Cost of Production Quiz

In economics, a firm that faces no competitors is referred to as _________________. a) an oligopoly b) a monopoly c) a perfect competitor d) an oligopolizor

a) a monopoly

If a firm is experiencing _____________________, then as the quantity of output rises, the average cost of production rises. a) decreasing returns to scale b) consent returns to scale c) economies of scale d) increasing returns to scale

a) decreasing returns to scale

Refer to the table below. If the firm produces 5 units that it sells at a price of $30.00 each, what will its profits or losses equal? a) losses equal $5 b) profits equal $5 c) profits equal $25 d) losses equal $25

a) losses equal $5

______________ include all of the costs of production that increase with the quantity produced. a) Fixed costs b) Variable costs c) Average costs d) Average variable costs

b) Variable costs

Which of the following falls outside of the classification of business expenditures that fall into the category of variable costs? a) costs that increase with the quantity produced b) costs of research and development c) costs related to labor expenditures d) costs related to physical inputs

b) costs of research and development

The table below sets out cost information for the production of volley balls. Some values are missing. Which of the following statements is correct? a) A = 42; E = 40 b) A = 70; E = 40 c) A = 42, E = 12 d) A = 70; E = 12

c) A = 42, E = 12

In order to determine ____________, the firm's total costs must be divided by the quantity of its output. a) diminishing marginal returns b) fixed costs c) variable cost d) average cost

d) average cost

In microeconomics, the term ___________________ is synonymous with decreasing returns of scale. a) monopoly b) economies of scale c) diminishing returns d) diseconomies of scale

d) diseconomies of scale

Economies of scale may arise from all but one of the following. Which one is it? a) doubling promotional expenses to expand sale more than proportionately b) having a larger retail space can expand sales more than proportionately c) spreading the fixed-costs of administration over more customers holds average costs down d) government economic subsidies protect firms from competition to avoid losses.

d) government economic subsidies protect firms from competition to avoid losses.

Refer to the table below. If this information were used to create a total cost graph, the curve should a) begin at 40 on the vertical axis and slope upward. b) become steeper as quantity increases. c) become steeper due to diminishing returns. d) reflect all of the above.

d) reflect all of the above.

The future of cities in the United States and in other countries will be determined by their ability to benefit from the _________________ and to minimize or counterbalance the ______________________. a) economies of agglomeration; corresponding diseconomies b) economies of scale; agglomeration factors c) diverse population; greater returns to scale of illegal activities d) constant returns to scale; market-orientated system

a) economies of agglomeration; corresponding diseconomies

The term "constant returns to scale" describes a situation where a) expanding all inputs does not change the average cost of production. b) a larger-scale firm can produce at a lower cost than a smaller-scale firm. c) expanding all inputs changes the average cost of production. d) the quantity of output rises and the average cost of production falls.

a) expanding all inputs does not change the average cost of production.

A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production. a) fixed costs; do not change, b) variable costs; are constantly changing, c) fixed costs; are consistently changing, d) variable costs; do not change,

a) fixed costs; do not change

The economies-of-scale curve is a long-run average cost curve, because a) it allows all factors of production to change. b) fixed costs cannot be changed. c) only variable costs are allowed to change. d) only marginal costs are allowed to change

a) it allows all factors of production to change.

Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it? a) physical space for the gallery b) costs of purchasing art work to sell in the gallery c) wages paid to three part-time employees d) accountant's fees for preparing tax returns

a) physical space for the gallery

If a paper mill shuts down its operations for three months so that it produces nothing, its __________________ will be reduced to zero? a) variable costs b) fixed costs c) opportunity costs d) total cost

a) variable costs

________________________ arises where many firms are competing in a market to sell similar but differentiated products. a) Oligopolistic competition b) Perfect competition c) Monopolistic competition d) Monogopolised competition

c) Monopolistic competition

The graph above illustrates the total cost function for GoodieCookie Co. How are the company's fixed costs represented in this graph? a) by adding up the fixed costs b) at any vertical axis point where the total cost curve never equals zero c) as the point where the total cost curve touches the vertical axis d) by adding up the variable costs

c) as the point where the total cost curve touches the vertical axis

Which of the following falls outside of the classification of business expenses that fall into the category of fixed costs? a) costs that must be made before production starts b) costs that vary according to specific line of business c) costs incurred in the act of producing d) costs incurred as advertising expenses

c) costs incurred in the act of producing

The graph above illustrates the electricity market. Consider market competition between firms where price is based on AR and select the most appropriate answer. a) in the short-run, the demand curve and average revenue shift as other firms enter the market and increase competition b) in the short-run, the demand curve and average revenue shift as other firms leave the market and decrease competition c) in the long-run, the demand curve and average revenue shift as other firms enter the market and increase competition d) in the long-run, the demand curve and average revenue shift as other firms leave the market and decrease competition

c) in the long-run, the demand curve and average revenue shift as other firms enter the market and increase competition