Question 1

A software company spends $$1,000,000 on developing a new app, regardless of how many copies it sells. Each additional copy sold costs 1 in $$server fees. What type of cost is the $$1,000,000, and what type is the 1 $$per copy?

Accepted Answer

The $$1,000,000 is a fixed cost; the 1 $$per copy is a variable cost.

Question 2

Which formula correctly calculates total cost ($$TC) in $$the short run?

Accepted Answer

$$TC = TFC + TVC$$

Question 3

A concert venue has high fixed costs and low marginal costs. Which of the following is most likely a fixed cost for the venue?

Accepted Answer

Booking the stadium for the season

Question 4

If a firm’s total fixed cost ($$TFC) is$$ $$500$$ and it produces $$10$$ units, what is its average fixed cost ($$AFC$$)?

Accepted Answer

$$AFC = 500 / 10 = 50$$

Question 5

Which statement best describes the behavior of average fixed cost ($$AFC) as $$output increases?

Accepted Answer

AFC decreases as output increases.

Question 6

A firm’s total variable cost ($$TVC) $$for producing 5 units is $$200. $$What is its average variable cost ($$AVC$$)?

Accepted Answer

$$AVC = 200 / 5 = 40$$

Question 7

In the short run, why does the marginal cost ($$MC) $$curve eventually rise as output increases?

Accepted Answer

Because of diminishing returns to variable inputs.

Question 8

If marginal cost ($$MC) is $$below average variable cost ($$AVC$$), what happens to $$AVC as $$output increases?

Accepted Answer

$$AVC$$ decreases.

Question 9

A perfectly competitive firm faces a market price of $$P = 10. $$Its marginal cost ($$MC) at 100 $$units is $$8$$, and at 120 units is $$10. $$What is the profit-maximizing output?

Accepted Answer

120 units

Question 10

Which equation represents the profit-maximizing condition for a perfectly competitive firm?

Accepted Answer

$$MR = MC$$

Question 11

If a firm’s total cost ($$TC) is$$ $$600$$ and it produces $$20$$ units, what is its average total cost ($$ATC$$)?

Accepted Answer

$$ATC = 600 / 20 = 30$$

Question 12

In perfect competition, the marginal revenue ($$MR) $$curve for a firm is:

Accepted Answer

Horizontal at the market price

Question 13

A bakery’s total fixed cost ($$TFC) is$$ $$200$$ and total variable cost ($$TVC) $$for 50 loaves is $$150. $$What is the total cost ($$TC) $$for 50 loaves?

Accepted Answer

$$TC = 200 + 150 = 350$$

Question 14

Which of the following best describes 'spreading overhead'?

Accepted Answer

Dividing total fixed costs by more units of output

Question 15

If a firm’s marginal cost ($$MC) is $$above its average total cost ($$ATC$$), what happens to $$ATC as $$output increases?

Accepted Answer

$$ATC$$ increases.

Question 16

Which of the following is NOT a characteristic of perfect competition?

Accepted Answer

Firms have control over market price.

Question 17

A firm’s total revenue ($$TR) is$$ $$500$$ and its total cost ($$TC) is$$ $$400. $$What is its profit?

Accepted Answer

$$500 - 400 = 100$$

Question 18

Which curve represents the short-run supply curve for a perfectly competitive firm?

Accepted Answer

The marginal cost curve above the shutdown point

Question 19

A factory’s marginal cost ($$MC) $$for the 10th unit is $$12$$, and the market price is $$15. $$Should the factory produce the 10th unit?

Accepted Answer

Yes, because $$MC \u003c P$$

Question 20

If a firm’s average variable cost ($$AVC) is$$ $$8$$ and average fixed cost ($$AFC) is$$ $$2$$, what is its average total cost ($$ATC$$)?

Accepted Answer

$$ATC = 8 + 2 = 10$$

Chapter 8: Short-Run Costs and Output Decisions – Principles of Microeconomics

Guida di studio - Domande di pratica

Study guide - Flashcard