Module 3 Eco2023
As output rises,
AFC falls
The FC of producing 2000 units is $2500 while the TC is $3400. Which of the following is true?
AVC is $.45.
All costs are fixed in the short-run.
False
Marginal Cost falls for most of its length.
False
The decision to shut down and the decision to go out of business are interchangeable; therefore, there is no need to distinguish between them.
False
The law of diminshing returns is also known as diseconomies of scale.
False
The price of your product is $6 while the AVC is $4 and the AFC is $3. You are currently producing at the point that MR = MC. Which of the following is true?
In the short run, you should produce Q*.
In the short run a firm cannot exit the industry.
True
In the short run, the ATC curve is always above the AVC curve.
True
You rent a facility for $2000 a month and lease equipment for $500 a month, both by one year contract. You take orders for $4000 worth of product that requires $1000 in supplies and $1500 in labor to make.
Your firm is doing better to stay open because TR is greater than VC.
In the long run
a firm will exit the industry when P
For very competitive sellers the breakeven point is:
all of the above
The MC curve intersects the AVC and ATC curves at their minimum points
all of the time.
At an output of zero, total cost is
equal to fixed cost.
Average Fixed Cost does not change as production changes.
false
As long as there are __________ costs, we are in the short run.
fixed
The Marginal Cost curve slopes upward for most of its length. This is because of the:
law of diminishing returns
When average total cost is declining, then
marginal cost must be less than average total cost.
Average Total Cost
rises when Marginal Cost is above it.
If a firm cannot cover its variable costs, it will:
shut down in the short run and go out of business in the long run
In the long run, all costs are _____________.
variable
All other things equal, a market with no economies of scale.
will probably result in a market dominated by a large number of small firms.
f you had fixed cost of $100,000 and variable costs of $10,000, in the short run you would operate if total revenue were equal to, or greater than
$10,000.
The distance between the ATC and AVC curves is:
Average Fixed Cost
Average Total Cost minus Average Fixed Cost is:
Average Variable Cost
Variable cost at 200 units is $500 while Fixed Cost is $400. Which of the following is true?
Average total cost is $4.50 at 200 units.
The major source of economies of scale in retailing is:
Bulk discounts.
Which is most clearly a fixed cost?
Rent
The Fixed Cost of producing 100 units is $500. The Total Cost is $1100. Which is true?
The Average Total Cost of producing 100 units is $11.
Which statement is true?
The marginal cost curve intersects both the average variable cost curve and the average total cost curve at their minimum points.
When there are diseconomies of scale what happens as a firm gets bigger and expands to a new set of short-run curves?
The new short-run curves are to the right and higher than the old ones.
When there are Fixed Costs of production we know that:
Total cost will be larger than Fixed Cost if quantity is more than 0.
Average Total Cost always intersects Marginal cost at the lowest point on the ATC curve.
True
Economies and diseconomies of scale occur in the long run while increasing and diminishing returns occur in the short run.
True
Variable inputs can be found:
in both the long run and the short run.
Adam Smith's pin factory example was a case of:
increasing returns due to specialization of labor.