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Ch 22. Questions to study

Terms

undefined, object
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Output Average
fixed
cost Average
variable
cost
1 $120 $40
2 60 30
3 40 25
4 30 30
5 24 40
6 20 55

Refer to the data. The total cost of producing 5 units of output is:
$320
It is often unnecessary to graph the firm's average fixed cost because it can always be found as:
the vertical distance between the average total cost and average variable cost curves
Suppose that at its current output level, a firm's average fixed cost is $20, its average total cost is $40, its wage is $10 per hour, and labor's marginal product is 2 units per hour. The firm's marginal cost is:
$5
Which short-run cost curve would not be affected by an increase in the wage paid to a firm's labor?
Average Fixed Costs
Economies of scale are reflected in the downward-sloping segment of the firm's
long-run average cost curve
Use the following data to answer the next question. The letters A, B, and C designate three successively larger plant sizes.

Output ATC-A ATC-B ATC-C
100 $10 $20 $30
200 8 13 20
300 10 7 12
400 14 4 8
500 20 3 5
600 or more units of output
"The increase in total output arising from the employment of an additional worker" describes:
marginal product
What curve must increase if output decreases?
Average fixed cost
If marginal product is positive but falling:
total product is increasing at a decreasing rate
At a firm's minimum efficient scale (MES) of operations, the corresponding value on its long-run average cost curve is $5 per unit. If the firm chooses to produce the output corresponding to MES

A) its cost per unit will be less than $5, but
its cost per unit may exceed $5, but that would imply an inefficient use of resources
The WXY Corporation has fixed costs of $30. Its total variable costs (TVC) vary with output as shown in the following table.

Output TVC
1 $ 0
2 70
3 110
4 160
5 220
50
Suppose that when output is 20 units, TC = $120, TVC = $100, and MC = $10. At this output:
AFC = $1
Suppose a particular firm exhibits constant returns to scale as it increases its output over any reasonable range. If it increases all its inputs by 10%, its:

total cost will increase by less than 10%


B) average total cost
average total cost will increase by 10%

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