Micro 1

A firm is producing 100 units of output at a total cost of $400. The firm's average variable cost is $3 per unit. What is the firm's total fixed cost? a) $1 b) $50 c) $100 d) $300

c) $100

A factory producing calculators employs four workers. At current levels of operation each worker produces 40 calculators per week. Assuming labor is the only variable input and the weekly wage is $400 per worker: a) average variable cost is $10. b) variable cost is $10. c) average variable cost is $40. d) average fixed cost is $10.

a) average variable cost is $10.

Marginal product eventually: a) declines because some inputs are fixed. b) increases because some inputs are fixed. c) declines because some inputs are variable d) increases because some inputs are variable.

a) declines because some inputs are fixed.

average product is: a) total output/total labor b) total labor/total output c) marginal labor/marginal output d) marginal output/marginal labor

a) total output/total labor

Output per worker is also called: a) marginal product. b) average product. c) total product. d) variable product.

b) average product

At the level of output where marginal product begins to fall, marginal costs will: a) begin to fall. b) begin to rise. c) remain constant. d) equal marginal product.

b) begin to rise.

Implicit and explicit revenues minus implicit and explicit costs equals: a) accounting profit. b) economic profit. c) zero profit. d) implicit profit.

b) economic profit.

If you have already signed up for a plan with your cell phone company that gives you 4,000 free minutes for $39.99 per month with a cost of $0.35 per minute for any time exceeding the limit, your marginal cost curve is: a) horizontal at a marginal cost of zero. b) horizontal at a marginal cost of zero up to 4,000 minutes. c) horizontal at a marginal cost of $0.35. d) upward-sloping.

b) horizontal at a marginal cost of zero up to 4,000 minutes.

Owen runs a delivery business and currently employs three drivers. He owns three vans that employees use to make deliveries, but he is considering hiring a fourth driver. If he hires a fourth driver, he can schedule breaks and lunch hours so that all three vans are in constant use, allowing him to increase deliveries per day from 60 to 75. It will cost an additional $75 per day to hire the fourth driver. The marginal cost per delivery of increasing output beyond 60 deliveries per day: a) is $0 since Owen does not have to purchase another van. b) is $5. c) is $75. d) cannot be calculated without knowing Owen's total fixed costs.

b) is $5.

The marginal cost curve intersects the average total cost curve when average variable costs are: a) falling. b) rising. c) at a minimum. d) at a maximum.

b) rising

In the short run: a) some inputs are variable and no inputs are fixed. b) some inputs are variable and some inputs are fixed. c) no inputs are variable and all inputs are fixed. d) no inputs are variable and some inputs are fixed.

b) some inputs are variable and some inputs are fixed.

If a firm shuts down for a week, during that week its: a) total cost is zero. b) total cost equals total fixed cost. c) total cost equals total variable cost. d) total variable cost exceeds total fixed cost.

b) total cost equals total fixed cost.

Accounting profit is equal to: a) total revenue minus implicit costs. b) total revenue minus explicit measurable costs. c) total revenue minus implicit and explicit costs. d) implicit and explicit revenues minus implicit costs.

b) total revenue minus explicit measurable costs.

Can accounting profit be positive while economic profits are negative? a) No. The two concepts are identical. b) Yes, if total revenue covers opportunity costs but not explicit costs. c) Yes, if total revenue covers explicit costs but not opportunity costs. d) No. Economic profits must always be larger than accounting profits.

c) Yes, if total revenue covers explicit costs but not opportunity costs.

The minimum point of the average total cost curve always occurs at a larger output level than the minimum point of the average variable cost curve because: a) marginal cost is falling. b) average fixed costs are rising. c) average fixed costs are falling. d) marginal cost is rising.

c) average fixed costs are falling.

The marginal cost curve intersects the: a) total cost curve at its minimum point. b) variable cost curve at its minimum point. c) average variable cost curve at its minimum point. d) average fixed cost curve at its minimum point.

c) average variable cost curve at its minimum point.

If marginal cost exceeds average total cost: a) average total cost decreases as output increases. b) average fixed cost increases as output increases. c) average variable cost increases as output increases. d) average variable cost decreases as output increases.

c) average variable cost increases as output increases.

The total fixed cost curve is: a) upward-sloping. b) U-shaped. c) horizontal. d) downward-sloping.

c) horizontal.

At very high levels of output, total cost tends to: a) increase at a constant rate. b) increase at a decreasing rate. c) increase at an increasing rate. d) decrease at an increasing rate.

c) increase at an increasing rate.

The marginal cost curve: a) first rises and then declines. b) rises when the average total cost curve lies above the average variable cost curve. c) rises when the point of diminishing marginal productivity is reached. d) declines until average total cost increases.

c) rises when the point of diminishing marginal productivity is reached.

Implicit cost refers to: a) the amount a firm receives for selling its product or service. b) any increase in the value of the assets owned by the firm. c) the opportunity cost of factors of production provided by the owners of the firm. d) explicit payments to the factors of production.

c) the opportunity cost of factors of production provided by the owners of the firm.

If the law of diminishing marginal productivity holds true, eventually both the marginal cost curve and the average cost curve must become: a) vertical lines. b) downward-sloping. c) upward-sloping. d) horizontal lines.

c) upward-sloping.

The only variable input used in producing bicycles in a small factory is labor. Currently four workers are employed; each works 40 hours per week and is paid $10 per hour. If fixed cost is $2,000 per week and total output is 10 bicycles per week, average cost is: a) $160. b) $260. c) $200. d) $360.

d) $360.

Whenever the marginal cost curve lies below the average total cost curve, the: a) average variable cost is increasing. b) average variable cost is decreasing. c) average total cost is increasing. d) average total cost is decreasing.

d) average total cost is decreasing.

In the short run, average variable cost equals: a) output divided by total cost. b) total cost divided by output. c) total cost minus total fixed cost. d) average total cost minus average fixed cost.

d) average total cost minus average fixed cost.

Other things being equal, when average productivity falls: a) average fixed cost must rise. b) marginal cost must rise. c) average total cost must rise. d) average variable cost must rise.

d) average variable cost must rise.

Long-run decisions are: a) constrained because all inputs are variable. b) constrained because all inputs are fixed. c) constrained because some inputs are fixed and others are variable. d) unconstrained since all inputs are variable.

d) unconstrained since all inputs are variable.