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| 1 | |
The WXY Corporation has fixed costs of $50. Its total variable costs (TVC) vary with output as shown in the following table.
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Refer to the table. The average total cost of 4 units of output is: |
| | A) | $27.50 |
| | B) | $40.00 |
| | C) | $52.50 |
| | D) | $210.00 |
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| 2 | |
Answer the next question based on the cost data in the following table:
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Refer to the data. The total cost of producing 5 units of output is: |
| | A) | $64 |
| | B) | $200 |
| | C) | $320 |
| | D) | $400 |
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| 3 | |
It is often unnecessary to graph the firm's average fixed cost because it can always be found as: |
| | A) | the vertical distance between the average total cost and average variable cost curves |
| | B) | the vertical distance between the average total cost and marginal cost curves |
| | C) | the area under the total cost curve |
| | D) | the area under the total variable cost curve |
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| 4 | |
Use the following graph to answer the next question:
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The diagram shows the short-run average total cost curves for five different plant sizes for a firm. The firm experiences economies of scale over the range of plant sizes: |
| | A) | 1 through 2 only |
| | B) | 1 through 3 only |
| | C) | 1 through 5 |
| | D) | 3 through 5 only |
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| 5 | |
Explicit costs and implicit costs: |
| | A) | are alike in that both represent opportunity costs |
| | B) | are alike in that both reflect an outlay of cash |
| | C) | are alike in that both are deducted from revenue to find accounting profit |
| | D) | differ in that only explicit costs are deducted from revenue to find economic profit |
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| 6 | |
Suppose that at its current output level, a firm's average fixed cost is $20, its average total cost is $40, its wage is $10 per hour, and labor's marginal product is 2 units per hour. The firm's marginal cost is: |
| | A) | $40 |
| | B) | $30 |
| | C) | $10 |
| | D) | $5 |
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| 7 | |
Suppose that a business incurred implicit costs of $300,000 and explicit costs of $1,300,000 over the past year. If the firm earned $1,400,000 in revenue, its: |
| | A) | accounting profits were $400,000 and its economic profits were $100,000 |
| | B) | accounting losses were $200,000 and its economic profits were $100,000 |
| | C) | accounting profits were $100,000 and its economic profits were zero |
| | D) | accounting profits were $100,000 and its economic losses were $200,000 |
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| 8 | |
Use the following diagram of a firm's long-run average total cost curve to answer the next question.
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Which of the following best explains the shape of the curve from B to C? |
| | A) | Labor's marginal product is decreasing |
| | B) | The law of diminishing returns |
| | C) | Wages increase as the firm uses more labor |
| | D) | Managing and coordinating a firm becomes increasingly costly as firm size increases |
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| 9 | |
The long run is a period of time in which all costs are variable costs. |
| | A) | True |
| | B) | False |
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| 10 | |
Answer the next question on the basis of the following short-run production data for a small firm.
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Refer to the data. Average product is at a maximum when: |
| | A) | 2 workers are hired |
| | B) | 3 workers are hired |
| | C) | 4 workers are hired |
| | D) | 5 workers are hired |
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