Chapter 20 Flashcards
In the short run, the ATC curve is _______________________ above the AVC curve
- always
- sometimes
- never
Always
As output rises,
- AFC rises
- AFC falls
- AFC remains the same
- there is no way of determining what happens to the AFC
AFC falls
If fixed cost is $5000.00 and at an output of 3 variable cost is $4000.00 how much is the average total cost of an output of 3?
- 1,333.33
- 3,000
- 4,500.00
- 9,000.00
- there is not enough information to determine ATC at an output of 3.
3,000.00
If fixed cost is $8000, variable cost is $5000 at an output of 2 and $9000 at an output of 3, how much is marignal cost at an output of 3?
- 3,000
- 4,000
- 5,000
- 8,000
- there is not enough information to determine marginal cost at an output of 3
4,000
Which statement is true?
- AFC declines with output
- ATC declines with output
- AFC-AVC= ATC
- Output divided by fixed cost = AFC
AFC declines with output
The phrase “speading the overhead” refers to:
- the decrease in total cost that occurs as a firm reduces the size of its work force
- the decrease in average fixed cost that occurs as a firm increases its output
- the decrease in average variable cost that occurs as a firm increases its output
- the decrease in total fixed cost that occurs as a firm increases its output
the decrease in average fixed cost that occurs as a firm increases its output
A firm has a fixed cost of $2000.00 and at an output of one, variable cost is $1500. How much is marginal cost at an output of 1?
- 1,000.00
- 1500.00
- 2000.00
- 3500.00
*
$1500.00
Which statement is false?
- The AFC curve is U-shaped
- the AVC curve is U-shaped
- The ATC curve is U-shaped
- None is false
The AFC curve is U-shaped
Which statement is true?
- Fixed costs and variable costs vary with output
- Neither fixed costs nor variable costs vary with output
- only fixed cost varies with output
- only variable cost varies with output
only variable varies with ouput
In the long run
- all costs become fixed
- all costs become variable
- all cost become neither fixed nor variable
all costs become variable
The average fixed cost curve
- is a vertical line
- is a horizontal line
- slopes downward to the right as output rises
- is U-shpaed (it declines as output rises, reaches a minimum, and then rises)
slopes downward to the right as ouput rises
As output rises, average fixed cost
- rises
- falls
- remains the same
Falls
Which statement is true?
- Going out of business is a short run option
- Operating or shutting down are long run options
- Going out of business or not going out of business are long run options
Going out of business or not going out of business are long run options
If a firm cannot cover its variable costs, it will
- operate in the short run and stay in business in the long run
- operate in the short run and go out of business in the long run
- shut down in the short run and stay in business in the long run
- shut down in the short run and go out of business in the long run
shut down in the short run and go out of business in the long run
Average variable cost is equal to
- average cost plus average fixed cost
- marginal cost plus average fixed cost
- marginal cost
- average total cost minus average fixed cost
average total cost minus average fixed cost
Both Jill and John own toothpick factories. Jill’s factory has low fixed cost and high variable costs. John’s factory has high fixed costs and low variable costs. Currently each factory is producing 1,000 boxes of toothpicks at the same total cost. Complete the following statement with the correct answer. If each produces:
- more, their costs will be equal
- less, their costs will be equal
- less, the costs of Jill’s factory will exceed those of John’s factory
- more, the costs of Jill’s factory will exceed those of John’s factory.
more, the costs of Jill’s factory will exceed those of John’s factory
Fixed costs are best defined as:
- costs that will not vary with the firm’s output level over some period of time.
- costs that are paid on a yearly basis rather than a weekly or monthly basis
- costs of inputs that cannot be moved, such as real estate
- costs that will last as long as the firm exists
costs that will not vary with the firm’s output level over some period of time
A variable input is an input that can change
- in the short run but not in the long run
- in the long run but not in the short run
- in both the long run and the short run
- without changing the level of output
in both the long run and the short run
What is most clearly a variable cost?
- Rent
- Insurance premiums
- Salaries of employees under long-term contract
- Interest payment
- Wages of production worker
Wages of production workers
Fixed cost is sometimes referred to as
- sunk cost
- variable cost
- total cost
- economic cost
- accounting cost
sunk cost
Jimmy, Walter, Mike and Bill run a school for political candidates. The school has fixed cost of $10 million, variable cost of $4 million, and total revene of $15 million. In the short run the school will ____________________ and in the long run the school will
- operate, stay in business
- operate, go out of business
- shut down, stay in business
- shut down, go out of business
operate, stay in business
The basic characteristic of the short run is that:
- a firm does not have sufficient time to change the amount of any of the resources it employs
- the firm does not have sufficient time to cut its rate of output to zero.
- the firm does not have sufficient time to change the size of its plant
- the time frame is sufficient to allow new firms to enter the industry
the firm does not have sufficient time to change the size of its plant
In the short run
- all costs are fixed
- all costs are variable costs
- some costs are fixed costs
- all costs are marginal costs
some costs are fixed costs
Average total cost is found by dividing
- varable cost by output
- output by variable cost
- total cost by output
- output by total cost
total cost by output
Average variable cost is found by dividing
- total cost by output
- output by total cost
- variable cost by output
- output by variable cost
variable cost by output
