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- 1. Multiple ChoiceShort run marginal costs eventually increase because of the effects of:increasing marginal productdiminishing marginal productincreasing fixed costsdiseconomies of scale
- 2. Multiple ChoiceAt 100 units of output, a firm's total cost is $10,000. If the firm's total fixed cost is $4,000, its average variable cost is equal to:$140$100$60$40
- 3. Multiple ChoiceThe most profitable level of output for any firm operating in the short run is the level of output at which:marginal revenue exceeds marginal cost by the highest amountmarginal revenue equals marginal costprice exceeds average cost by the highest amount
price equals marginal cost - 4. Multiple Choice
If a new tax on capital increases a firm’s fixed cost of production, which of the following will occur in the short run?
Average total cost will increase
Marginal cost will increase
Average variable cost will increase
The profit-maximizing level of output will increase
- 5. Multiple ChoiceAn entrepreneur has earned enough total revenue to cover her accounting costs, but economic losses are being incurred. What must be true?Her accounting costs are larger than her economic costsHer implicit costs are less than her accounting costsHer accounting profits are greater than her economic costsHer accounting profits are less than her implicit costs
- 6. Multiple ChoiceWhen total physical product is at its maximum, marginal physical product must be:greater than oneequal to oneequal to zeroless than one
- 7. Multiple ChoiceAs output of a firm increases, the difference between the firm’s average total cost and its average variable cost gets smaller because the firm’stotal cost is increasing
marginal cost is increasing
average fixed cost is decreasing
marginal product of labor is decreasing - 8. Multiple Choice
The graph above shows the marginal product (MP) and the average product (AP) of labor for a firm that uses labor as the only variable input. At which quantity of labor does marginal cost change from decreasing to increasing?
L1
L2
L3
L5
- 9. Multiple ChoiceShelby is an entrepreneur who has decided to open a small advertising firm. She rents office space at a cost of $25,000 per year, she has employed an assistant at a salary of $30,000 per year, and she incurs annual utility and office supply expenses of $20,000. Her best alternative is to work elsewhere and to earn a salary of $50,000 per year. How much annual revenue must her firm receive so that Shelby earns zero economic profit?$50,000$75,000$100,000$125,000
- 10. Multiple ChoiceA firm produces 400 books and sells each book for $15. If the explicit cost of producing the books is $4,500 and the implicit cost is $1,000, the firm’s economic profit is:$0$500$1,000$1,500
- 11. Multiple ChoiceA 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?$100$1$300$50
- 12. Multiple ChoiceAssume that the fixed cost is $50. Based on the cost and output data in the table, what is the marginal cost when the firm increases its output from three to four units AND the average total cost of producing 4 units (respectively)?MC=$35; ATC=$40MC=$35; ATC=$35MC=$25; ATC=$35MC=$25; ATC=$25
- 13. Multiple ChoiceSuppose that a firm begins to hire workers for a newly completed plant with a fixed amount of machinery. As the firm hires additional workers, one would expect the marginal product to:fall initially, but eventually rise
rise initially, but eventually fall
rise consistently due to diminishing returnsrise consistently due to the advantages of specialization
- 14. Multiple ChoiceIn the short run, which of the following costs must continuously decrease as output produced increases?Total variable costTotal fixed costAverage total costAverage fixed cost
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