Q: Which of the following is the correct formula for total fixed cost (TFC)?

$$\text{TFC} = \text{TC} - \text{TVC}$$

Question 1

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The highest-valued alternative that must be given up to engage in an activity.

Question 2

Suppose the U.S. can produce 6 smartphones or 12 bushels of wheat per hour, and China can produce 4 smartphones or 2 bushels of wheat per hour. What is the opportunity cost for the U.S. to produce 1 bushel of wheat?

Accepted Answer

$$0.5$$ smartphones

Question 3

A country that has a comparative advantage in producing a good will:

Accepted Answer

Produce that good at a lower opportunity cost than other countries.

Question 4

If the world price of ethanol is $$1.00 per gallon and the U.S. equilibrium price without trade is 2.00 $$per gallon, what happens when the U.S. allows imports of ethanol?

Accepted Answer

U.S. production decreases and U.S. consumption increases.

Question 5

Which of the following is NOT a reason why countries do not completely specialize in the production of one good?

Accepted Answer

All goods are produced with constant returns to scale.

Question 6

A tariff imposed by the U.S. government on imported sugar will:

Accepted Answer

Make domestic producers better off and domestic consumers worse off.

Question 7

Which of the following best explains why the marginal cost curve is U-shaped?

Accepted Answer

Initially, the marginal product of labor rises, then falls.

Question 8

If a firm has total costs (TC) of $$1,000, variable costs (VC) of 700$$, and produces 25 units, what is the average fixed cost (AFC)?

Accepted Answer

$$12$$

Question 9

Which of the following is an example of a positive technological change?

Accepted Answer

A firm increases output by rearranging the layout of its factory floor.

Question 10

Suppose Vipsana's Gyros House produces 50 gyros per day. The cost of ingredients is $$2.00 per gyro, she pays two employees 60 $$each per day, and fixed costs are $120 per day. What is the variable cost per day?

Accepted Answer

$$220$$

Question 11

Which of the following is the correct formula for total fixed cost (TFC)?

Accepted Answer

$$	ext{TFC} = 	ext{TC} - 	ext{TVC}$$

Question 12

If fixed costs do not change, then marginal cost (MC) equals:

Accepted Answer

The change in variable cost divided by the change in output: $$MC = \frac{\Delta VC}{\Delta Q}$$

Question 13

Which of the following is NOT a source of comparative advantage?

Accepted Answer

Government-imposed tariffs

Question 14

In the short run, marginal product of labor increases at first and then falls because:

Accepted Answer

There are fewer opportunities for division of labor and specialization when fewer workers are hired.

Question 15

Which of the following statements about international trade is correct?

Accepted Answer

Trade is a win-win situation for all countries, but some individuals may lose.

Question 16

Protectionism is best defined as:

Accepted Answer

The use of trade barriers to protect domestic firms, especially infant industries, from foreign competition.

Question 17

Suppose a country imposes a quota on imported cars. Who is most likely to benefit from this policy?

Accepted Answer

Domestic producers of cars

Question 18

Which of the following best describes the Law of Diminishing Returns?

Accepted Answer

As more variable inputs are added to a fixed input, the marginal product of the variable input eventually declines.

Question 19

For output rates greater than 20,000 picture frames per month, a firm will:

Accepted Answer

Experience diseconomies of scale.

Question 20

If a country is in autarky, which of the following is true?

Accepted Answer

It does not trade with other countries.

Microeconomics Exam 4 Review: International Trade and Production Costs

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