Economics Chapter 20 Workbook Questions

In general a firm's

C) average total cost declines as output rises up to a certain point and then begins to rise

The marginal cost curve intersects ... at its/their minimum point(s).

C) both the ATC and the AVC

As output rises, the difference between ATC and AVC

C) falls

In the short run,

C) some costs are fixed costs

Total cost is the sum of

C) variable cost and fixed cost

Al and George's used car lot has total revenue of $5 million, fixed costs of $8 million, and variable costs of $4 million. In the short run the firm will, and in the long run it will

D) Short run: operate, Long run: go out of business

Adam Smith noted each of the following economies of scale except

D) diminishing returns

If price is above ATC, the firm will

D) operate in the short run and stay in business in the long run

In the short run, a firm has two options:

D) operate or shut down

The decision to shut down is made in

D) the short run

As output expands to larger and larger numbers,

A) AFC

When MC is rising but still below ATC, then

A) ATC is declining

We find price by dividing

A) Total revenue by output

The salaries paid to people who are in the middle of three-year guaranteed contracts are

A) a fixed cost

The law of diminishing returns may also be called the law of

A) diminishing marginal output

In general, as output rises you first attain

A) increasing returns, then diminishing returns, then negative returns

If AVC is decling, then

A) marginal cost must be less than AVC

The marginal cost curve intersects the average variable cost curve at the

A) shut-down point

Average variable cost is found by dividing

A) variable cost by output

A firm has a fixed cost of $100,000 , and variable cost is $90,000, at an output of one. How much is marginal cost at an output of one?

B) $90,000

Which of the following is most likely to be a variable cost?

D) Fuel and power payments

Which statement is the most accurate?

D) Whether to hold a wedding in city hall or in a wedding hall is at least partially an economic decision

Which statement is false?

C) When output is zero, total cost is zero

Which statement is true?

B) A firm will operate in the short run when total revenue exceeds variable costs.

In Figure 1, if you want to produce an output of 100, in the long run you will choose a plant whose size is represented by

B) ATC2

Parkinson's law is an example of

B) diseconomies of scale

As output increases, eventually

B) diseconomies of scale become larger than economies of scale.

A production function shows a firm how to

B) maximize output

In figure 1, if you want to produce an output of 200, in the long run you will choose a plant whose size is represented by

C) ATC3

Which statement is false?

C) AVC equals ATC at an output of one.

Statement 1: AVC can never be higher than ATC. Statement 2: AVC and marginal cost are equal at an output of one

C) Both statements are true

When output is zero, fixed cost is and variable cost is

C) Fixed cost: more than zero, Variable cost: zero

Each of the following provides an example of economies of scale except

E) the services of psychiatrists, personal trainers, barbers and hairstylists

When total output is maximized, marginal output is

E) zero