Unit 4: Cost Theory and Estimation - Practice Quiz

1 In the short run, which cost does not change with the level of output?

2 Total cost (TC) in the short run is calculated as:

3 Average fixed cost (AFC) is best defined as:

4 As output increases, average fixed cost (AFC):

5 Marginal cost (MC) refers to the:

6 The typical short-run average total cost (ATC) curve is:

7 The marginal cost curve intersects the average total cost curve at the ATC's:

8 Average variable cost (AVC) is calculated as:

9 In the long run, a firm's costs are all:

10 The long-run average cost (LRAC) curve is often called the:

11 The long-run average cost curve is formed from the:

12 The downward-sloping portion of the LRAC curve reflects:

13 The upward-sloping portion of the LRAC curve is associated with:

14 Economies of scale occur when long-run average cost:

15 Which of the following is an example of an internal economy of scale?

16 Diseconomies of scale are most commonly caused by:

17 External economies of scale benefit:

18 A learning curve shows the relationship between cumulative output and:

19 According to the learning curve concept, as workers gain experience, the cost per unit tends to:

20 The learning curve effect is primarily driven by:

21 A firm's short run total cost is . What is the average variable cost (AVC) when ?

22 Given , what is the marginal cost (MC) when ?

23 At which point does the marginal cost curve intersect the average total cost curve?

24 If a firm's total fixed cost is $500 and it produces 100 units, what is the average fixed cost (AFC)?

25 As output increases in the short run, what happens to the vertical distance between the ATC and AVC curves?

26 A firm produces 20 units at a total variable cost of $400 and fixed cost of $200. What is its average total cost?

27 Which factor is primarily responsible for the eventual upward slope of the short run marginal cost curve?

28 If marginal product of labor is rising, what is happening to marginal cost?

29 The long run average cost (LRAC) curve is often called an envelope curve because it:

30 At the minimum point of a U-shaped LRAC curve, the tangent short run average cost curve is tangent:

31 In the long run, why are there no fixed costs?

32 A firm operating on a SRAC curve to the left of the LRAC minimum wants to reduce long run cost. It should:

33 If the LRAC curve is horizontal over a range of output, the firm experiences:

34 Doubling all inputs leads to output rising by 150%. This indicates:

35 Which of the following is a source of economies of scale?

36 Diseconomies of scale cause the LRAC curve to:

37 The minimum efficient scale (MES) refers to the:

38 When a firm's per-unit cost falls because it can afford to buy cheaper inputs in bulk, this is an example of:

39 A firm has an 80% learning curve. If the first unit takes 100 labor hours, how long does the second unit take?

40 With an 80% learning curve and the first unit requiring 100 hours, the cumulative average time per unit for the first 4 units is:

41 A firm's short-run total cost function is . At what output level is marginal cost minimized?

42 Given , at what output does average total cost equal marginal cost?

43 A firm has fixed cost of $500 and . What is the minimum average total cost?

44 If the marginal cost curve intersects the average variable cost curve, which statement is necessarily true at that point?

45 A production process shows diminishing marginal returns beginning at . Assuming a constant wage rate, what happens to marginal cost at the corresponding output?

46 For , what is average fixed cost at ?

47 A firm's AVC is $25 and its ATC is $40 at an output of 100 units. What is the total fixed cost?

48 The long-run average cost curve is the envelope of short-run average cost curves. At the minimum point of the LRAC, which condition holds?

49 On the downward-sloping portion of the LRAC curve, a short-run average cost curve is tangent to the LRAC. At the tangency point, the SRAC is tangent:

50 A firm's long-run total cost is . At what output is long-run average cost minimized?

51 Why is the long-run average cost curve generally flatter (less steeply U-shaped) than any individual short-run average cost curve?

52 If a firm's LRAC is constant over a wide range of output before eventually rising, this range is best described as exhibiting:

53 A firm's cost function gives an output elasticity of total cost of . What does this imply about scale economies?

54 Doubling all inputs increases output by a factor of . What type of returns to scale does this indicate, and what happens to long-run average cost (input prices constant)?

55 A multiproduct firm finds that producing goods X and Y jointly costs less than producing them separately. This condition is measured by:

56 Which of the following is a genuine source of real (technological) economies of scale rather than pecuniary economies?

57 A firm exhibits economies of scale up to , constant returns from 500 to 800, and diseconomies beyond 800. What is its minimum efficient scale (MES)?

58 A firm operates on an 80% learning curve. The first unit takes 100 labor-hours. How many hours does the 4th unit require?

59 The learning curve has a learning rate of 90%. What is the exponent ?

60 A manager confuses the learning curve with economies of scale. What is the key conceptual distinction?