Economics of Production and Output
Costs Of Production Practice Questions
1. The main difference between the short run and the long run is that: A) firms earn zero profits in the long run. B) the long run always refers to a time period of one year or longer. C) in the short run, one or more inputs is 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.
Use the following to answer question 3:
3. Refer to the above table. The total cost of five units of output will be: A) $290. B) $320. C) $420. D) $500.
4. If 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.
5. If marginal cost exceeds 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.
6. At an output level of 50 units per day a firm has average total costs of $60 and average variable costs of $35. Its total fixed costs are: A) $925. B) $1,250. C) $1,750. D) $3,000.
7. If long-run average total cost decreases as output increases, this is due to: A) declining average fixed costs. C) economies of scale. B) the law of diminishing returns. D) externalities.
8. 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.
9. Refer
1. The main difference between the short run and the long run is that: A) firms earn zero profits in the long run. B) the long run always refers to a time period of one year or longer. C) in the short run, one or more inputs is 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.
Use the following to answer question 3:
3. Refer to the above table. The total cost of five units of output will be: A) $290. B) $320. C) $420. D) $500.
4. If 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.
5. If marginal cost exceeds 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.
6. At an output level of 50 units per day a firm has average total costs of $60 and average variable costs of $35. Its total fixed costs are: A) $925. B) $1,250. C) $1,750. D) $3,000.
7. If long-run average total cost decreases as output increases, this is due to: A) declining average fixed costs. C) economies of scale. B) the law of diminishing returns. D) externalities.
8. 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.
9. Refer