Question 1

Average fixed costs:

Accepted Answer

A)   rise when production increases.
B)   rise when production decreases.
C)   rise when total costs increase.
D)   rise when average variable costs increase
E)   never rise.

Question 2

Short-run total cost includes all of the private economic costs and social costs of the firm in the short run.

Accepted Answer

A) True 
 B)False

Question 3

If the marginal product of a variable input rises, there will be a corresponding fall in short-run marginal cost.

Accepted Answer

A) True 
 B)False

Question 4

Fixed costs are costs that do not vary with the level of output in the short run.

Accepted Answer

A) True 
 B)False

Question 5

Short-run marginal cost:

Accepted Answer

A)   is the rate of change of short-run fixed cost as the level of output changes.
B)   is the rate of change of short-run total variable cost as the level of output changes.
C)   is the rate of change of short-run average cost as the level of output changes.
D)   is the rate of change of short-run total cost as the level of output changes.
E)   b and d

Question 6

Which of the following would not be considered an opportunity cost?

Accepted Answer

A)   the monthly salary that the owner could expect to earn if he worked for someone else.
B)   the wages and salaries of employee who could be working in another division.
C)   an expected return on the capital invested in the firm if it were available to be invested elsewhere.
D)   estimated rental income that the firm's owners could have earned on manufacturing equipment by leasing it to another business.
E)   estimated rental income that the firm's owners could have earned on the building by leasing it to another business.

Question 7

Implicit costs represent the opportunity that a company gives up by using a firm-owned resource in one way rather than another.

Accepted Answer

A) True 
 B)False

Question 8

Variable costs might include all of the following EXCEPT:

Accepted Answer

A)   direct labor to produce a firm's product
B)   direct materials to produce a firm's product
C)   salary of the firm's accountant
D)   utilities
E)   worker's compensation insurance

Question 9

Variable costs are costs that increase as a firm's output increases but are constant as a firm's output decreases.

Accepted Answer

A) True 
 B)False

Question 10

Economies of scale are technological and organizational advantages that accrue to the firm as it increases output in the long run.

Accepted Answer

A) True 
 B)False

Question 11

Semi-variable costs are costs that increase as a firm's output increases but are constant as a firm's output decreases.

Accepted Answer

A) True 
 B)False

Question 12

Short Run Data for Sullivan's Salmon Farm 
-What is the average fixed cost for Sullivan's Salmon Farm?

Accepted Answer

A)   336, 168, 112, 84, 67.2, 56
B)   370, 195, 138, 113, 99, 91
C)   340, 270, 260, 240, 195, 138
D)   340, 318, 290, 168, 113, 99
E)   370, 168, 138, 112, 99, 84

Question 13

The Summer Clean Up Company performs landscaping to get yards in shape for summer parties. Its only variable input is labor. Each homeowner must provide all the tools necessary for the day's job. Each worker must supply his or her own transportation to the job site. Each worker costs $30.00 per day and Summer Clean Up's total fixed cost is $200 per day. The following table contains some of the company's daily production and cost data, where Q is cubic yards of trash. Where is SMC at its minimum and MPL at a maximum? L at a maximum?   A)  SMC is at a minimum between 50 and 150 units of output. MPL is at a maximum between 50 and 100 units of output and 5 and 10 units of input labor. B)  SMC is at a minimum between 150 and 225 units of output. MPL is at a maximum between 100 and 150 units of output and 10 and 15 units of input labor. C)  SMC is at a minimum between 225 and 275 units of output. MPL is at a maximum between 150 and 225 units of output and 15and 20 units of input labor. D)  SMC is at a minimum between 275 and 305 units of output. MPL is at a maximum between 275 and 305 units of output and 20 and 25 units of input labor. E)  SMC is at a minimum between 330 and 350 units of output. MPL is at a maximum between 305 and 330 units of output and 35and 40 units of input labor." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   SMC is at a minimum between 50 and 150 units of output. MPL is at a maximum between 50 and 100 units of output and 5 and 10 units of input labor.
B)   SMC is at a minimum between 150 and 225 units of output. MPL is at a maximum between 100 and 150 units of output and 10 and 15 units of input labor.
C)   SMC is at a minimum between 225 and 275 units of output. MPL is at a maximum between 150 and 225 units of output and 15and 20 units of input labor.
D)   SMC is at a minimum between 275 and 305 units of output. MPL is at a maximum between 275 and 305 units of output and 20 and 25 units of input labor.
E)   SMC is at a minimum between 330 and 350 units of output. MPL is at a maximum between 305 and 330 units of output and 35and 40 units of input labor.

Question 14

Costs that do not involve actual payment by a firm to factors of production but which nevertheless represent costs to the firm in the sense that in order to use certain inputs in the production process the firm has to abandon opportunities to use them elsewhere are:

Accepted Answer

A)   explicit costs
B)   opportunity costs
C)   fixed costs
D)   historical costs
E)   variable costs

Question 15

When marginal cost is greater than average cost, then average cost must be rising.

Accepted Answer

A) True 
 B)False

Question 16

Short-run average variable cost is the variable cost per unit of output in the short run.

Accepted Answer

A) True 
 B)False

Question 17

If the average productivity of the variable input increases, there will be a corresponding fall in average variable cost.

Accepted Answer

A) True 
 B)False

Question 18

The long-run average cost function reaches a minimum where:

Accepted Answer

A)   dLAC/dQ = 0.
B)   LTC = LAC.
C)   dTFC/dQ = 0.
D)   dLMC/dQ = 0.
E)   dLTC/dQ = 0.

Question 19

Suppose the firm has the following total cost function:
  a. Write equations for average fixed cost and average variable cost
a. What will be the value of short-run average cost when Q = 80?
b. Write the marginal cost equation for this firm
c. What will be the marginal cost be when Q = 40?
d. For this firm, what will be the dollar value of AVC at its minimum?
e. At what level of output will marginal cost be at its minimum?
f. What will be the value of marginal cost when it is at its minimum?

Accepted Answer

a.

b.

c.

d.

e. The minimu...

Question 20

Private costs include all of the following EXCEPT:

Accepted Answer

A)   explicit costs
B)   implicit costs
C)   fixed costs
D)   variable costs
E)   social costs

Exam 6: Cost of Production

Short Run Data for Sullivan's Salmon Farm -What is the average fixed cost for Sullivan's Salmon Farm?

Correct Answer
verified

Variable costs might include all of the following EXCEPT:

Correct Answer
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Economies of scale are technological and organizational advantages that accrue to the firm as it increases output in the long run.

Correct Answer
verified

Fixed costs are costs that do not vary with the level of output in the short run.

Correct Answer
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Correct Answer
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If the marginal product of a variable input rises, there will be a corresponding fall in short-run marginal cost.

Correct Answer
verified

Average fixed costs:

Correct Answer
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Costs that do not involve actual payment by a firm to factors of production but which nevertheless represent costs to the firm in the sense that in order to use certain inputs in the production process the firm has to abandon opportunities to use them elsewhere are:

Correct Answer
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When marginal cost is greater than average cost, then average cost must be rising.

Correct Answer
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The long-run average cost function reaches a minimum where:

Correct Answer
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Variable costs are costs that increase as a firm's output increases but are constant as a firm's output decreases.

Correct Answer
verified

Short-run marginal cost:

Correct Answer
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Semi-variable costs are costs that increase as a firm's output increases but are constant as a firm's output decreases.

Correct Answer
verified

Which of the following would not be considered an opportunity cost?

Correct Answer
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a.
b. c. d. e. The minimu...
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Private costs include all of the following EXCEPT:

Correct Answer
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If the average productivity of the variable input increases, there will be a corresponding fall in average variable cost.

Correct Answer
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Implicit costs represent the opportunity that a company gives up by using a firm-owned resource in one way rather than another.

Correct Answer
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Short-run average variable cost is the variable cost per unit of output in the short run.

Correct Answer
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Short-run total cost includes all of the private economic costs and social costs of the firm in the short run.

Correct Answer
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Exam 6: Cost of Production

Short Run Data for Sullivan's Salmon Farm -What is the average fixed cost for Sullivan's Salmon Farm?

Correct AnswerverifiedShow Answer

Variable costs might include all of the following EXCEPT:

Correct AnswerverifiedShow Answer

Economies of scale are technological and organizational advantages that accrue to the firm as it increases output in the long run.

Correct AnswerverifiedShow Answer

Fixed costs are costs that do not vary with the level of output in the short run.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the marginal product of a variable input rises, there will be a corresponding fall in short-run marginal cost.

Correct AnswerverifiedShow Answer

Average fixed costs:

Correct AnswerverifiedShow Answer

Costs that do not involve actual payment by a firm to factors of production but which nevertheless represent costs to the firm in the sense that in order to use certain inputs in the production process the firm has to abandon opportunities to use them elsewhere are:

Correct AnswerverifiedShow Answer

When marginal cost is greater than average cost, then average cost must be rising.

Correct AnswerverifiedShow Answer

The long-run average cost function reaches a minimum where:

Correct AnswerverifiedShow Answer

Variable costs are costs that increase as a firm's output increases but are constant as a firm's output decreases.

Correct AnswerverifiedShow Answer

Short-run marginal cost:

Correct AnswerverifiedShow Answer

Semi-variable costs are costs that increase as a firm's output increases but are constant as a firm's output decreases.

Correct AnswerverifiedShow Answer

Which of the following would not be considered an opportunity cost?

Correct AnswerverifiedShow Answer

Correct Answerverifieda. b. c. d. e. The minimu...View AnswerShow Answer

Private costs include all of the following EXCEPT:

Correct AnswerverifiedShow Answer

If the average productivity of the variable input increases, there will be a corresponding fall in average variable cost.

Correct AnswerverifiedShow Answer

Implicit costs represent the opportunity that a company gives up by using a firm-owned resource in one way rather than another.

Correct AnswerverifiedShow Answer

Short-run average variable cost is the variable cost per unit of output in the short run.

Correct AnswerverifiedShow Answer

Short-run total cost includes all of the private economic costs and social costs of the firm in the short run.

Correct AnswerverifiedShow Answer

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a.
b. c. d. e. The minimu...
View Answer

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