Chapter 20

Question 1

In the short run, the ATC curve is ——- above the AVC curve.

Answer 1

Always

Question 2

As outpout rises,

Answer 2

AFC falls

Question 3

IF fixed cost is $5000, and, At an output of 3 variable cost is $4000, how much is average total cost at an output of 3?

Answer 3

$3,000

Question 4

If fixed cost is $8,000, variable cost is $5,000 at an output of 2 and $9,000 at an output of 3, how much is marginal cost at an output of 3?

Answer 4

$4,000

Question 5

Which statement is true 1?

Answer 5

AFC declines with output

Question 6

The phrase “spreading the overhead” refers to

Answer 6

the decrease in average fixed cost that occurs as a firm increases its output

Question 7

A firm has a fixed cost of $2000, and at an output of one, variable cost is $1,500. How much is marginal cost at an output of 1

Answer 7

$1,500

Question 8

Which statement is false?

Answer 8

The AFC curve is U-shaped

Question 9

Which statement is true 2?

Answer 9

Only varible cost varies with output.

Question 10

In the long run

Answer 10

All cost become variable

Question 11

The average fixed cost curve

Answer 11

slopes downward to the right as output rises

Question 12

As output rises, average fixed cost

Answer 12

falls

Question 13

Which statement is true 3?

Answer 13

Going out of business or not going out of business are long run options

Question 14

If a firm cannot cover its variable costs, it will

Answer 14

shutdown in the short run and go out of business in the long run

Question 15

Both Jill and John own toothpick factories. Jill’s factory has low fixed cost and high variable cost. 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

Answer 15

more, the costs of Jill’s factory will exceed those of John’s factory

Question 16

Average variable cost is equal to

Answer 16

average total cost minus average fixed cost

Question 17

Fixed costs are best defined as

Answer 17

costs that will not vary with the firm’s output level over some period of time

Question 18

A variable input is an input that can change

Answer 18

in both the long run and the short run

Question 19

Which is most clearly a variable cost?

Answer 19

Wages of production workers

Question 20

Fixed cost is sometimes referred to as

Answer 20

sunk cost

Question 21

Jimmy, Walter, Mike and Bill run a school for political candidates, The school has fixed costs of $10 million, variable costs of $4 Million and total revenue of $15 million. In the short run the school will ——– and in the long run the school will —–.

Answer 21

Operate and stay in business

Question 22

The basic characteristic of the short run is that

Answer 22

the firm does not have sufficient time to change the size of the plant.

Question 23

In the short run 2

Answer 23

some cost are fixed

Question 24

Average total cost is found by dividing

Answer 24

total cost by output

Question 25

Average variable cost is found by dividing

Answer 25

variable cost by output