Week 8 Quiz

If marginal cost is greater than average total cost, then:

average total cost is increasing.

The long-run average total cost of producing 100 units of output is $4, while the long-run average cost of producing 110 units of output is $4. These numbers suggest that the firm producing this output is experiencing:

constant returns to scale.

An input whose quantity cannot be changed during a particular period is a(n):

fixed input.

The change in total cost resulting from a one-unit change in quantity is:

marginal cost.

Darren runs a barbershop with fixed costs equal to $100 per day and a total output of 50 haircuts per day. What is his weekly total fixed cost if he is open 6 days per week?

$600

A farm can produce 1,000 bushels of wheat per year with two workers and 1,300 bushels of wheat per year with three workers. The marginal product of the third worker is:

300 bushels. ((1300-1000)/(3-2))

Quantity of labor (workers) Total numbers of cars serviced 0 0 1 12 2 22 3 30 4 36 5 40 6 42 The table above gives the production function for Andrew's Garage. If labor is the variable input and number of cars serviced is the output, what is the marginal product of labor when the number of workers rises from 2 to 3?

8

Quantity of output Fixed cost Variable cost Total cost 0 $70 $18 1 70 32 2 70 42 3 70 57 4 70 75 5 70 95 6 70 120 The table shows the cost information for Bonita's pet-sitting service, where quantity of output is the number of clients served per day. Think about the number you would put in the total cost column, and then answer this question. What is the marginal cost of increasing output from 5 clients to 6 clients?

$25

If the total variable cost for five shoes is $50 and the total variable cost of six shoes is $80, which of the following is true?

Average variable cost for the fifth shoe is $10.

The additional quantity of output obtained from using one more unit of labor is known as the:

marginal product of labor.

Economists explicitly assume that the primary objective of firms is to maximize:

profits.

If a firm has $10,000 in variable costs and no fixed cost, then the time period referred to is

the long run

As defined in the text, the long run is a planning period:

in which a firm can adjust all resources.

Assuming that all other factors of production are held constant, marginal product is the change in ________ output resulting from a one-unit change in ________ .

total; a variable input

Which of the following curves is not affected by the existence of diminishing returns?

the average fixed cost curve

In the short run:

some inputs are fixed and some inputs are variable.

Oscar has negotiated a lease for his sporting goods store in which he is required to pay $2,500 per month in rent. Oscar pays his staff $9 per hour to sell sporting goods and his monthly electricity bill averages $700, depending on his total hours of operation. Oscar's fixed costs of production equal:

$2,500 per month.

Suppose Cyd knows the average cost of producing 9 scones is $5, while the average cost of producing 10 scones is $5.20. What is the marginal cost of the 10th unit?

$7

Costs that cannot be recovered are:

sunk costs.

In the short run, an example of a fixed cost is:

a property tax.

Mingma hired another cashier to work in her clothing store, and her sales more than doubled. Hiring the second worker resulted in

increasing marginal returns

Economies and diseconomies of scale are associated with the:

long-run average total cost curve and the long run.

A firm's marginal cost is:

the ratio of the change in total cost to the change in the quantity of output.

A factor of production whose quantity cannot be changed during a particular period is a(n):

fixed factor of production.

A cost that does not depend on the quantity of output produced is called a:

fixed input.

When marginal cost is above average variable cost, average variable cost must be:

greater than average fixed cost.

If each of your first seven employees add more to output than the previous worker hired, you are experiencing:

increasing marginal returns.

The curve that illustrates the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output is the:

long-run average total cost curve.

Suppose that Bob leaves a job that pays $50,000 per year in order to open a new sponge business. His insurance cost is $5,000, his material cost is $25,000, his lease payments are $10,000 and his sales revenue is $90,000. Bob's economic profit is:

$0.

The change in total cost arising from producing one more unit of output is known as:

marginal cost.

Wendy leaves her job as a dancer to start her own dance studio. As a dancer, she made $34,000 per year. During the first year she paid $4,300 per year for insurance, $1846 for music and licensing fees, $150 for a boom box, and $11,300 for rent and utilities. She received $60,480 in tuition payments. Wendy's economic profit was

$8,884

Suppose that the first four units of a variable input generate corresponding total outputs per period of 200, 350, 450, and 500, respectively. The marginal product of the second unit of input is:

150.

Suppose that the units of variable input in a coal-production process are 1, 2, 3, 4, and 5, and the corresponding total outputs per period are 10, 15, 19, 22, and 24 tons, respectively. The marginal product of the third unit of input is ________ tons per period.

4

At quantities greater than the long-run least per-unit cost quantity of output, the long-run average total cost curve is tangent to the ________ of the corresponding short-run average total cost curve.

right of the minimum

Lauren has 11 people working in her tangerine grove. The marginal product of the eleventh worker equals 13 bushels of tangerines. If she hires a twelfth worker, the marginal product of that worker will equal:

The answer cannot be determined with the information available.

When the Frame Factory is producing 1,500 frames, total cost is $225,000 and total variable cost is $180,000. What does average fixed costs equal at 1,500 units?

$30

Quantity of output Fixed cost Variable cost Total cost 0 $70 $18 1 70 32 2 70 42 3 70 57 4 70 75 5 70 95 6 70 120 The table shows the cost information for Bonita's pet-sitting service, where quantity of output is the number of clients served per day. Think about the number you would put in the total cost column, and then answer this question. What is the average total cost of serving 5 clients?

$33

If a firm produces 10 units of output and incurs $30 in average variable cost and $35 in average total cost, total fixed cost is:

$50.

If Jakob knows the marginal cost of the first sports jersey is $21, the marginal cost of the second sports jersey is $40, and the marginal cost of the third jersey is $17, what is the total variable cost of producing three jerseys?

$78

Quantity of labor (workers) Total numbers of cars serviced 0 0 1 12 2 22 3 30 4 36 5 40 6 42 The table above gives the production function for Andrew's Garage. If labor is the variable input and number of cars serviced is the output, which of the following statements is true?

There are diminishing returns to labor.

Which of the following equations is true?

Total Cost = Fixed Cost + Variable Cost

Which of the following occurs in the short run?

Wal-Mart hires five new workers.

When the Keep On Calling Cell Phone Company is at full capacity, it incurs costs of $230,000. During the December shutdown period, when no cell phones are produced, it incurs costs of $76,000. One can conclude that

at full capacity, variable costs are $154,000.

The short run is the period of time in which:

at least one input is fixed.

Marginal cost is the:

increase in total cost when one more unit of output is produced.

If a firm experiences lower costs per unit as it increases production in the long run, this is an example of:

increasing returns to scale.

At 30 units of output, a firm's marginal cost and average variable cost each equal $10. Therefore, assuming normally shaped cost curves, at 29 units of output its marginal cost:

is less than $10 and its average variable cost is more than $10.

For a restaurant:

labor and food would be variable resources and a building would be a fixed resource in the short run.

Cindy operates Birds-R-Us, a small store manufacturing and selling 100 bird feeders per month. Cindy's monthly total fixed costs are $500, and her monthly total variable costs are $1,000. If for some reason Cindy's variable cost increased to $4,000, then her:

marginal costs would increase.

If a firm has $9,000 of fixed costs and $21,500 of variable costs, then the time period referred to is:

the short run.

The sum of fixed and variable costs is:

total cost.

At 20 units of output, a firm finds that its average variable cost is $5 per unit and its average total cost is $8 per unit. Therefore, its:

average fixed cost is $3 per unit.

Suppose the marginal product of the 23rd worker is eight boxes of output. Average product when 23 workers are employed if five boxes per worker. We can conclude that:

average product is rising

Total cost divided by the quantity of output produced is:

average total cost.

The average total cost of producing cell phones in a factory is $20 at the current output level of 100 units per week. If fixed cost is $1,200 per week:

average variable cost is $8.

Variable cost divided by the quantity of output produced is:

average variable cost.

When marginal cost is rising:

both average variable cost and average total cost may be rising or falling.

The average total cost curve in the short run slopes upward due to:

diminishing returns.

A firm finds that as it produces more, its long-run average total costs increase. This firm is experiencing:

diseconomies of scale.

With one input fixed, a firm will find that as it attempts to produce more, the total product curve will increase at a decreasing rate and its marginal product curve will be:

downward-sloping.

Profits that are in excess of both implicit and explicit costs are called ____.

economic profits

A firm that is able to more efficiently utilize by-products as it increases production in the long run is an example of:

economies of scale.

For large beer breweries, it is common for long-run average total cost to decline as output increases. This indicates that many breweries achieve:

economies of scale.

You own a small deli that produces sandwiches, soups, and other items for customers in your town. Which of the following is a variable input in the production function at your deli?

employees hired to help make the food

The slope of a long-run average total cost curve exhibiting diseconomies of scale is:

positive.

In the short run, an example of a variable cost is:

the cost of labor.

Diminishing returns is a reason why:

the marginal cost curve is upward-sloping.

The production function provides information about:

the transformation of inputs into outputs.

The diminishing returns of a variable input will account for:

the upward slope of marginal cost.

Average variable cost is the ratio of:

variable cost to the quantity of output.

The costs associated with variable inputs are ________ costs and the costs associated with ________ inputs are ________costs.

variable; fixed; fixed

A fixed input is one:

whose quantity cannot be changed in a particular time period.

Buford Bus Manufacturing installs a new assembly line. As a result, the output produced per worker increases. The marginal cost of output at Buford:

will decrease (the MC curve will shift right).