Question 1

Suppose Jan started a lemonade stand. Which of the following is a variable cost for her business?

Accepted Answer

The cost of lemons and sugar.

Question 2

Given the following production data: 0 workers produce 0 units, 1 worker produces 9,000 units, 2 workers produce 19,000 units, and 3 workers produce 27,000 units. What is the marginal product of the third worker?

Accepted Answer

$$8,000$$ units

Question 3

Based on the production data, at which worker does diminishing marginal product begin?

Accepted Answer

Third worker

Question 4

Which of the following is an implicit cost of production?

Accepted Answer

Rent that could have been earned on a building owned and used by the firm.

Question 5

If a firm produces 5 units of output and the variable cost is $100, what is the variable cost of producing 5 units?

Accepted Answer

$$100$$

Question 6

If the fixed cost of production for a firm is $10, what is the fixed cost?

Accepted Answer

$$10$$

Question 7

If the total cost of producing 7 units is $$143 and the total cost of producing 8 units is 185$$, what is the marginal cost of the 8th unit?

Accepted Answer

$$42.00$$

Question 8

If the variable cost of producing 6 units is $118, what is the average variable cost of producing 6 units?

Accepted Answer

$$19.67$$

Question 9

In the short run, if marginal product is at its maximum, then:

Accepted Answer

Marginal cost is at its minimum.

Question 10

When marginal cost is less than average total cost, what must be true?

Accepted Answer

Average total cost is falling.

Question 11

Refer to the provided cost curve diagram. The firm experiences economies of scale at which output levels?

Accepted Answer

Output levels less than $$M$$

Question 12

Suppose a firm’s average total cost (ATC) is minimized at an output of $$Q^*. If $$the firm produces less than $$Q^*$$, what is likely happening to its average total cost?

Accepted Answer

ATC is decreasing as output increases.

Question 13

If a firm’s total cost function is $$TC = 50 + 10Q$$, what is the marginal cost?

Accepted Answer

$$10$$

Question 14

A bakery pays $$500$$ per month for rent and $$2$$ per loaf of bread in ingredients. What is the total cost of producing $$x$$ loaves in a month?

Accepted Answer

$$TC = 500 + 2x$$

Question 15

If a firm’s average fixed cost (AFC) is $$AFC = \frac{FC}{Q}$$, what happens to AFC as output increases?

Accepted Answer

AFC decreases.

Question 16

A firm’s total cost increases from $$100 to$$ $$130$$ when output increases from $$4 to$$ $$5$$ units. What is the marginal cost of the 5th unit?

Accepted Answer

$$30$$

Question 17

If a firm’s average variable cost (AVC) is $$AVC = \frac{VC}{Q}$$ and variable cost is $$60$$ when output is $$3$$, what is AVC?

Accepted Answer

$$20$$

Question 18

Which of the following best describes economies of scale?

Accepted Answer

Long-run average total cost falls as output increases.

Question 19

If a firm’s total cost is $$TC = FC + VC$$, and fixed cost is $$40$$ while variable cost is $$60 at a $$certain output, what is total cost?

Accepted Answer

$$100$$

Question 20

A firm is currently producing where marginal cost equals marginal revenue. What does this imply about the firm’s profit-maximizing behavior?

Accepted Answer

The firm is maximizing profit.

Microeconomics Cost Concepts and Production Analysis Study Guide

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