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A firm is producing 100 units of output at a total cost of $400. The firm's average variable cost is $3 per unit. What is the firm's total fixed cost?

$100

Ryan quit a job with a daily salary and opened a business. On a daily basis, the total revenue of the business is $200, and the explicit costs of the business are $120. If Ryan has zero economic profits, what must be the value of Ryan's implicit costs?

$80

Which of the following statements regarding accounting profits, opportunity costs, and economic profits is true?

If accounting profits are less than opportunity costs, there will be economic losses.

Economic profit can be calculated as accounting profit minus which of the following?

Implicit costs

Assume that the short-run marginal cost curve initially falls, and it then rises as quantity of output increases. Which of the following must be true?

Initially the marginal product of labor increases but eventually marginal product of labor decreases.

If labor is the only variable input in the production process, the short-run marginal cost curve is upward sloping because which of the following occurs as more and more labor is added?

Output increases at a decreasing rate, and thus the cost of producing each additional unit of output increases.

The following questions refer to the diagram below, which shows the short-run production function of a perfectly competitive firm that produces potatoes using one variable input, labor.

Second worker

Which of the following is a result of increasing returns to sale?

Downward-sloping long-run average total cost curve

If a firm is experiencing economies of scale, which of the following will decrease as output increases?

Long-run average total cost

Short-run marginal costs eventually increase because of the effects of

diminishing marginal product

Instead of being employed at a printing company at a salary of $25,000 per year, Sally starts her own printing firm. Rather than renting a building that she owns to someone else for $10,000 per year, she uses it as the location for her company. Her costs for workers, materials, advertising, and energy during her first year are $125,000. If the total revenue from her printing company is $155,000, her total economic profit is

-$5,000

If a firm's average total cost decreases as the firm increases its output, the firm's marginal cost must be

less than the average total cost

The most profitable level of output for any firm operating in the short run is the level of output at which

marginal revenue equals marginal cost

A firm produces 400 books and sells each book for $15. If the explicit cost of producing the books is $4,500 and the implicit cost is $1,000, the firm's economic profit is

$500

The table above shows a firm's total cost of producing various units of output. What is the average variable cost of producing three units?

$7

Which of the following explains the difference between short-run and long-run costs?

All costs are variable in the long run but not in the short run.

Which of the following MUST be true of the long run?

All factors of production are variable.

Which of the following provides an example of the law of diminishing returns?

As more of a variable input—for example, labor is used with a fixed number of machines— output increases but at a diminishing rate.

Which of the following is true of the marginal cost curve?

It intersects the average variable cost curve and the average total cost curve at each curve's minimum point.

In the short run, which of the following is true of a firm's average total cost of production?

It is equal to average fixed cost plus average variable cost.

Assume that the fixed cost is $50. Based on the cost and output data in the table above, what is the marginal cost when the firm increases its output from three to four units and the average total cost of producing 4 units?

Marginal Cost: $25 Average Total Cost: $35

The table below shows a production function for a firm. All of the following can be concluded from the information in the table EXCEPT:

This is a production function for a perfectly competitive firm.

The following problems refer to the graph below for a representative firm in a perfectly competitive, constant-cost industry, which shows the firm's marginal cost (MC), average total cost (ATC), and average variable cost (AVC). In the short run, the firm will realize an economic loss but will continue to produce if the price is

between P2 and P3

If the output of a firm doubles when the firm doubles all of its inputs, the firm must be experiencing

constant returns to scale

A farmer grows wheat using two inputs: labor and land whose prices are constant. If she doubles her inputs, she finds that the quantity of wheat produced more than doubles. Therefore, it must be true that in this output range her long-run average total cost curve is

downward sloping

If total revenue is increasing as output increases, marginal revenue is always

greater than zero

The graph above shows the short-run cost and revenue curves for a perfectly competitive firm. Assume that the market price is P0 and the firm is producing at quantity Q2. To maximize profit, the firm should

produce quantity Q1, where price is equal to marginal cost

In the short run, a profit-maximizing firm, faced with U-shaped average cost curves, is producing a level of output at which the average total cost of production is minimized. At this level of output, which of the following is true for the firm?

Marginal cost equals average total cost

Assume that a firm uses only one variable input. If a firm is experiencing diminishing returns, which of the following is true as more of the variable input is used?

Marginal cost will increase

Assume that labor is the only variable input. If a firm's short-run marginal cost is increasing as output rises, which of the following must be true?

Marginal product of labor is decreasing.