(A)Average Product of Labor Is Constant

Assume that labor is the only variable input. If a firm’s short-run marginal cost is increasing as output rises, which of the following must be true?

(A)Average product of labor is constant.

(B)Average product of labor is increasing.

(C)Marginal product of labor is greater than average product of labor.

(D)Marginal product of labor is decreasing.

(E)Total product of labor is decreasing.

This table shows a firm’s total cost of producing various units of output. What is the average variable cost of producing three units?

(A)$4

(B)$7

(C)$10

(D)$17

(E)Cannot be determined from the given information

In the short run, a profit-maximizing firm, faced with U-shaped average cost curves, is producing a level of output at which the average total cost of production is minimized. At this level of output, which of the following is true for the firm?

(A)Marginal cost equals average fixed cost.

(B)Marginal cost equals average variable cost.

(C)Marginal cost equals average total cost.

(D)Profit per unit equals average total cost.

(E)Profit per unit equals marginal cost.

Assume that a firm uses only one variable input. If a firm is experiencing diminishing returns, which of the following is true as more of the variable input is used?

(A)Marginal cost will decrease at a constant rate.

(B)Marginal cost will decrease at a diminishing rate.

(C)Marginal cost will increase.

(D)Marginal product will increase at a constant rate.

(E)Marginal product will increase at a diminishing rate.

Short-run marginal costs eventually increase because of the effects of

(A)increasing marginal product

(B)diminishing marginal product

(C)diseconomies of scale

(D)economies of scale

(E)increasing fixed costs

If a new tax on capital increases a firm's fixed cost of production, which of the following will occur in the short run?

(A)Marginal cost will increase.

(B)Average variable cost will increase.

(C)Average total cost will increase.

(D)The profit-maximizing level of output will increase.

(E)The profit-maximizing level of output will decrease.

At 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

(A)$140

(B)$100

(C)$60

(D)$40

(E)$0

As output of a firm increases, the difference between the firm's average total cost and its average variable cost gets smaller because the firm's

(A)total cost is increasing

(B)marginal cost is increasing

(C)average fixed cost is decreasing

(D)marginal product of labor is decreasing

(E)long-run average total cost is decreasing

What is a defining characteristic of the marginal cost curve?

(A)It intersects the AVC and the AFC at their minimum point.

(B)It intersects the AVC and the ATC at their minimum point.

(C)It’s located right in between the TC and the TVC curves.

(D)It goes up at first, but eventually turns and decrease when diminishing marginal returns starts kicking in.

(E)It continuously decreases.

If the marginal cost of producing one taco is $10 and the marginal cost of producing the second taco is $20, the average variable cost of producing 2 tacos is

(A)$5

(B)$10

(C)$15

(D)$25

(E)$30

What kind of costs must continue to go down in the short-run as output goes up?

(A)Total cost

(B)Marginal cost

(C)Average fixed cost

(D)Average variable cost

(E)Average total cost

If the average variable cost of producing 3 units of a good is $50 and the average variable cost of producing 4 units is $100, then the marginal cost of increasing output from 3 to 4 units is

(A)$300

(B)$250

(C)$150

(D)$75

(E)$50

Assume labor is the only variable input when producing a product. As more workers are hired, why is the short-run marginal cost curve upward sloping?

(A)Output goes down, and as a result marginal cost goes up.

(B)Output goes up, and as a result marginal cost goes up.

(C)Output goes up at a decreasing rate, and as a result the cost of producing each additional unit of output goes up.

(D)Output goes up at an increasing rate, and as a result the cost of producing each additional unit of output goes up.

(E)Output goes up at a decreasing rate, and as a result the cost of producing each additional unit of output goes down.

When a firm produces 200 units of output, average total cost is $20, average variable cost is $16, average fixed cost is $4, and marginal cost is $24. If the firm increases output, how will each of the following change?

(A)Average Total Cost = Go up ; Average Variable Cost = Go up ; Average Fixed Cost = Go down

(B)Average Total Cost = Go up ; Average Variable Cost = Go up ; Average Fixed Cost = Go up

(C)Average Total Cost = Go up ; Average Variable Cost = Go down ; Average Fixed Cost = Go down

(D)Average Total Cost = Go down ; Average Variable Cost = Go up ; Average Fixed Cost = Go up

(E)Average Total Cost = Go down ; Average Variable Cost = Go down ; Average Fixed Cost = Go down

This table shows the number of workers needed to produce certain levels of output. If the wage is $10 and total fixed cost is $60, the average total cost of producing 10 units of output is

(A)$3

(B)$8

(C)$10

(D)$20

(E)$80

What will cause a firm's marginal cost curve to shift upward?

(A)The level of output goes down.

(B)The price of a fixed input goes up.

(C)The price of a variable input goes up.

(D)Labor productivity goes up.

(E)The demand for the product goes down.

Why does the short-run marginal cost curve eventually turn and go up?

(A)There are no fixed inputs and costs eventually go up.

(B)Demand for the product goes down when production is capped.

(C)Variable costs go up when marginal product goes up.

(D)There is at least one fixed input and eventually the law of diminishing marginal returns starts to set in.

(E)Costs of production go up when production goes up.

Which is true about a firm’s average total cost in the short-run?

(A)It is equal to the sum of marginal cost and average variable cost.

(B)It is equal to the sum of average fixed cost and average variable cost.

(C)It is equal to the sum of marginal cost and average fixed cost.

(D)It always goes up when a firm produces more.

(E)If the firm shuts down, it is zero.

What must marginal cost be if a business's average total cost is going down as production goes up?

(A)MC > AVC

(B)MC < AFC

(C)MC is negative

(D)MC going down

(E)MC < ATC

This graph shows the cost curves for a competitive firm that produces 40 units of output. What are the total cost and the total fixed cost of producing 40 units of output?

(A)Total Cost = $40 ; Total Fixed Cost = $0

(B)Total Cost = $480 ; Total Fixed Cost = $400

(C)Total Cost = $800 ; Total Fixed Cost = $80

(D)Total Cost = $800 ; Total Fixed Cost = $400

(E)Total Cost = $480 ; Total Fixed Cost = $80

In the short-run, how should you describe the relationship between the average total cost curve and the marginal cost curve?

(A)If the average total cost curve is going up, the marginal cost curve is lower than the average total cost curve.

(B)If the average total cost curve is going up, the marginal cost curve is higher than the average total cost curve.

(C)If the average total cost curve is higher than the marginal cost curve, the marginal cost curve is going up.

(D)If the average total cost curve is lower than the marginal cost curve, the marginal cost curve is going down.

(E)If the average and marginal cost curves intersect, the marginal cost curve has reached its lowest point.

Which of the following is caused by a technological advance?

(A)a decrease in marginal utility

(B)an increase in net exports

(C)a drop in average total costs

(D)an increase in marginal costs

(E)decreasing marginal returns

What is marginal cost?

(A)change in total cost that results from using one more unit of input

(B)change in total cost that results from producing one more unit of output

(C)total cost - total variable cost

(D)total variable cost - total fixed cost

(E)(average total cost - average variable cost) divided by output

Why does the short-run average total cost curve have a U-shape?

(A)Total fixed costs get spread over a larger amount of output, and constant returns

(B)Average variable costs steadily decrease and increasing returns

(C)Total fixed costs steadily increase and increasing returns

(D)Average variable costs steadily increase and decreasing returns

(E)Total fixed costs get spread over a larger amount of output, and eventually diminishing returns

The vertical distance BA represents the

(A)total cost of producing Q1 units of output

(B)average fixed cost of producing Q1 units of output

(C)average total cost of producing Q1 units of output

(D)total variable cost of producing Q1 units of output

(E)amount of the firm's profit resulting from producing Q1 units of output

This table shows the production costs for a firm. Using the data from the table, calculate the average total cost of producing 3 units of output.

(A)$5

(B)$4

(C)$3

(D)$16

(E)$8

Total fixed costs = $48. Average product of labor is 10 units when 20 units of output are produced. Wages = $6 per worker. Assuming labor is the only variable cost, what is the average total cost of producing 20 units of output?

(A)$ 3

(B)$ 6

(C)$ 1

(D)$ 9

(E)$12

Assume labor is the only variable cost and that wages = $20 per hour. The marginal physical product of labor is 5 units per hour. What is the marginal cost of 1 unit of output?

(A)$ 1

(B)$ 5

(C)$ 20

(D)$ 4

(E) $100