1. Total cost is the
a. amount a firm receives for the sale of its output.
b. fixed cost less variable cost.
c. market value of the inputs a firm uses in production.
d. quantity of output minus the quantity of inputs used to make a good.

2. For a firm, the relationship between the quantity of inputs and quantity of output is called the
a. profit function.
b. production function.
c. total-cost function.
d. quantity function.

3. If a firm produces nothing, which of the following costs will be zero?
a. total cost
b. fixed cost
c. opportunity cost
d. variable cost

4. The Wacky Widget company has total fixed costs of $100,000 per year. The firm's average variable cost is $5 for 10,000 widgets. At that level of output, the firm's average total costs equal
a. $10
b. $15
c. $100
d. $150

5. Marginal cost of output equals

(i) change in total cost divided by change in quantity produced.
(ii) change in variable cost divided by change in quantity produced.
(iii) the average fixed cost of the current unit.

a. (i) and (ii) only
b. (ii) and (iii) only
c. (i) only
d. (i), (ii), and (iii)
8. If the cost curve gets steeper as output increases, the firm is experiencing:
a. diseconomies of scale
b. economies of scale
c. diminishing marginal product
d. increasing marginal product

9. Which of the following is an example of positive technological change?
a. A firm offers workers a higher wage to work on weekends and at night. As a result, the firm is able to increase its weekly production of surf boards.
b. A firm buys an additional machine that it uses to make surf boards. As a result, the firm is able to increase its weekly production of surf boards.
c. A firm conducts a new advertising campaign. As a result, the demand for the firm’s surf boards increases.
d. A firm’s workers participate in a training program designed to increase the number of surf boards they can produce per day.

10. Which of the following is a factor of production that generally is fixed in the short run?
a. raw materials
b. labor
c. a factory building
d. water

11. Economic costs of production differ from accounting costs in that
a. economic costs include expenditures for hired resources while accounting costs do not.
b. economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.
c. accounting costs include expenditures for hired resources while economic costs do not.
d. accounting costs are always larger than economic cost.

12. Vipsana’s Gyros House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. Calculate Vipsana’s total cost per day when she produces 50 gyros using two workers?
a. $100
b. $124.40
c. $220
d. $340

13. The marginal product of labor is defined as
a. the additional sales revenue that results when one more worker is hired.
b. the additional output that results when one more worker is hired, holding all other resources constant.
c. the additional number of workers required to produce one more unit of output.
d. the cost of hiring one more worker.

15. If the marginal cost curve is below the average variable cost curve, then
a. average variable cost is increasing.
b. average variable cost is decreasing.
c. marginal cost must be decreasing.
d. average variable cost could either be increasing or decreasing.

16. Average variable cost can be calculated using any of the formulas below except
a. TVC/Q.
b. (TC - FC)/Q.
c. Δ(TC - FC)/ΔQ.
d. (TC/Q) - AFC.

17. The long-run average cost curve shows
a. the lowest average cost of producing every level of output in the long run.
b. where the most profitable level of output occurs.
c. the average cost of producing where diminishing returns are not present.
d. the plant size or scale that the firm should build.

True/False:

18. Diminishing marginal productivity implies decreasing total product.
T F
19. The typical total-cost curve is U-shaped.
T F
20. If average product is decreasing, then marginal product must be negative.
T F

Attachments:

• 1504765764-2222.docx