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Cost-Minimizing Combination of Labor and Capital quiz #1 Flashcards

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Cost-Minimizing Combination of Labor and Capital quiz #1
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  • Which of the following is NOT a direct cost for a scooter manufacturer?
    An indirect cost, such as factory rent, is NOT a direct cost for a scooter manufacturer. Direct costs include materials and labor directly involved in production.
  • Which of the following is a variable cost in the short run?
    Costs that change with the level of output, such as raw materials or hourly wages, are variable costs in the short run.
  • Which of the following types of businesses tend to have low fixed costs?
    Service-based businesses, such as consulting firms, tend to have low fixed costs because they require less investment in equipment or facilities.
  • Refer to Figure 13-4. Which of the figures represents the total cost curve for a typical firm?
    The total cost curve for a typical firm is upward sloping and increases as output increases, reflecting both fixed and variable costs.
  • Using the table above, what is the average variable cost of producing 400 units of output?
    Average variable cost is calculated by dividing total variable cost by the number of units produced. For 400 units, AVC = TVC / 400.
  • Which of the graphs represents the correct relationship among the cost curves?
    The correct relationship is: Marginal cost (MC) intersects average total cost (ATC) and average variable cost (AVC) at their minimum points, and average fixed cost (AFC) declines as output increases.
  • Which of the following is a fixed cost for a tire manufacturing business?
    Factory rent is a fixed cost for a tire manufacturing business because it does not change with the level of output.
  • Which of the following costs is an example of a fixed cost?
    Depreciation on machinery is an example of a fixed cost, as it remains constant regardless of output.
  • When examining the ratio of power produced against the cost to produce it, what economic concept is being analyzed?
    This examines cost efficiency, specifically the cost-minimizing combination of inputs to maximize output for a given cost.
  • The cost per unit decreases as volume increases for which of the following cost behaviors?
    Economies of scale cause the cost per unit to decrease as production volume increases.
  • Incremental or differential costs are best described as:
    Incremental or differential costs are the additional costs incurred when producing one more unit of output.
  • Variable cost per unit of output produced is:
    Variable cost per unit is the total variable cost divided by the number of units produced.
  • Is cost the sum of fixed cost and variable cost at each level of output?
    Yes, total cost at each level of output is the sum of fixed cost and variable cost.
  • Total cost per unit is equal to:
    Total cost per unit is equal to total cost divided by the number of units produced, also known as average total cost.