Professional Documents
Culture Documents
Chapter 7
Chapter 7
2 correct
(20%)
8 incorrect
(80%)
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unanswere
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Your Results:
1
INCORRECT The WXY Corporation has fixed costs of $50. Its total variable costs (TVC) vary
with output as shown in the following table.
Refer to the table. The average total cost of 4 units of output is:
$27.50
A)
$40.00
B)
$52.50
C)
$210.00
D)
Feedback: The total cost of 4 units of output is $210 = $50 (fixed cost) +
$160 (total variable cost.) To find average total cost, divide this by the
number of units of output: $210 / 4 = $52.50 per unit.
2
INCORRECT Use the following graph to answer the next question:
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:
1 through 2 only
A)
1 through 3 only
B)
1 through 5
C)
3 through 5 only
D)
3 CORRECT
Explicit costs and implicit costs:
are alike in that both are deducted from revenue to find accounting profit
C)
differ in that only explicit costs are deducted from revenue to find economic
profit
D)
4
INCORRECT 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:
accounting profits were $400,000 and its economic profits were $100,000
A)
accounting losses were $200,000 and its economic profits were $100,000
B)
accounting profits were $100,000 and its economic profits were zero
C)
accounting profits were $100,000 and its economic losses were $200,000
D)
5
INCORRECT Which one of the following short-run cost curves would not be affected by an
increase in the wage paid to a firm's labor?
Marginal cost
D)
6
INCORRECT If marginal product is positive but falling:
7 CORRECT
The distinguishing feature of the short run is that:
output is fixed
B)
technology is variable
D)
Feedback: In the long run, all inputs are variable while the short run is
characterized by restrictions on one or more inputs.
8
INCORRECT The WXY Corporation has fixed costs of $30. Its total variable costs (TVC) vary
with output as shown in the following table.
Refer to the table. The marginal cost of the fourth unit of output is:
$30
A)
$40
B)
$50
C)
$60
D)
Feedback: Marginal cost is the increase in cost associated with the next unit.
Both variable cost and total cost increase by $50 when output is expanded
from 3 to 4 units.
9
INCORRECT Use the following average total cost data to answer the next question. The
letters A, B, and C designate three successively larger plant sizes.
Refer to the data. In the long run, the firm should use plant size "A" for:
Feedback: For any given level of output, the firm should select the plant size
that minimizes the average cost of production. Plant A has the lowest costs
only for output levels of 100 and 200, after which plant B has lower costs
through 500 units of output.
10
INCORRECT Suppose a particular firm exhibits constant returns to scale as it increases its
output over any reasonable range. If it increases all its inputs by 10%, its:
long run average cost curve will shift to the right by 10%
D)