Quiz 5

Suppose a firm has the following expenditures per day: $240 for wages, $150 for materials and $80 for equipment rental. The owner of the firm owns the building in which it operates. If the firm were not operating in the building, he could rent the building for $70 per day. Total daily revenue is $600. What are the daily implicit costs for the firm described above?

*$70 $80 $150 $220

Which of the following is the best explanation of why the law of diminishing returns does not apply in the long run?

*All factors of production are variable in the long run The MPP does not change in the long run In the long run, firms have enough time to find more qualified workers All factors of production are fixed in the long run

Which of the following will always increase as output increases?

*Total cost Average total cost Marginal cost Fixed costs

During the short run:

All inputs can be changed *Some inputs are fixed Factory size can be changed The number of workers cannot be changed

The sum of fixed cost and variable cost at any rate of output is equal to:

Average total cost Total profit *Total cost Marginal cost

The reason the ATC curve has an upturn is because of:

Increasing returns *Rising marginal costs Negative marginal costs Falling average costs

In the short run, a manufacturer should produce the next unit of output as long as:

Marginal cost is greater than price Price is greater than total cost *Price is greater than marginal cost Price equals total cost

The increase in total cost associated with a one-unit increase in production is:

Marginal revenue Marginal physical product *Marginal cost Average total cost

A firm can be identified as profitable if the:

Sum of total revenue and total costs is high Difference between its total revenue and total costs is negative *Difference between its total revenue and total costs is positive Total costs and marginal costs are low

Assume a toy company hires an additional worker to assemble toys and the size of the factory and amount of equipment remain constant. As a result, the level of output increases but by a smaller amount than when the previous additional worker was hired. This is an example of:

The law of poor planning *The law of diminishing returns Say's Law The law of substitution

If price is greater than marginal cost but not average total cost, then:

Total revenues are greater than total costs The firm is earning a profit *Eventually the firm will go out of business The firm is experiencing diminishing marginal utility