Chapter 6 Section 3 and 5 Quiz

When economies of scale exist, a decrease in the level of output will lead to: A. A decrease in cost per unit B. An increase in cost per unit C. No change in cost per unit D. An increase in total costs E. Both b and d above

B

Constant returns to scale indicate that a firm is experiencing: A. Increasing marginal product B. Per unit costs of production that are increasing as the scale of output expands C. Per unit costs of production that remain stable as the scale of output expands D. Per unit costs of production hat are decreasing as the scale of output expands

C

Don Keene promotes boxing matches. He makes $6,500 per fight. Which cost is most relevant to a decision as to whether to promote one more fight? A. The marginal costs of promoting one additional boxing match B. The sunk cost of promoting previous boxing matches C. The average total costs of promoting a boxing match D. The average fixed cost of promoting a boxing match E. The total cost of promoting gall boxing matches during the year

A

Fixed costs are best defined as: A. Costs that do not vary with output B. The same of all marginal costs C. The change in total costs when one more unit of output is produced D. Costs that vary with output E. Costs that decline as output increases

A

The marginal costs of a good is: A. The addition to total costs from producing one more unit of output B. Decreasing whenever average total cost is decreasing C. The difference between average total cost and average variable cost D. Always equal to average variable costs when the firm is maximizing profit

A

Total Variable costs: A. Increase as production increases B. Are costs associated with short run fixed capital C. Are so named b/c they vary from firm to firm within an industry D. Decrease as production increases

A

When economies of scale exist: A. Per unit production costs decline as output expands B. Per unit production costs increase as output expands C. Marginal costs must decrease as output expands D. Per unit production costs remain constant as output expands

A

The sum of Average Variable Cost (AVC) and Average Fixed Cost (AFC) equals: A. Accounting profit B. Average total costs C. Total variable cost D. Marginal cost E. Economic profits

B

Which of the following is most likely to be a fixed cost for a business? A. Shipping charges for the delivery of products B. Interest payments on a loan used to finance the construction of a building C. Wages paid to temporary worker D. Payment for raw materials used in manufacturing goods

B

Assuming fixed costs are positive, over a range of output in which average total costs were constant: A. Marginal costs would be less than average variable costs B. Average variable costs would be constant as output increases C. Average variable costs would be rising as output increases D. Average variable costs would be falling as output increases

C

Costs that do not vary with output produced

Fixed cost

One that does not vary with quantity produced

Fixed cost

The interest payments on a loan used to finance the construction of a building is likely example of a:

Fixed cost

Is the change in total costs resulting from production one more unit of output

Marginal cost

Examples of variable costs:

Raw materials, temporary working wages, peicer rate labor, sales commissions, production supplies, energy bills, fuel purchases, transportion costs and shipping charges

Are the costs that do vary with the quantity of output produced for a given production process within a firm

Total variable cost

Costs that vary with output produced

Variable cost