Multiple Choice Questions:
1. Total fixed costs
a. Do not vary with the level of output.
b. Cannot be avoided in the short run without going out of business.
c. do not exist in the long run.
d. Are characterized by all of the above.
2. Which of the following is most likely a variable cost for a business?
a. The loan payment on funds borrowed when a new building is constructed
b. Payments for electricity
c. The lease payment on a warehouse used by the business
d. The opportunity cost of the heavy equipment installed in a factory
3. The change in total cost that results from the production of one additional unit of output is called
a. Marginal revenue.
b. Average variable cost.
c. Marginal cost.
d. Average total cost.
e. Average fixed cost.
4. Which short-run curve typically declines continuously as output expands?
a. Average variable cost
b. Average total cost
c. Average fixed cost
d. Marginal cost
e. None of the above
5. Which of the following is true?
a. The short-run ATC exceeds the short-run AVC at any given level of output.
b. If the short-run ATC curve is rising, the short-run AVC curve is also rising.
c. The short-run AFC is always falling with increased output, whether the short-run MC curve is greater or less than short-run AFC.
d. If short-run MC is less than short-run AVC, short-run AVC is falling.
e. All of the above are true.
6. Which of the following is false in the short run?
a. ATC is usually U-shaped.
b. Declining AFCs are the primary reason ATC decreases at low levels of output.
c. ATC increases at high levels of output because of diminishing marginal product.
d. Diminishing marginal product sets in at the minimum point of ATC.
e. All of the above are true in the short run.
7. Typically, what is the shape of the average total cost curve for a firm in the short run?
a. Typically, an average total cost curve is U-shaped.
b. Typically, an average total cost curve constantly slopes upward as output expands and eventually approaches an infinite dollar amount at high rates of output.
c. Typically, an average total cost curve is a vertical line.
d. Typically, an average total cost curve slopes downward as output expands and approaches the X-axis when output is very large.
8. Which of the following is true in the short run?
a. MC equals ATC at the lowest point of ATC.
b. MC equals AVC at the lowest point of AVC.
c. When AVC is at its minimum point, ATC is falling.
d. When ATC is at its minimum point, AVC is rising.
e. All of the above are true.