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25 Cards in this Set
- Front
- Back
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If AVC rises with output, each increment in cost would have to be ___ the previous average to pushthe average higher. |
a. greater than b. equal to c. less than d. twice as large as e. one-half as large as |
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Fixed costs facing any firm in the short run include: |
a. any cost whose total is established at the time the input is purchased. b. the minimum cost of producing any given quantity of output under the most favorable operating conditions. c. any cost whose per unit charge has been settled for some future period, such as a long-term wage contract with a labor union. d. total expenses which must be covered even if nothing is produced. e. none of these things |
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Marginal costs facing any firm considering a change in output represent: |
a. extraordinary overtime charges that must sometimes be paid to increase output. b. the cost incurred even if the firm produces zero output. c. the difference between the total cost actually incurred to produce any given output and the smallest possible total cost of producing that output. d. the increase in total cost that accrues from a 1-unit increase in quantity produced. e. the increase in total cost that accrues from any increase in quantity produced, whether 1 unit or more. |
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Suppose that the property taxes paid by a firm on its plant are increased; i.e., suppose that its fixedcosts increase. As a result, the marginal cost curve for this firm would move: |
a. to the right. b. to the left. c. upward. d. downward. e. not at all. |
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Total cost in a certain plant, at an output level of 1000 units daily, is $4900. If production is reducedby 1 unit, total cost would be $4890. Within this output range: |
a. average cost is greater than marginal cost. b. average cost and marginal cost are approximately equal. c. marginal cost is greater than average cost. d. we cannot compare average and marginal cost, since we cannot derive marginal cost from the given information. e. we cannot compare average and marginal cost, since we cannot derive average cost from the given information |
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At five units of output, the average fixed cost is: |
a. $5. b. $20. c. $26. d. $100. e. $130. |
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The marginal cost of the fifth unit of output is: |
a. 0. b. $2.00. c. $2.60. d. $6.00. e. $30.00. |
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The average variable cost of five units of output is: |
a. 0. b. $2.00. c. $2.60. d. $6.00. e. $30.00. |
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Let average costs be minimized at output X*. Which of the following statements is also true at X*? |
a. Average variable cost will be equal to total fixed cost. b. Profit for the firm must be at its maximum level. c. Marginal cost will be equal to average variable cost. d. Marginal cost will be equal to average cost. e. None of the above is necessarily true at X*. |
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If marginal cost exceeds average cost within a certain range of plant output, then any increase in outputwithin that range should cause average cost to: |
a. rise. b. fall. c. rise or fall, depending upon the change in variable cost. d. remain constant. e. rise, fall, or remain constant, depending upon market conditions. |
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In a certain plant, marginal cost is $2.00 at 400 units of output weekly and it is $2.50 at 500 units ofoutput. If output increases within this 400-to-500 range, then average cost: |
a. must rise. b. must fall. c. must remain constant. d. may fall, may rise, or both, but cannot remain constant throughout this output range. e. must fall and then rise |
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If a firm has employed all its inputs so that the ratios of marginal product to price are the same for allinputs, then: |
a. the marginal product of each input is equal to its price. b. the firm is producing the maximum-profit output at minimum cost. c. the firm is producing the maximum-profit output, but it may or may not be producing that output at minimum cost. d. the firm may or may not be producing the maximum-profit output, but it is producing its present output at minimum cost. e. the firm may or malt not be producing the maximum-profit output, and it may not even be producing its present output at minimum cost. |
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The production function alone will tell a firm: |
a. what it will cost to produce any given quantity of output. b. the maximum-profit level of output. c. the various combinations of inputs that should be used in order to produce any given quantity of output most efficiently, i.e., at the least money cost. d. the various combinations of inputs that could be used in order to produce any given quantity of output. e. none of these |
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A, B, and C are inputs employed to produce good X. If the quantity of A used were increased, then wewould ordinarily expect A’s marginal product to: |
a. increase, in all circumstances. b. increase if the quantities of B and C were left unchanged, but not necessarily to increase if the quantities of B and C were increased in the same proportion. c. decrease in all circumstances. d. decrease if the quantities of B and C were left unchanged, but not necessarily decrease if the quantities of B and C were increased in the same proportion. e. decrease if the quantities of B and C were increased in the same proportion, but increase if the quantities of B and C were left unchanged. |
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A firm employs inputs A and B so that the marginal product of A is 60 and the marginal product of Bis 40. The prices of A and B are $4 and $9, respectively. Assuming that A and B are the only inputsinvolved, this firm is: |
a. producing its present output at minimum cost but definitely is not earning maximum possible profit. b. not producing its present output at minimum cost and is not earning maximum possible profit. (only not not) c. producing its present output at minimum cost but may or may not be earning maximum possible profit. d. not producing its present output at minimum cost but nevertheless is earning maximum possible profit. e. possibly in any of the positions just described—the information furnished is insufficient to tell |
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In question 15, change the price of input A from $4 to $3. If all the other information still applies,which alternative in question 15 is now correct? |
a. b. c. d. e. |
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Marginal cost reaches its minimum when: |
a. average variable cost reaches its minimum. b. average total cost reaches its minimum. c. average fixed cost reaches its minimum. d. marginal product reaches its maximum. |
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A particular income statement records no depreciation expense for a piece of machinery, even thoughthat machinery was used for production during the year. This accounting procedure could be justified: |
a. if the company did not find it necessary to spend money on the maintenance or repair of the machine during the year. b. if depreciation entries totaling the original cost of the machine had already been made on earlier income statements. c. if sales for the year were below normal, so the company decided not to charge any depreciation cost for the year. d. if the company responded to an increase in market prices by estimating that the money worth of the machinery was unchanged even though it underwent some physical depreciation through use during the year. e. by recognizing that depreciation entries are properly made on the balance sheet, not the income statement. |
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A balance sheet must always “balance” because: |
a. total assets must equal total liabilities when both are properly specified. b. net profit is defined as total revenue minus total expenses. c. the definition of net worth is total assets minus total liabilities. d. current assets plus fixed assets must equal current liabilities plus long-term liabilities. e. the definition of net worth is capital stock plus retained earnings. |
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A company’s total assets at the end of 1999 were $100,000, and its total liabilities were $70,000. Atthe end of 2000, its total assets were $115,000, and its liabilities totaled $75,000. It paid dividendstotaling $15,000 in 2000. Assuming no change in its capital stock, its net profit after taxes for 2000must have been: |
a. $10,000. b. $15,000. c. $20,000. d. $25,000. (115-15-75=25) e. $30,000. |
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A company’s 2000 income statement shows a net profit earned (after taxes) of $200,000. This meansthat on its end-of-2000 balance sheet, as compared with its end-of-1999 balance sheet: |
a. the total of assets should be up by $200,000, and so should the total of liabilities plus net worth. b. retained earnings should be up by $200,000 minus the total of dividends paid. c. current assets minus current liabilities should be up by $200,000. d. cash on hand minus expenditures for new fixed assets should be up by $200,000. e. net worth should be up by $200,000 minus the total of any bond interest paid. |
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A company’s total assets were $600,000, and its total liabilities were $400,000 at the end of 2000. Atthe end of 2001, its total assets were $550,000, and its total liabilities were $200,000. During 2001, it(a) paid a dividend of $50,000 and (b) sold additional shares of its own stock for $100,000. With thesefigures, its net profit after taxes for 2001 must have been: |
a. zero. b. $50,000. c. $100,000. d. $150,000. e. $200,000 |
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Opportunity costs are defined as: |
a. the value of a resource at all its alternative uses. b. fixed costs of production that must be paid even if output is zero. c. the addition to total cost when the firm increases output by one unit. d. the value of a resource at its next-best alternative use. e. none of the above. |
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The opportunity cost of a new parking lot at your college is: |
a. the cost of all the expenses that must be incurred to produce it. b. determined by the value of the resources at their next-best alternative use. c. the amount of depreciation on machinery and equipment that must be allowed for the production of the lot. d. salary expenses for the laborers who produce it. e. determined by the fees charged people who park in the new lot |
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The most important application of opportunity cost arises: |
a. for market goods. b. for nonmarket goods. c. when planning for national defense. d. none of the above. |
