Page 1
1.
In the short run, the costs associated with variable inputs are _____, and the costs
associated with _____ inputs are _____.
A)
variable; fixed; fixed
B)
fixed; fixed; variable
C)
variable; fixed; variable
D)
fixed; fixed; fixed
2.
Which cost concept is correctly defined?
A)
MC = TC/FC
B)
ATC = VC + FC
C)
ATC = AVC + AFC
D)
TC = AVC + AFC
3.
A cost that does not depend on the quantity of output produced is:
A)
marginal.
B)
fixed.
C)
variable.
D)
average.
Use the following to answer questions 4-5:
4.
(Ref 21-1 Table: Total Cost Data) Use Table 21-1: Total Cost Data. What is the fixed
cost for this bicycle firm?
A)
$40
B)
$50
C)
$100
D)
$70
Page 2
5.
(Ref 21-1 Table: Total Cost Data) Use Table 21-1: Total Cost Data. What is the total
variable cost for this bicycle firm when the firm produces 5 bicycles?
A)
$50
B)
$240
C)
$60
D)
$190
6.
The total cost curve for shows how _____ cost depends on the quantity of _____.
A)
total; fixed inputs
B)
average; variable inputs
C)
total; output
D)
marginal; output
7.
A fixed cost:
A)
will exist only in the long run.
B)
depends on the level of output.
C)
is positive, even if the firm doesn’t produce any output in the short run.
D)
decreases until the point of diminishing returns is reached.
8.
The sum of fixed and variable costs is _____ cost.
A)
total
B)
marginal
C)
variable
D)
average
Use the following to answer questions 9-17:
Page 3
9.
(Ref 21-2 Table: Production Function for Soybeans) Use Table 21-2: Production
Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a
tractor, which have a combined cost of $150 per day. The cost of labor is $100 per
worker per day. The fixed cost of producing 25 bushels of soybeans is:
A)
$50.
B)
$100.
C)
$150.
D)
$250.
10.
(Ref 21-2 Table: Production Function for Soybeans) Use Table 21-2: Production
Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a
tractor, which have a combined cost of $150 per day. The cost of labor is $100 per
worker per day. The variable cost of producing 25 bushels of soybeans is:
A)
$50.
B)
$100.
C)
$150.
D)
$250.
11.
(Ref 21-2 Table: Production Function for Soybeans) Use Table 21-2: Production
Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a
tractor, which have a combined cost of $150 per day. The cost of labor is $100 per
worker per day. The total cost of producing 25 bushels of soybeans is:
A)
$50.
B)
$100.
C)
$150.
D)
$250.
12.
(Ref 21-2 Table: Production Function for Soybeans) Use Table 21-2: Production
Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a
tractor, which have a combined cost of $150 per day. The cost of labor is $100 per
worker per day. The variable cost of producing 45 bushels of soybeans is:
A)
$100.
B)
$200.
C)
$350.
D)
$4,500.
Page 4
13.
(Ref 21-2 Table: Production Function for Soybeans) Use Table 21-2: Production
Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a
tractor, which have a combined cost of $150 per day. The cost of labor is $100 per
worker per day. The total cost of producing 45 bushels of soybeans is:
A)
$100.
B)
$200.
C)
$350.
D)
$4,500.
14.
(Ref 21-2 Table: Production Function for Soybeans) Use Table 21-2: Production
Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a
tractor, which have a combined cost of $150 per day. The cost of labor is $100 per
worker per day. The variable cost of producing 60 bushels of soybeans is:
A)
$5.
B)
$100.
C)
$150.
D)
$300.
15.
(Ref 21-2 Table: Production Function for Soybeans) Use Table 21-2: Production
Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a
tractor, which have a combined cost of $150 per day. The cost of labor is $100 per
worker per day. The total cost of producing 60 bushels of soybeans is:
A)
$150.
B)
$450.
C)
$750.
D)
$900.
16.
(Ref 21-2 Table: Production Function for Soybeans) Use Table 21-2: Production
Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a
tractor, which have a combined cost of $150 per day. The cost of labor is $100 per
worker per day. The total cost of producing 70 bushels of soybeans is:
A)
$250.
B)
$400.
C)
$550.
D)
$1,024.
Page 5
17.
(Ref 21-2 Table: Production Function for Soybeans) Use Table 21-2: Production
Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a
tractor, which have a combined cost of $150 per day. The cost of labor is $100 per
worker per day. The total cost of producing 75 bushels of soybeans is:
A)
$650.
B)
$1,150.
C)
$1,225.
D)
$7,650.
18.
The total cost curve is:
A)
positively sloped.
B)
negatively sloped.
C)
vertical.
D)
horizontal.
19.
The fixed cost curve is:
A)
positively sloped.
B)
negatively sloped.
C)
vertical.
D)
horizontal.
20.
Once diminishing returns have set in, as output increases, the total cost curve:
A)
gets steeper.
B)
gets flatter.
C)
becomes horizontal.
D)
increases at first, and then decreases.
21.
The total cost curve gets steeper as output increases because of:
A)
increasing returns to the variable input.
B)
decreasing returns to the variable input.
C)
increases in fixed cost.
D)
decreases in overhead costs.
22.
The change in total output resulting from a one-unit increase in the quantity of an input
used, holding the quantities of all other inputs constant, is:
A)
average cost.
B)
average product.
C)
marginal cost.
D)
marginal product.
Page 6
23.
Austin’s total fixed cost at the bakery is $3,600 a month. Austin employs 20 workers and
pays each worker $8 an hour. The marginal product of the twentieth worker is 12 iced
cupcakes an hour. What is the marginal cost of the last cupcake produced by the last
worker Austin hired?
A)
$0.26
B)
$0.66
C)
$3.81
D)
$8.00
24.
For Heidi, the marginal cost of producing one additional photograph equals the change
in _____ cost divided by the change in the _____ of photographs.
A)
total; number
B)
marginal; number
C)
total; marginal product
D)
average; number
25.
When a cherry orchard in Oregon adds a worker, the total cost of production increases
by $24,000. Adding the worker increases total cherry output by 600 pounds. Therefore,
the marginal cost of the last pound of cherries produced is:
A)
$40.
B)
$19.
C)
$4,000.
D)
$24,000.
26.
Marginal cost cannot be calculated as:
A)
TC/Q, where TC is total cost and Q is output.
B)
VC/Q, where VC is variable cost and Q is output.
C)
the slope of the total cost curve.
D)
ATC * Q, where ATC is average total cost and Q is output.
27.
If the marginal cost of producing the seventh sports jersey is $21, then the total cost of
seven sports jerseys is:
A)
$21.
B)
$60.
C)
$147.
D)
The answer cannot be determined from the information provided.
Page 7
28.
If Marie Marionettes is operating under conditions of diminishing marginal product, the
marginal costs will be:
A)
equal to average total cost.
B)
decreasing.
C)
increasing.
D)
constant.
29.
Buford Bus Manufacturing installs a new assembly line. As a result, the output per
worker increases. The marginal cost of output at Buford:
A)
will increase (the MC curve will shift up).
B)
will decrease (the MC curve will shift down).
C)
will be unchanged.
D)
is at its maximum.
30.
If the marginal cost of the first sports jersey is $21, the marginal cost of the second
sports jersey is $40, and the marginal cost of the third jersey is $17, what is the total
variable cost of producing three jerseys?
A)
$26
B)
$78
C)
$17
D)
$61
31.
The shape of the marginal cost curve is the mirror image of the shape of the _____
curve.
A)
total product
B)
average product
C)
marginal product
D)
average total cost
32.
Ashley Bakery expects its marginal cost curve will eventually slope upward because, as
with most production processes, baking has:
A)
constant opportunity costs.
B)
a maximum output.
C)
diminishing marginal returns.
D)
decreasing opportunity costs.
Page 8
33.
The _____ curve shows the additional cost of producing each additional unit of output.
A)
average cost
B)
total cost
C)
marginal product
D)
marginal cost
34.
Marginal cost is the change in _____ cost resulting from a one-unit change in _____.
A)
total; a variable input
B)
total; output
C)
total; average cost
D)
average; output
35.
A firm’s marginal cost is:
A)
the ratio of the change in total cost to the change in the quantity of output.
B)
the change in total cost divided by the change in labor input.
C)
the slope of the average fixed cost curve.
D)
total cost divided by output.
36.
Marginal cost _____ over the range of increasing marginal returns and _____ over the
range of diminishing marginal returns.
A)
increases; decreases
B)
decreases; increases
C)
is constant; decreases
D)
increases; is constant
37.
Which statement is false?
A)
When the marginal product of labor is upward sloping, the marginal cost curve is
upward sloping.
B)
The average fixed cost curve is downward sloping and approaches the horizontal
axis as output increases.
C)
The marginal cost curve intersects the average variable cost curve at the minimum
of average variable cost.
D)
When the marginal cost curve is above the average cost curve, the average cost
curve is upward sloping.
Page 9
38.
The curve that shows the additional cost of each additional unit of output is called the
_____ curve.
A)
average cost
B)
total cost
C)
marginal product
D)
marginal cost
39.
Marginal cost is the change in:
A)
total product resulting from a one-unit change in a variable input.
B)
total cost resulting from a one-unit change in quantity of a variable input.
C)
total cost divided by the change in output.
D)
average cost resulting from a one-unit change in quantity of output.
40.
The change in total cost resulting from a one-unit change in quantity is _____ cost.
A)
average fixed
B)
average variable
C)
marginal
D)
average total
41.
A firm’s marginal cost is the:
A)
ratio of the change in fixed cost to the change in the quantity of output.
B)
slope of the total cost curve.
C)
slope of the average variable cost curve.
D)
ratio of the change in total output to the change in the quantity of labor.
42.
Marginal cost is the:
A)
increase in total cost when one more unit of output is produced.
B)
reduction in cost from economies of scale.
C)
ratio of average total cost to total cost.
D)
increase in output from the addition of one unit of labor.
43.
The larger the output, the more output over which fixed cost is distributed. Called the
_____ effect, this leads to a _____ average _____ cost as output rises.
A)
spreading; lower; fixed
B)
spreading; higher; fixed
C)
diminishing returns; lower; variable
D)
diminishing returns; higher; variable
Page 10
44.
The larger the output, the more variable input required to produce additional units.
Called the _____ effect, this leads to a _____ average _____ cost as output rises.
A)
spreading; lower; fixed
B)
spreading; higher; fixed
C)
diminishing returns; lower; variable
D)
diminishing returns; higher; variable
45.
The average total cost curve has a shape because the _____ effect is dominant at low
levels of output, and the _____ effect is dominant at high levels of output.
A)
diminishing returns; spreading
B)
spreading; diminishing returns
C)
comparative advantage; absolute advantage
D)
absolute advantage; comparative advantage
46.
The rent for Oscar’s sporting goods store is $2,500 per month. Oscar pays his staff $9
per hour, and his monthly electricity bill averages $700, depending on his total hours of
operation. Oscar’s fixed costs of production equal:
A)
$2,500 per month.
B)
$3,200 per month.
C)
$9 per hour multiplied by total hours of work plus $700.
D)
$9 per hour multiplied by total hours of work plus $3,200.
47.
Krista’s dry-cleaning business incurs $900 per month in fixed costs. Last month her total
output was 3,000 pounds of clothes. This month her total output fell to 2,700 pounds.
This means her average fixed cost _____ by a little more than _____ cents.
A)
fell; 3.33
B)
increased; 3.33
C)
fell; 2.50
D)
increased; 2.50
48.
Darren runs a barbershop with average fixed costs of $60 per day and a total output of
50 haircuts per day. Darren shuts down every year during the last week of July and the
first week of August (meaning it is open 50 weeks a year). What is his annual fixed cost
if he is open six days per week?
A)
$18,000
B)
$3,000
C)
$60
D)
The answer cannot be determined with the information available.
Page 11
49.
The average total cost of producing cell phones in a factory is $20 at the current output
level of 100 units per week. If the fixed cost is $1,200 per week:
A)
average fixed cost is $20.
B)
total cost is $3,200.
C)
variable cost is $2,000.
D)
average variable cost is $8.
50.
Average variable cost does not equal:
A)
variable cost divided by output.
B)
total cost minus fixed cost divided by output.
C)
average total cost minus average fixed cost.
D)
variable cost times output.
51.
You run a business producing picture frames. This month, your total cost of production
is $10,000, your variable cost of production is $6,000, and you produce 3,000 picture
frames. It follows that average _____ cost is _____.
A)
variable; $2
B)
total; $3
C)
total; $1
D)
fixed; $1
52.
For most restaurants, the average total cost curve _____ at _____ levels of output, then
_____ at _____ levels.
A)
falls; low; rises; high
B)
rises; low; falls; high
C)
rises; high; rises; low
D)
falls; high; falls; low
53.
In the short run, the average total cost curve slopes upward because of:
A)
economies of scale.
B)
diseconomies of scale.
C)
increasing returns.
D)
diminishing returns.
54.
The _____ cost curve is not affected by diminishing returns.
A)
average fixed
B)
average variable
C)
average total
D)
marginal
Page 12
55.
The _____ cost curve continually declines as more output is produced in the short run.
A)
marginal
B)
average variable
C)
average fixed
D)
average total
Use the following to answer questions 56-58:
56.
(Ref 21-3 Figure: The Average Total Cost Curve) Use Figure 21-3: The Average Total
Cost Curve. The total cost of producing three pairs of boots is approximately:
A)
$24.
B)
$72.
C)
$75.
D)
$216.
57.
(Ref 21-3 Figure: The Average Total Cost Curve) Use Figure 21-3: The Average Total
Cost Curve. The total cost of producing five pairs of boots is approximately:
A)
$408.
B)
$82.
C)
$108.
D)
$17.
58.
(Ref 21-3 Figure: The Average Total Cost Curve) Use Figure 21-3: The Average Total
Cost Curve. The total cost of producing 10 pairs of boots is approximately:
A)
$13.
B)
$54.
C)
$131.
D)
$1,308.
Page 13
59.
Average total cost is:
A)
the change in cost divided by the change in output.
B)
total cost divided by output.
C)
the change in output divided by the change in costs.
D)
total cost times output.
60.
Total cost divided by the quantity of output produced is:
A)
average total cost.
B)
average fixed cost.
C)
average product.
D)
marginal cost.
61.
Average variable cost is:
A)
variable cost per unit multiplied by output.
B)
total variable cost divided by output.
C)
the difference between average total cost and total variable cost.
D)
the difference between total cost and total variable cost.
62.
Average variable cost is the ratio of:
A)
total cost to marginal cost.
B)
total cost to the amount of variable input.
C)
variable cost to the quantity of output.
D)
marginal cost to the quantity of output.
63.
A business produces 10 pairs of eyeglasses. It incurs $30 in average variable cost and $5
in average fixed cost. The average total cost of producing 10 pairs of eyeglasses is:
A)
$30.
B)
$35.
C)
$50.
D)
$300.
64.
A business produces 10 pairs of eyeglasses. It incurs $35 in average total cost and $5 in
average fixed cost. The average variable cost of producing 10 pairs of eyeglasses is:
A)
$30.
B)
$35.
C)
$50.
D)
$300.
Page 14
65.
A business produces 10 pairs of eyeglasses. It incurs $30 in average variable cost and $5
in average fixed cost. The total cost of producing 10 pairs of eyeglasses is:
A)
$35.
B)
$50.
C)
$300.
D)
$350.
66.
A business produces 10 pairs of eyeglasses. It incurs $30 in average variable cost and
$35 in average total cost. The total fixed cost of producing 10 pairs of eyeglasses is:
A)
$3.
B)
$35.
C)
$50.
D)
$300.
67.
Average total cost is:
A)
the change in variable cost divided by the change in quantity.
B)
total cost divided by quantity.
C)
the change in quantity divided by the change in labor costs.
D)
total cost times quantity.
68.
Average variable cost is:
A)
variable cost per unit multiplied by quantity.
B)
total variable cost divided by quantity.
C)
the difference between average total cost and total cost.
D)
the difference between total cost and total fixed cost.
69.
Average total cost is the ratio of _____ cost to _____.
A)
total; marginal cost
B)
total; quantity of output
C)
total; amount of variable input
D)
marginal; amount of variable input
70.
Total cost divided by the quantity of output produced is:
A)
always increasing.
B)
always decreasing.
C)
average total cost.
D)
marginal cost.
Page 15
71.
Average variable cost is the ratio of:
A)
total cost to the marginal cost.
B)
variable inputs to fixed inputs.
C)
variable cost to the quantity of output.
D)
fixed costs to variable cost.
72.
Variable cost divided by the quantity of output produced is _____ cost.
A)
marginal
B)
average total
C)
average fixed
D)
average variable
73.
Tankao makes earbuds for mobile devices. When Tankao produces 20 sets of earbuds,
its average variable cost is $5 per set and its average total cost is $8 per set. Tankao’s:
A)
marginal cost is less than $3 per set.
B)
marginal cost is $3 per set.
C)
average fixed cost is $3 per set.
D)
marginal cost is equal to its average fixed cost.
74.
Tankao makes Bluetooth headphones for mobile devices. When 50 Bluetooth
headphones are produced in the short run, the average variable cost is $30. Fixed costs
are greater than zero. Therefore, Tankao’s average _____ cost is _____.
A)
total; $30.
B)
total; greater than $30.
C)
total; less than $30.
D)
fixed; $30.
75.
Austin’s total fixed cost is $3,600 a month for making 100,000 cupcakes at his cupcake
bakery. Austin employs 20 workers and pays each worker $600 a month. If labor is his
only variable cost, what is Austin’s total cost per month for making 100,000 cupcakes?
A)
$3,600
B)
$1,200
C)
$15,600
D)
$12,000
76.
When marginal cost is rising:
A)
average variable cost must be rising.
B)
average total cost must be rising.
C)
average variable cost and average total cost must be falling.
D)
both average variable cost and average total cost may be rising or falling.
Page 16
77.
When Aishe’s Bar-B-Que produces 10 pork sandwiches, the total cost is $5. When 11
pork sandwiches are produced, the total cost rises to $6. From this we know that the
marginal cost of the eleventh pork sandwich:
A)
is equal to the average cost of 11 pork sandwiches.
B)
is greater than the average cost of 11 pork sandwiches.
C)
is less than the average cost of 11 pork sandwiches.
D)
can’t be calculated without more information.
78.
Suppose the marginal cost curve in the short run first decreases and then increases. If
marginal cost is decreasing, _____ must be _____ and _____ must be _____.
A)
marginal product; increasing; average fixed cost; zero
B)
average variable cost; decreasing; average fixed cost; increasing
C)
average total cost; increasing; marginal cost; decreasing
D)
marginal product; increasing; average variable cost; decreasing
79.
Suppose the marginal cost curve in the short run first decreases and then increases. If
marginal cost is increasing, _____ must be _____.
A)
marginal product; increasing
B)
average variable cost; increasing
C)
average total cost; increasing
D)
marginal product; decreasing
80.
At the current level of output, Becca Furniture’s marginal cost curve is above the
average total cost curve. This means Becca Furniture’s average total cost curve:
A)
must be rising.
B)
must be flat.
C)
must be falling.
D)
may be rising, falling, or flat depending on other things.
81.
The marginal cost curve intersects the average variable cost curve at:
A)
its lowest point.
B)
its maximum.
C)
its end point.
D)
no point; the curves don’t intersect.
Page 17
82.
When marginal cost is below average variable cost, average variable cost must be:
A)
at its minimum.
B)
at its maximum.
C)
falling.
D)
rising.
83.
When marginal cost is above average variable cost, average variable cost must be:
A)
at its minimum.
B)
at its maximum.
C)
falling.
D)
rising.
84.
If marginal cost is greater than average total cost:
A)
average total cost is increasing.
B)
average total cost is decreasing.
C)
average total cost is unchanged.
D)
marginal cost is decreasing.
85.
In general, if marginal cost is equal to average total cost:
A)
average total cost is increasing.
B)
average total cost is at its maximum.
C)
average total cost is at its minimum.
D)
marginal cost is decreasing.
86.
If an increase in output results in a decrease in average total cost, the corresponding
marginal cost is:
A)
less than average total cost.
B)
greater than average total cost.
C)
equal to average total cost.
D)
negative.
87.
When a caterer produces 30 catered meals, its marginal cost and average variable cost
each equal $10. Therefore, assuming normally shaped cost curves, at 29 meals its
marginal cost is _____ $10 and its average variable cost is _____ $10.
A)
greater than; less than
B)
less than; greater than
C)
greater than; greater than
D)
equal to; equal to
Page 18
88.
When marginal cost is below average variable cost, average variable cost must be:
A)
above average total cost.
B)
below average fixed cost.
C)
falling.
D)
rising.
89.
When marginal cost is above average variable cost, average variable cost must be:
A)
at its minimum.
B)
at its maximum.
C)
greater than average total cost.
D)
rising.
90.
If marginal cost is greater than average total cost, then average total cost is:
A)
at its maximum.
B)
at its minimum.
C)
rising.
D)
falling.
91.
If marginal cost is less than average total cost, then _____ cost is _____.
A)
average total; increasing
B)
average total; decreasing
C)
marginal; necessarily increasing
D)
marginal; necessarily decreasing
92.
Suppose Cyd knows the average total cost of producing 9 scones is $5, while the
average total cost of producing 10 scones is $5.20. What is the marginal cost of the tenth
scone?
A)
$7.00
B)
$5.20
C)
$0.20
D)
$5.00
Page 19
Use the following to answer question 93:
93.
(Ref 21-4 Table: Output and Marginal Cost) Use Table 21-4: Output and Marginal Cost.
After graduation, you achieve your dream of opening an art shop that specializes in
selling mud statues. How many statues should you produce to minimize your average
variable costs?
A)
two
B)
three
C)
four
D)
five
94.
Kaile Cakes produces 10 cakes per day. The marginal cost of the tenth cake is $24, and
average total cost of 10 cakes is $6. The average total cost of 9 cakes is:
A)
$4.
B)
$5.
C)
$6.
D)
$8.
95.
Cindy operates Birds-R-Us, a small store manufacturing and selling 100 bird feeders per
month. Cindy’s monthly total fixed costs are $500, and her monthly total variable costs
are $2,500. If for some reason Cindy’s fixed cost fell to $400, then her _____ costs
would _____.
A)
average fixed; increase
B)
average total; decrease
C)
marginal; decrease
D)
average variable; decrease
Page 20
96.
In the short run, as output gets larger:
A)
fixed cost gets smaller.
B)
the average variable cost curve gets closer to the average total cost curve.
C)
marginal cost gets smaller.
D)
average total cost decreases after the point of diminishing returns.
Use the following to answer questions 97-101:
97.
(Ref 21-5 Figure and Table: Variable, Fixed, and Total Costs) Use Figure and Table
21-5: Variable, Fixed, and Total Costs. The marginal cost of increasing production from
19 to 36 bushels of wheat is:
A)
$23.53.
B)
$11.76.
C)
$22.22.
D)
$11.11.
Page 21
98.
(Ref 21-5 Figure and Table: Variable, Fixed, and Total Costs) Use Figure and Table
21-5: Variable, Fixed, and Total Costs. The marginal cost of increasing production from
51 to 64 bushels of wheat is:
A)
$16.00.
B)
$15.38.
C)
$12.50.
D)
$18.75.
99.
(Ref 21-5 Figure and Table: Variable, Fixed, and Total Costs) Use Figure and Table
21-5: Variable, Fixed, and Total Costs. The marginal cost of increasing production from
84 to 91 bushels of wheat is:
A)
$13.00.
B)
$19.78.
C)
$22.22.
D)
$28.57.
100.
(Ref 21-5 Figure and Table: Variable, Fixed, and Total Costs) Use Figure and Table ]
21-5: Variable, Fixed, and Total Costs. When 51 bushels of wheat is produced, the
average fixed cost is _____, average variable cost is _____, and average total cost is
_____.
A)
$7.84; $11.76; $19.60
B)
$133.33; $200.00; $333.33
C)
$400.00; $600.00; $1,000.00
D)
$5.33; $13.33; $18.67
101.
(Ref 21-5 Figure and Table: Variable, Fixed, and Total Costs) Use Figure and Table
21-5: Variable, Fixed, and Total Costs. When 96 bushels of wheat is produced, the
average fixed cost is _____, average variable cost is _____, and average total cost is
_____.
A)
$7.84; $11.76; $19.60
B)
$133.33; $200.00; $333.33
C)
$4.17; $16.67; $20.83
D)
$5.33; $13.33; $18.67
Page 22
Use the following to answer questions 102-105:
102.
(Ref 21-5 Figure: Short-Run Costs) Use Figure 21-5: Short-Run Costs. A is the _____
cost curve.
A)
average total
B)
average variable
C)
marginal
D)
total
103.
(Ref 21-5 Figure: Short-Run Costs) Use Figure 21-5: Short-Run Costs. B is the _____
cost curve.
A)
average total
B)
average variable
C)
marginal
D)
total
104.
(Ref 21-5 Figure: Short-Run Costs) Use Figure 21-5: Short-Run Costs. C is the _____
cost curve.
A)
average total
B)
total
C)
marginal
D)
average variable
Page 23
105.
(Ref 21-5 Figure: Short-Run Costs) Use Figure 21-5: Short-Run Costs. The vertical
difference between curve B and curve C at any quantity of output is _____ cost.
A)
marginal
B)
fixed
C)
average fixed
D)
average variable
Use the following to answer questions 106-113:
106.
(Ref 21-6 Figure: Short-Run Costs II) Use Figure: 21-6 Short-Run Costs II. Curve 1 is
the _____ cost curve.
A)
average total
B)
average variable
C)
marginal
D)
total
107.
(Ref 21-6 Figure: Short-Run Costs II) Use Figure 21-6: Short-Run Costs II. Curve 2 is
the _____ cost curve.
A)
average total
B)
average variable
C)
marginal
D)
total
Page 24
108.
(Ref 21-6 Figure: Short-Run Costs II) Use Figure 21-6: Short-Run Costs II. Curve 3 is
the _____ cost curve.
A)
average total
B)
total
C)
marginal
D)
average variable
109.
(Ref 21-6 Figure: Short-Run Costs II) Use Figure: 21-6: Short-Run Costs II. Curve 1
crosses the average variable cost curve at:
A)
3 units of output.
B)
approximately 5.3 units of output.
C)
the minimum value of curve 2.
D)
the level of output at which diminishing marginal returns begin.
110.
(Ref 21-6 Figure: Short-Run Costs II) Use Figure 21-6: Short-Run Costs II. Curve 1
crosses the average total cost curve at:
A)
the minimum value of curve 2.
B)
approximately 4.3 units of output.
C)
approximately 2.8 units of output.
D)
point A.
111.
(Ref 21-6 Figure: Short-Run Costs II) Use Figure 21-6: Short-Run Costs II. At 6 units of
output, marginal cost is approximately:
A)
$100.
B)
$120.
C)
$250.
D)
$200.
112.
(Ref 21-6 Figure: Short-Run Costs II) Use Figure 21-6: Short-Run Costs II. At 6 units of
output, average total cost is approximately:
A)
$100.
B)
$120.
C)
$170.
D)
$250.
Page 25
113.
(Ref 21-6 Figure: Short-Run Costs II) Use Figure 21-6: Short-Run Costs II. At 6 units of
output, average variable cost is approximately:
A)
$100.
B)
$120.
C)
$200.
D)
$250.
Use the following to answer questions 114-127:
114.
(Ref 21-7 Table: Cost Data) Use Table 21-7: Cost Data. When the purse factory
produces 5 units of output (purses):
A)
marginal cost is above average total cost, and average total cost is rising.
B)
average total cost is above average variable cost, and average variable cost is
falling.
C)
marginal cost is below average variable cost, and average variable cost is falling.
D)
marginal cost is above average variable cost and below average total cost, and
average total cost is rising.
115.
(Ref 21-7 Table: Cost Data) Use Table 21-7: Cost Data. The average variable cost of
producing 2 purses is:
A)
$190.
B)
$70.
C)
$50.
D)
$35.
Page 26
116.
(Ref 21-7 Table: Cost Data) Use Table 21-7: Cost Data. The average fixed cost of
producing 2 purses is:
A)
$0.
B)
$50.
C)
$25.
D)
$2.
117.
(Ref 21-7 Table: Cost Data) Use Table 21-7: Cost Data. The average total cost of
producing 2 purses is:
A)
$60.
B)
$120.
C)
$190.
D)
$220.
118.
(Ref 21-7 Table: Cost Data) Use Table 21-7: Cost Data. The marginal cost of producing
the second purse is:
A)
$60.
B)
$50.
C)
$35.
D)
$20.
119.
(Ref 21-7 Table: Cost Data) Use Table 21-7: Cost Data. The average variable cost of
producing 4 purses is:
A)
$190.00.
B)
$140.00.
C)
$47.50.
D)
$35.00.
120.
(Ref 21-7 Table: Cost Data) Use Table 21-7: Cost Data. The average fixed cost of
producing 4 purses is:
A)
$12.50.
B)
$47.50.
C)
$50.00.
D)
$82.50.
Page 27
121.
(Ref 21-7 Table: Cost Data) Use Table 21-7: Cost Data. The average total cost of
producing 4 purses is:
A)
$12.50.
B)
$47.50.
C)
$50.00.
D)
$82.50.
122.
(Ref 21-7 Table: Cost Data) Use Table 21-7: Cost Data. The marginal cost of producing
the fourth purse is:
A)
$60.
B)
$50.
C)
$40.
D)
$20.
123.
(Ref 21-7 Table: Cost Data) Use Table 21-7: Cost Data. The average total cost of
producing 6 purses is:
A)
$190.
B)
$70.
C)
$50.
D)
$35.
124.
(Ref 21-7 Table: Cost Data) Use Table: Cost Data. The average fixed cost of producing
5 purses is:
A)
$0.
B)
$50.
C)
$25.
D)
$10.
125.
(Ref 21-7 Table: Cost Data) Use Table 21-7: Cost Data. The average variable cost of
producing 5 purses is:
A)
$10.
B)
$38.
C)
$48.
D)
$190.
Page 28
126.
(Ref 21-7 Table: Cost Data) Use Table 21-7: Cost Data. The average total cost of
producing 5 purses is:
A)
$10.
B)
$38.
C)
$48.
D)
$240.
127.
(Ref 21-7 Table: Cost Data) Use Table 21-7: Cost Data. The marginal cost of producing
the fifth purse is:
A)
$60.
B)
$50.
C)
$35.
D)
$20.
Use the following to answer questions 128-130:
128.
(Ref 21-8 Figure: A Firm’s Cost Curves) Use Figure 21-8: A Firm’s Cost Curves. The
curve labeled V represents the firm’s _____ cost curve.
A)
total
B)
average total
C)
marginal
D)
average variable
129.
(Ref 21-8 Figure: A Firm’s Cost Curves) Use Figure 21-8: A Firm’s Cost Curves. The
curve labeled W represents the firm’s _____ cost curve.
A)
average fixed
B)
average total
C)
average variable
D)
total variable
Page 29
130.
(Ref 21-8 Figure: A Firm’s Cost Curves) Use Figure 21-8: A Firm’s Cost Curves. The
curve X represents the firm’s _____ cost curve.
A)
marginal
B)
average total
C)
average fixed
D)
average variable
Use the following to answer questions 131-138:
131.
(Ref. 21-9 Table: Workers and Output) Use Table 21-9: Workers and Output. After
graduation, you achieve your dream of opening an art shop that specializes in selling
mud statues. You pay $10 per day on a loan from your uncle, regardless of how much
you produce. You also pay $10 per day to each of the workers who you hire to make the
mud statues. The fixed cost of producing 25 statues is:
A)
$10.
B)
$20.
C)
$25.
D)
$35.
132.
(Ref. 21-9 Table: Workers and Output) Use Table 21-9: Workers and Output. After
graduation, you achieve your dream of opening an art shop that specializes in selling
mud statues. You pay $10 per day on a loan from your uncle, regardless of how much
you produce. You also pay $10 per day to each of the workers who you hire to make the
mud statues. The variable cost of producing 25 statues is:
A)
$10.
B)
$20.
C)
$25.
D)
$35.
Page 30
133.
(Ref. 21-9 Table: Workers and Output) Use Table 21-9: Workers and Output. After
graduation, you achieve your dream of opening an art shop that specializes in selling
mud statues. You pay $10 per day on a loan from your uncle, regardless of how much
you produce. You also pay $10 per day to each of the workers who you hire to make the
mud statues. The total cost of producing 25 statues is:
A)
$10.
B)
$20.
C)
$25.
D)
$30.
134.
(Ref. 21-9 Table: Workers and Output) Use Table 21-9: Workers and Output. After
graduation, you achieve your dream of opening an art shop that specializes in selling
mud statues. You pay $10 per day on a loan from your uncle, regardless of how much
you produce. You also pay $10 per day to each of the workers who you hire to make the
mud statues. The variable cost of producing 43 statues is:
A)
$10.
B)
$20.
C)
$40.
D)
$43.
135.
(Ref. 21-9 Table: Workers and Output) Use Table 21-9: Workers and Output. After
graduation, you achieve your dream of opening an art shop that specializes in selling
mud statues. You pay $10 per day on a loan from your uncle, regardless of how much
you produce. You also pay $10 per day to each of the workers who you hire to make the
mud statues. The total cost of producing 43 statues is:
A)
$10.
B)
$20.
C)
$40.
D)
$50.
136.
(Ref. 21-9 Table: Workers and Output) Use Table 21-9: Workers and Output. After
graduation, you achieve your dream of opening an art shop that specializes in selling
mud statues. You pay $10 per day on a loan from your uncle, regardless of how much
you produce. You also pay $10 per day to each of the workers who you hire to make the
mud statues. The variable cost of producing 48 statues is:
A)
$50.
B)
$48.
C)
$20.
D)
$10.
Page 31
137.
(Ref. 21-9 Table: Workers and Output) Use Table 21-9: Workers and Output. After
graduation, you achieve your dream of opening an art shop that specializes in selling
mud statues. You pay $10 per day on a loan from your uncle, regardless of how much
you produce. You also pay $10 per day to each of the workers who you hire to make the
mud statues. The total cost of producing 48 statues is:
A)
$240.
B)
$60.
C)
$50.
D)
$10.
138.
(Ref. 21-9 Table: Workers and Output) Use Table 21-9: Workers and Output. After
graduation, you achieve your dream of opening an art shop that specializes in selling
mud statues. You pay $10 per day on a loan from your uncle, regardless of how much
you produce. You also pay $10 per day to each of the workers who you hire to make the
mud statues. How many workers should you hire to minimize your marginal cost?
A)
two
B)
three
C)
four
D)
five
139.
Table: Output and Costs
(Table: Output and Costs) Use Table: Output and Costs. When output increases from 1
to 2, marginal cost equals:
A)
$13.
B)
$10.
C)
$8.
D)
$17.
Page 32
140.
Table: Output and Costs
(Table: Output and Costs) Use Table: Output and Costs. When output is 4, total variable
cost equals:
A)
$48.
B)
$38.
C)
$58.
D)
$28.
141.
Table: Output and Costs
(Table: Output and Costs) Use Table: Output and Costs. When output is 3, average total
cost equals:
A)
$13.
B)
$10.
C)
$8.
D)
$17.
Page 33
Use the following to answer questions 142-149:
142.
(Ref 21-10 Table: Costs of Producing Bagels) Use Table 21-10: Cost of Producing
Bagels. The total cost of producing 6 bagels is:
A)
$0.10.
B)
$0.20.
C)
$0.80.
D)
$0.90.
143.
(Ref 21-10 Table: Costs of Producing Bagels) Use Table 21-10: Cost of Producing
Bagels. The marginal cost of producing the sixth bagel is:
A)
$0.10.
B)
$0.15.
C)
$0.20.
D)
$0.80.
144.
(Ref 21-10 Table: Costs of Producing Bagels) Use Table 21-10: Cost of Producing
Bagels. Marginal cost reaches its minimum value for the _____ bagel.
A)
first
B)
third
C)
fourth
D)
fifth
Page 34
145.
(Ref 21-10 Table: Costs of Producing Bagels) Use Table 21-10: Cost of Producing
Bagels. Average total cost reaches its minimum value for the _____ bagel.
A)
first
B)
third
C)
fourth
D)
fifth
146.
(Ref 21-10 Table: Costs of Producing Bagels) Use Table 21-10: Cost of Producing
Bagels. The average total cost of producing 6 bagels is:
A)
$0.10.
B)
$0.15.
C)
$0.20.
D)
$0.80.
147.
(Ref 21-10 Table: Costs of Producing Bagels) Use Table 21-10: Cost of Producing
Bagels. The total cost of producing 2 bagels is:
A)
$0.10.
B)
$0.20.
C)
$0.40.
D)
$0.50.
148.
(Ref 21-10 Table: Costs of Producing Bagels) Use Table 21-10: Cost of Producing
Bagels. The average total cost of producing 2 bagels is:
A)
$0.05.
B)
$0.10.
C)
$0.20.
D)
$0.40.
149.
(Ref 21-10 Table: Costs of Producing Bagels) Use Table 21-10: Cost of Producing
Bagels. The marginal cost of producing the second bagel is:
A)
$0.05.
B)
$0.10.
C)
$0.30.
D)
$0.40.
Page 35
Use the following to answer questions 150-164:
150.
(Ref. 21-11 Table: Costs of Birthday Cakes) Use Table 21-11: Costs of Birthday Cakes.
Assume that fixed costs are $10. What is the average variable cost of 2 cakes?
A)
$40.00
B)
$35.00
C)
$25.00
D)
$12.50
151.
(Ref. 21-11 Table: Costs of Birthday Cakes) Use Table 21-11: Costs of Birthday Cakes.
Assume that fixed costs are $10. What is the average fixed cost of 2 cakes?
A)
$5
B)
$10
C)
$25
D)
$30
152.
(Ref. 21-11 Table: Costs of Birthday Cakes) Use Table 21-11: Costs of Birthday Cakes.
Assume that fixed costs are $10. What is the average total cost of 2 cakes?
A)
$35.00
B)
$25.00
C)
$17.50
D)
$12.50
153.
(Ref. 21-11 Table: Costs of Birthday Cakes) Use Table 21-11: Costs of Birthday Cakes.
Assume that fixed costs are $10. What is the marginal cost of the second cake?
A)
$5
B)
$10
C)
$25
D)
$35
Page 36
154.
(Ref. 21-11 Table: Costs of Birthday Cakes) Use Table 21-11: Costs of Birthday Cakes.
Assume that fixed costs are $10. What is the average variable cost of 4 cakes?
A)
$38.00
B)
$10.00
C)
$9.50
D)
$8.00
155.
(Ref. 21-11 Table: Costs of Birthday Cakes) Use Table 21-11: Costs of Birthday Cakes.
Assume that fixed costs are $10. What is the average fixed cost of 4 cakes?
A)
$48.00
B)
$10.00
C)
$5.00
D)
$2.50
156.
(Ref. 21-11 Table: Costs of Birthday Cakes) Use Table 21-11: Costs of Birthday Cakes.
Assume that fixed costs are $10. What is the average total cost of 4 cakes?
A)
$35.00
B)
$25.00
C)
$9.50
D)
$12.00
157.
(Ref. 21-11 Table: Costs of Birthday Cakes) Use Table 21-11: Costs of Birthday Cakes.
Assume that fixed costs are $10. What is the marginal cost of the fourth cake?
A)
$8
B)
$10
C)
$25
D)
$35
158.
(Ref. 21-11 Table: Costs of Birthday Cakes) Use Table 21-11: Costs of Birthday Cakes.
Assume that fixed costs are $10. What is the average variable cost of 5 cakes?
A)
$300
B)
$250
C)
$50
D)
$10
Page 37
159.
(Ref. 21-11 Table: Costs of Birthday Cakes) Use Table 21-11: Costs of Birthday Cakes.
Assume that fixed costs are $10. What is the average fixed cost of 5 cakes?
A)
$1
B)
$2
C)
$5
D)
$10
160.
(Ref. 21-11 Table: Costs of Birthday Cakes) Use Table 21-11: Costs of Birthday Cakes.
Assume that fixed costs are $10. What is the average total cost of 5 cakes?
A)
$110
B)
$60
C)
$12
D)
$2
161.
(Ref. 21-11 Table: Costs of Birthday Cakes) Use Table 21-11: Costs of Birthday Cakes.
Assume that fixed costs are $10. What is the marginal cost of the fifth cake?
A)
$2
B)
$10
C)
$12
D)
$20
162.
(Ref. 21-11 Table: Costs of Birthday Cakes) Use Table 21-11: Costs of Birthday Cakes.
Assume that fixed costs are $10. The point of diminishing returns begins when output
exceeds:
A)
2.
B)
3.
C)
4.
D)
5.
163.
(Ref. 21-11 Table: Costs of Birthday Cakes) Use Table 21-11: Costs of Birthday Cakes.
Assume that fixed costs are $10. The minimum average variable cost occurs at output
of:
A)
2.
B)
3.
C)
4.
D)
5.
Page 38
164.
(Ref. 21-11 Table: Costs of Birthday Cakes) Use Table 21-11: Costs of Birthday Cakes.
Assume that fixed costs are $10. The minimum average total cost occurs at output of:
A)
6.
B)
5.
C)
3.
D)
2.
165.
When returns are diminishing, the marginal cost curve is upward-sloping.
A)
True
B)
False
166.
As a firm increases production in the short run, the marginal cost of output increases
because the marginal product of the variable input decreases.
A)
True
B)
False
167.
The short-run average total cost curve is U-shaped because at low output levels the
spreading effect of falling average fixed costs dominates the diminishing returns effect,
while at high output levels the reverse is true.
A)
True
B)
False
168.
In the short run, and with nonzero fixed costs, the average total cost curve always lies
above the average variable cost curve.
A)
True
B)
False
169.
If the average total cost curve and the average variable cost curve are both U-shaped,
and fixed costs are nonzero, then the minimum point of the average total cost curve
must lie above the minimum point of the average variable cost curve.
A)
True
B)
False
170.
If average total cost is declining, marginal cost cannot be increasing.
A)
True
B)
False
Page 39
171.
In the short run, if marginal cost is higher than average total cost, producing an extra
unit of output must raise average total cost.
A)
True
B)
False
172.
In the short run, the average total cost curve reaches its minimum point at a lower level
of output than the short-run marginal cost curve reaches its minimum.
A)
True
B)
False
173.
It is time to pay the bills. You pay the rent, the basic cable bill, the electricity bill, and
your grocery bill. Which of these are good examples of fixed costs, and which are
variable costs? Explain your reasoning.
174.
(Table: Marie’s Textbook Company) Use Table: Marie’s Textbook Company. Marie has
fixed costs of $500 per month and hires workers for $2,000 each per month. With as
much precision as possible, calculate the following:
A) total cost of production when four workers are employed
B) the output level that produces the lowest average total cost
C) the price that Marie must charge to break even on the production of 130 textbooks
175.
Describe the shape of the AFC curve when fixed costs are nonzero and explain why it
takes this shape. Can AFC ever intersect the x-axis in such cases?
176.
Consider the statement, “When the marginal cost is rising, the average total cost must
also be rising.” Is this statement true or false? Explain your reasoning.
Page 40
177.
A firm employs capital as a fixed input and labor as a variable input in the short run. If
the cost of capital falls, what will happen to the AVC, ATC, and MC curves? Explain.
178.
(Table: Marie’s Production and Costs) Use Table: Marie’s Production and Costs. Marie
has fixed costs of $500 per month and hires workers for $2,000 each per month. Some
of Marie’s monthly production and cost information is in the accompanying table.
Calculate the missing information and complete the table.
179.
Janet’s poodle grooming salon has a total cost curve expressed by the equation TC = 100
+ 3Q2, where Q is the quantity of dogs groomed. Given this expression, Janet is
operating in the:
A)
long run.
B)
short run, and her fixed costs are $100.
C)
long run, and her fixed costs are $100.
D)
short run, and there are no fixed costs.
180.
Janet’s poodle grooming salon has a total cost curve expressed by the equation TC = 100
+ 3Q2, where Q is the quantity of dogs groomed. Given this expression, if Janet grooms
five dogs, her total costs will be:
A)
$100.
B)
$175.
C)
$225.
D)
$75.
Page 41
181.
Janet’s poodle grooming salon has a total cost curve expressed by the equation TC = 100
+ 3Q2, where Q is the quantity of dogs groomed. Janet notices that, as she grooms more
dogs, her total cost curve:
A)
becomes steeper.
B)
becomes flatter.
C)
stays constant.
D)
becomes steeper and then becomes horizontal.
182.
A firm’s total fixed cost:
A)
stays constant in the short run.
B)
falls as the firm produces more output in the short run.
C)
falls as the firm produces more output in the long run.
D)
increases as the firm produces more output.
183.
Diminishing returns are a reason that:
A)
the marginal cost curve is downward sloping.
B)
fixed costs remain constant.
C)
the marginal cost curve is upward sloping.
D)
the average fixed cost curve is downward sloping.
184.
When a firm produces a small amount of output, the spreading effect:
A)
is stronger than the diminishing returns effect.
B)
is weaker than the diminishing returns effect.
C)
and the diminishing returns effect are equal.
D)
is zero.
185.
As production increases and the fixed cost is divided by larger quantities of output,
average fixed cost drops. This is referred to as the _____ effect.
A)
diminishing returns
B)
spreading
C)
constant cost
D)
increasing returns
186.
The eventual increase in AVC as output increases is the _____ effect.
A)
diminishing returns
B)
spreading
C)
constant cost
D)
increasing returns
Page 42
187.
If ATC is equal to MC, then the firm is operating:
A)
at the minimum point of ATC.
B)
on the downward-sloping portion of ATC.
C)
on the upward-sloping portion of ATC.
D)
with increasing returns to scale.
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