Question

As a firm increases the level of output that it produces, short-run average fixed cost

rises and then falls.

remains constant since fixed costs are constant.

decreases.

decreases up to a particular level of output and then increases.

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Question 22 pts

Suppose that a firm is currently producing 500 units of output. At this level of output, TVC = $1,000 and TFC = $2,500. What is the firms ATC?

$2

$5

$7

$10

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Question 32 pts

Average variable costs equal

total variable costs divided by marginal costs.

total variable costs divided by output.

the change in marginal costs from producing another unit of output.

output divided by the change in total costs.

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Question 42 pts

Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 65 cookies together. What is the average product of the first two workers?

15 cookies

20 cookies

17.5 cookies

35 cookies

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Question 52 pts

Which of the following would NOT be considered a fixed cost of production?

Wages paid to labor

The opportunity cost of capital

Interest payments on a loan

Insurance payments on plant and equipment

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Question 62 pts

Which of the following statements about a firm's short-run variable costs is correct?

They increase as the level of output decreases.

They typically include the cost of workers' wages.

They include the costs of plant and equipment.

They are always a greater expense than are fixed costs.

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Question 72 pts

Accounting costs represent

explicit costs paid by the firm.

opportunity costs.

both sunk and future costs.

long run costs only.

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Question 82 pts

Explicit costs are

the opportunity costs of all resources used by the firm.

the costs associated with the resources that the firm owns.

actual expenditures that a firm must make.

all costs associated with the short run.

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Question 92 pts

As a firm's production increases in the short run, the average total cost curve eventually slopes upward because

marginal physical product eventually declines as output increases.

marginal cost eventually declines as output increases.

average fixed cost declines with increases in output.

average physical product rises with increases in output.

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Question 102 pts

Which of the following is TRUE about the long run?

All resources are variable.

All resources are fixed.

At least one resource is fixed.

None of the above.

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Answer 1

1. As a firm increases the level of output that it produces , short-run average fixed cost decreases. Hence,option(C) is correct.

2. Q=500 units , TVC= 1000 , TFC= 2500 , So, TC= TVC+TFC = $(1000+2500)= $3500

Therefore, ATC = TC/Q = 3500/500 =$ 7 . Hence,option(C) is correct.

3. Average variable cost equal total variable costs divided by output. Hence,option(B) is correct.

4. 1 worker produces = 15 cookies

2 workers together produces= 35 cookies

So, the average product of first two workers = 35/2 = 17.5 cookies. Hence,option(C) is correct.

5. Wages paid to labor is not to be considered a fixed cost of production , it is variable cost. Hence,option(A) is correct.