total cost is rising.
b.
marginal cost is falling.
c.
average total cost is falling.
d.
Both b and c are correct.
196. At what level of output will average variable cost equal average total cost?
a.
when marginal cost equals average total cost
b.
for all levels of output in which average variable cost is falling
c.
when marginal cost equals average variable cost
d.
There is no level of output where this occurs, as long as fixed costs are positive.
197. Which of the following must always be true as the quantity of output increases?
a.
Marginal cost must rise.
b.
Average total cost must rise.
c.
Average variable cost must rise.
d.
Average fixed cost must fall.
198. Which of the following statements is not correct?
a.
The marginal cost of the fifth unit of output equals the total cost of five units minus the total cost of four units.
b.
The total variable cost of seven units equals the average variable cost of seven units times seven.
c.
If marginal cost is rising, then average variable cost must be rising.
d.
The marginal cost of the fifth unit of output equals the total variable cost of five units minus the total variable
cost of four units.
199. When marginal cost is rising, average variable cost
a.
must be rising.
b.
must be falling.
c.
must be constant.
d.
could be rising or falling.
200. When marginal cost is greater than average cost, average cost is
a.
rising.
b.
falling.
c.
constant.
d.
The direction of change in average cost cannot be determined from this information.
201. When average cost is greater than marginal cost, marginal cost must be
a.
rising.
b.
falling.
c.
constant.
d.
The direction of change in marginal cost cannot be determined from this information.
202. Which of the following is not a property of a firm's cost curves?
a.
Marginal cost must eventually rise as a result of diminishing marginal product.
b.
Average total cost is U-shaped.
c.
Economies of scale will exist when average total cost falls as output rises.
d.
Average total cost will cross marginal cost at the minimum of marginal cost.
203. If marginal cost is greater than average total cost, then
a.
profits are increasing.
b.
economies of scale are becoming greater.
c.
average total cost remains constant.
d.
average total cost is increasing.
204. The minimum points of the average variable cost and average total cost curves occur where the
a.
marginal cost curve lies below the average variable cost and average total cost curves.
b.
marginal cost curve intersects those curves.
c.
average variable cost and average total cost curves intersect.
d.
slope of total cost is the smallest.
205. Which of the following statements is correct?
a.
For most producers, the average total cost curve never crosses the marginal cost curve.
b.
The average fixed cost curve must eventually rise.
c.
The average total cost curve first rises, then falls with increased output.
d.
The marginal cost curve eventually rises with the quantity of output.
206. The marginal cost curve crosses the average total cost curve at
a.
the efficient scale.
b.
the minimum point on the average total cost curve.
c.
a point where the marginal cost curve is rising.
d.
All of the above are correct.
207. The efficient scale of the firm is the quantity of output that
a.
maximizes marginal product.
b.
maximizes profit.
c.
minimizes average total cost.
d.
minimizes average variable cost.
208. The firm's efficient scale is the quantity of output that minimizes
a.
average total cost.
b.
average fixed cost.
c.
average variable cost.
d.
marginal cost.
209. When a firm is operating at an efficient scale,
a.
average variable cost is minimized.
b.
average fixed cost is minimized.
c.
average total cost is minimized.
d.
marginal cost is minimized.
210. Tony’s Taco Truck has average variable costs of $1 and average fixed costs of $2 when it produces 50 units of output
(tacos). The truck's total cost at 50 units of output is
a.
$3.
b.
$50.
c.
$100.
d.
$150.
211. Tony’s Taco Truck has an average variable cost of $1.50 and a marginal cost of $2 when it produces 50 units of
output (tacos). We can conclude that the average variable cost of producing 51 tacos is
a.
higher than $1.50.
b.
lower than $1.50.
c.
equal to $1.50.
d.
either higher or lower than $1.50 depending on the direction of the marginal cost curve.
Table 13-16
Quantity
Total
Cost
Fixed
Cost
Variable
Cost
Marginal
Cost
Average
Fixed
Cost
Average
Variable
Cost
Average
Total
Cost
0
$24
--
--
--
--
1
$16
2
$50
3
$108
4
$40
212. Refer to Table 13-16. What is the fixed cost of producing 0 units of output?
a.
$0
b.
$12
c.
$24
d.
$16
213. Refer to Table 13-16. What is the total cost of producing 2 units of output?
a.
$50
b.
$74
c.
$76
d.
$58
214. Refer to Table 13-16. What is the marginal cost of the 4th unit of output?
a.
$40
b.
$52
c.
$68
d.
$136
