Last Updated 26 Aug 2020

Economics of Production and Output

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1. The main difference between the short run and the long run is that:

  • A) firms earn zero profits in the long run.
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  • B) the long run always refers to a time period of one year or longer.
  • C) in the short run, one or more inputs are fixed.
  • D) in the long run, only one variable can be fixed.

2. At the level of output where marginal cost equals average variable cost:

  • A) average total cost is decreasing.
  • B) average variable cost is decreasing.
  • C) marginal cost equals average total cost.
  • D) marginal cost is decreasing.

3. If the average variable cost is $74 and total fixed cost is $100 at 5 units of output, then average total cost at this output level is:

  • A) $91.
  • B) $94.
  • C) $97.
  • D) $100.

4. If the marginal cost exceeds the average variable cost, then:

  • A) average variable cost must be increasing.
  • B) average total cost must be increasing.
  • C) average fixed costs must be increasing.
  • D) marginal cost must be decreasing.

5. At an output level of 50 units per day, a firm has average total costs of $60 and Economics of Production and Output by civilization

  • A) $925.
  • B) $1,250.
  • C) $1,750.
  • D) $3,000.

6. If the long-run average total cost decreases as output increases, this is due to:

  • A) declining average fixed costs.
  • B) economies of scale.
  • C) the law of diminishing returns.
  • D) externalities.

7. At an output of 20,000 units per year, a firm's variable costs are $80,000 and its average fixed costs are $3. The total costs per year for the firm are:

  • A) $80,000.
  • B) $100,000.
  • C) $140,000.
  • D) $240,000.

Use the following to answer questions 9-10: Assume that the only variable resource used to produce output is labor.

8. Diminishing marginal returns set in with the addition of the:

  • A) first unit of labor.
  • B) third unit of labor.
  • C) the second unit of labor.
  • D) fourth unit of labor.

9. Refer to the above table. The marginal product of the fourth unit of labor is:

  • A) 4 units of output.
  • B) 8 units of output.
  • C) 6 units of output.
  • D) 30 units of output.

10. Which is not a fixed cost?

  • A) monthly rent of $1,000 contractually specified in a one-year lease
  • B) an insurance premium of $50 per year, paid last month
  • C) an attorney's retainer of $50,000 per year
  • D) a worker's wage of $15 per hour

11. The total variable cost of producing 35 units of output is:

  • A) $90.
  • B) $120.
  • C) $160.
  • D) $210.

12. Refer to the above table. If the output is zero, the total cost is:

  • A) $90.
  • B) $50.
  • C) $40.
  • D) $0.

13.  As output increases, average fixed costs:

  • A) increase.
  • B) remain constant.
  • C) decrease.
  • D) first increase and then decrease.

14. America Aniline's cost of delivering Internet access to each additional user has fallen over time because:

  • A) of constant returns to scale.
  • C) of economies of scale.
  • B) of minimum efficient scale.
  • D) it is a natural monopoly.

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