ECON Exam 2

Answer the question on the basis of the following cost data. The average total cost of producing 3 units of output is

$16

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were

$200,000 and its economic profits were $0.

Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and has average variable costs of $150. The firm's total fixed costs are

$5,000

Answer the question on the basis of the following cost data. The marginal cost of producing the sixth unit of output is

$8

Diseconomies of scale arise primarily because

of the difficulties involved in managing and coordinating a large business enterprise.

In the provided diagram, the short-run supply curve for this firm is the...

segment of the MC curve lying to the right of output level h.

Which of the following is correct as it relates to cost curves?

Marginal cost intersects average total cost at the latter's minimum point.

in the long run

all costs are variable costs.

The average variable cost of the firm when 5 units of output are produced is

400 units

With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50. Its output quantity must be

800 units

If a firm produces 10 units of output, total costs are $1,030, and average fixed costs are $10, then total variable costs are

930

Refer to the provided graph. If the firm is producing at Q1, the area BADE represents

total fixed costs

The short-run supply curve of a purely competitive producer is based primarily on its

MC curve.

In the figure, curves 1, 2, 3, and 4 represent the

MC, ATC, AVC, and AFC curves, respectively.

As the firm in the diagram expands from plant size #3 to plant size #5, it experiences

diseconomies of scale.

Price is constant to the individual firm selling in a purely competitive market because

each seller supplies a negligible fraction of total supply.

In the provided diagram, at the profit-maximizing output, total profit is

efbc

If you operated a small bakery, which of the following would be a variable cost in the short run?

baking supplies (flour, salt, etc.)

If marginal cost is below average variable cost,

both average total cost and average variable cost are decreasing.

The law of diminishing returns indicates that

as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.

average fixed cost

declines continually as output increases.

To the economist, total cost includes

explicit and implicit costs

Which of the following is most likely to be an implicit cost for Company X?

forgone rent from the building owned and used by Company X

Accounting profits are typically

greater than economic profits because the former do not take implicit costs into account.

The long-run average total cost curve

indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size.

The minimum efficient scale of a firm

is the smallest level of output at which long-run average total cost is minimized.

In the provided diagram, the profit-maximizing output

n

A purely competitive seller is

price taker

Accounting profits equal total revenue minus

total explicit costs

Implicit and explicit costs are different in that

the former refers to nonexpenditure costs and the latter to monetary payments.

A purely competitive firm's short-run supply curve is

upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve.

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue

will also be $5.