Question

Which of the following is a fixed cost to farmer McDonald?

a. gasoline

b. fertilizer

c. insurance

d. seed

____ 53. One reason why critics argue that large firms should not be broken up is that in some cases

a. large firms have a concentration of economic power.

b. large firms are less-efficient producers.

c. many smaller firms would be less-efficient producers.

d. there is no economic reason to break up large firms that may have some control over the market.

____ 54. If in some production range average cost is rising, the firm is experiencing

a. increasing returns to scale.

b. decreasing returns to scale.

c. constant returns to scale.

d. increasing costs per unit of output.

____ 55. Joe and Ed go to a diner that sells hamburgers for $5 and hot dogs for $3. They agree to split the lunch bill evenly. Ed chooses a hot dog. The marginal cost to Joe then of ordering a hamburger instead of a hot dog is

a. $1.

b. $2.

c. $2.50.

d. $3.

____ 56. The demand curve facing Company ABC is perfectly elastic. What is its marginal revenue?

a. Equal to the average revenue.

b. Less than the price.

c. Higher than the price.

d. Higher than the average revenue.

Answer 1

Answer 1:

Option C. Insurance is a fixed cost as fixed amount of premium is paid to the insurance firm every year which makes insurance a fixed cost.

Answer 53:

option C.Many smaller firms would be less efficient producers.

Answer 54;

Option B. If the average cost of the firm is rising, then the firm is experiencing decreasing returns to scale.

Answer 55:

Option A. It is $2 extra as 5 - 3 = $2, this is the marginal cost of ordering hamburger instead of hot dog.

Answer 56;

Option A. In case of perfectly elastic demand curve, the marginal revenue of the firm is equal to the price or average revenue of the firm.