Unit 3.1-3.3 MCQ

3.2 The chart below gives a firm's total cost of producing different levels of output. The marginal cost of producing the fourth unit of output is A $ 4 B $11 C $19 D $32 E impossible to determine from the information given

A $ 4

3.2 Which of the following factors can cause a firm's cost curves to shift upward? A An increase in wages B An increase in the firm's output C An increase in the output price D A decrease in the firm's output E A decrease in the price of energy

A An increase in wages

When marginal product exceeds average product, which of the following must be true? A Average product is increasing. B Average product is decreasing. C Marginal product is increasing. D Total product is decreasing. E Total product is at its maximum.

A Average product is increasing.

Which of the following statements about cost is always true for both monopolies and perfectly competitive firms? A Average total cost equals marginal cost when average total cost is a minimum. B Marginal cost decreases as production increases. C Average fixed cost is equal to marginal cost when average fixed cost is a minimum. D Average variable cost is equal to marginal cost when marginal cost is a minimum. E Average variable cost decreases as production increases.

A Average total cost equals marginal cost when average total cost is a minimum.

Which of the following best describes the relationship between the average total cost curve and the marginal cost curve in the short run? A If the average total cost curve is rising, the marginal cost curve is above the average total cost curve. B If the average total cost curve is rising, the marginal cost curve is below the average total cost curve. C If the average total cost curve is above the marginal cost curve, the marginal cost curve is rising. D If the average total cost curve is below the marginal cost curve, the marginal cost curve is falling. E If the average and marginal cost curves intersect, the marginal cost curve is at a minimum.

A If the average total cost curve is rising, the marginal cost curve is above the average total cost curve.

If the price of a firm's variable input increases, which of the following will occur? A The firm will decrease its level of production. B The price of the good will decrease in the short run. C The firm's marginal costs will decrease at every level of output. D The firm's average fixed cost will decrease. E More firms will enter the industry in the long run.

A The firm will decrease its level of production.

An increase in which of the following will cause a firm's marginal cost curve to shift upward? A The price of a variable input B The price of a fixed input C The level of output D Labor productivity E The demand for the firm's product

A The price of a variable input

3.2 Marginal cost is defined as the A change in total cost resulting from producing an additional unit of output B change in total cost resulting from using an additional unit of input C difference between total cost and total variable cost D difference between total variable cost and total fixed cost E difference between average total cost and average variable cost divided by output

A change in total cost resulting from producing an additional unit of output

A merger of two firms may increase economic efficiency by A decreasing average total cost through an increase in economies of scale B decreasing output to reduce marginal cost and equalize price C increasing economic profits but decreasing consumer surplus D increasing consumer surplus by decreasing economic profits E increasing consumer surplus by shifting the demand curve for the product to the right

A decreasing average total cost through an increase in economies of scale

3.3 F&D Manufacturing Company increases all its inputs by 50 percent each. If F&D's output increases by 100 percent, then F&D is experiencing A increasing returns to scale B constant returns to scale C diseconomies of scale D increasing marginal cost E decreasing profits

A increasing returns to scale

3.2 At 100 units of a firm's output, average total cost is $10, average variable cost is $8, average fixed cost is $2, and marginal cost is $12. How will each of the following change as the firm's output further increases? A Average Total CostAverage Variable CostAverage Fixed CostIncreaseIncreaseIncrease B Average Total CostAverage Variable CostAverage Fixed CostIncreaseIncreaseDecrease C Average Total CostAverage Variable CostAverage Fixed CostIncreaseDecreaseDecrease D Average Total CostAverage Variable CostAverage Fixed CostDecreaseIncreaseIncrease E Average Total CostAverage Variable CostAverage Fixed CostDecreaseDecreaseDecrease

B Average Total CostAverage Variable CostAverage Fixed CostIncreaseIncreaseDecrease

Which of the following indicates the presence of economies of scale as the quantity of output increases? 3.3 A Average variable cost decreases. B Long-run average total cost decreases. C Marginal cost decreases. D Average fixed cost decreases. E Marginal cost exceeds average total cost.

B Long-run average total cost decreases

In most cases the supply curve for a perfectly competitive industry can be described as which of the following? A More elastic in the short run than in the long run B More elastic in the long run than in the short run C Downward sloping in the short run D Perfectly inelastic in the long run E Perfectly elastic in the short run

B More elastic in the long run than in the short run

Which of the following best explains why the short-run average total cost curve is U-shaped? A Spreading total fixed costs over a larger output, and constant returns B Spreading total fixed costs over a larger output, and eventually diminishing returns C Increasing total fixed costs and increasing returns D Increasing average variable costs and decreasing returns E Decreasing average variable costs and increasing returns

B Spreading total fixed costs over a larger output, and eventually diminishing returns

3.3 A The firm increases only its labor input, and output decreases. B The firm doubles its inputs, and output triples. C The firm builds a new plant, and the average cost of production increases. D The firm hires a new plant manager, and profits increase. E The product price increases, and the firm increases its output.

B The firm doubles its inputs, and output triples.

Technological advances will lead to A an increase in marginal utility B a decrease in average total costs C a decrease in net exports D an increase in marginal costs E diseconomies of scale

B a decrease in average total costs

Beyond a certain level of output, the short-run marginal cost will rise because A there is no fixed input and costs will increase B at least one input is fixed and eventually diminishing returns will occur C the cost of the variable input increases when marginal product increases D the demand for the good decreases when production is limited E input prices increase when production increases and consumption is limited

B at least one input is fixed and eventually diminishing returns will occur

3.2 The chart below gives a firm's total cost of producing different levels of output. The total variable cost of producing five units of output is A $ 6 B $11 C $30 D $43 E impossible to determine from the information given

C $30

If labor is the only variable input and it costs $15 per hour and if the marginal product of labor is 3 units per hour, the short-run marginal cost of 1 unit of output is approximately 3.2 A $0.20 B $3.00 C $5.00 D $15.00 E $45.00

C $5.00

Assume that total fixed costs are $46, that the average product of labor is 5 units when 10 units of output are produced, and that the wage rate is $12. If labor is the only variable input, what is the average total cost of producing 10 units of output? 3.2 A $2 B $5 C $7 D $9 E $12

C $7

The table above shows the amount of labor inputs necessary to produce given levels of output. If the cost of a unit of labor is $20 and total fixed cost is $100, the average total cost of producing 20 units of output is 3.2 A $1 B $2 C $7 D $40 E $120

C $7

3.1 Locotek produces toy trains and pays each worker $350 per week. Five workers can produce 40 trains per week and six workers can produce 45 trains per week. The marginal product per week of the sixth worker is A $70 B $350 C 5 trains D 7.5 trains E 42.5 trains

C 5 trains

If a single firm can produce and supply an entire market at a lower unit cost than many small firms can, the long-run average total cost must be A increasing as firm size increases B remaining constant as firm size increases C decreasing as the firm's output increases D inelastic due to specialization E constant and equal to marginal cost

C decreasing as the firm's output increases

In microeconomics, the short run is defined as which of the following? A A period that is less than one year B A period that is between one year and four years C A period that is too short for a firm to be able to change its level of output D A period during which some inputs in a firm's production process cannot be changed E A period during which a firm's fixed costs exceed its variable costs

D A period during which some inputs in a firm's production process cannot be changed

Which of the following is always true of the relationship between average and marginal costs? 3.2: A Average total costs are increasing when marginal costs are increasing. B Marginal costs are increasing when average variable costs are higher than marginal costs. C Average variable costs are increasing when marginal costs are increasing. D Average variable costs are increasing when marginal costs are higher than average variable costs. E Average total costs are constant when marginal costs are constant.

D Average variable costs are increasing when marginal costs are higher than average variable costs.

For a firm where labor is the only variable input, which of the following happens when diminishing returns set in? 3.2 A Average variable cost begins to increase. B Average product of labor begins to decline. C Total product begins to decline. D Marginal cost begins to increase. E Average total cost begins to increase.

D Marginal cost begins to increase.

3.3 Economies of scale exist when A the doubling of all inputs doubles the output produced B short-run average total cost decreases as output increases C short-run average total cost remains constant as output increases D long-run average total cost increases as output increases E long-run average total cost decreases as output increases

E long-run average total cost decreases as output increases

Which of the following is true about a firm's average variable cost? 3.2: A It will rise if marginal cost is less than average variable cost. B It will never equal the firm's marginal cost. C It will decline when the firm's marginal product declines. D It will be negative if marginal revenue declines. E It will equal average total cost when fixed costs are zero.

E It will equal average total cost when fixed costs are zero.

A competitive firm produces a product using labor and plastic. The firm is initially in equilibrium. If the cost of plastic suddenly increases, which of the following will occur? 3.2 A The demand curve for the product will shift to the left. B The firm's demand curve for plastic will shift to the left. C The firm will increase the number of units offered for sale. D The firm will definitely go out of business, since competitive firms earn zero economic profits in equilibrium. E The firm's marginal costs will increase at each level of output.

E The firm's marginal costs will increase at each level of output.

As its output increases, a firm's short-run marginal cost will eventually increase because of A diseconomies of scale B a lower product price C inefficient production D the firm's need to break even E diminishing returns

E diminishing returns

The long-run average cost curve will be sloping downward if a firm experiences A diminishing marginal returns B decreasing returns to scale C constant returns to scale D diseconomies of scale E economies of scale

E economies of scale