890 ? Chapter 13/The Costs of Production
32. Charles’s Car Wash has average variable costs of $2 and average fixed costs of $3 when it produces 100 units
of output (car washes). The firm's total cost is a. $100. b. $200. c. $300. d. $500.
ANS: D DIF: LOC: Costs of production MSC: Applicative
2 REF: 13-3 NAT: Analytic TOP: Average total cost
33. Smith Technologies has average variable costs of $1 and average total costs of $3 when it produces 500 units
of output. The firm's total fixed costs equal a. $2. b. $4. c. $1,000. d. $2,000.
ANS: C DIF: LOC: Costs of production MSC: Applicative
2 REF: 13-3 NAT: Analytic TOP: Average fixed cost
34. Which of the following statements is not correct?
a. Fixed costs are constant.
b. Variable costs change as output changes. c. Average fixed costs are constant.
d. Average total costs are typically U-shaped.
ANS: C DIF: LOC: Costs of production MSC: Applicative
2 REF: 13-3 NAT: Analytic TOP: Average fixed cost
35. Suppose that for a particular firm the only variable input into the production process is labor and that output
equals zero when no workers are hired. In addition, suppose that when four units of output are produced, the total cost is $175, and the average variable cost is $33.75. What would the average fixed cost be if ten units were produced? a. $4 b. $10 c. $40 d. $135
ANS: A DIF: LOC: Costs of production MSC: Analytical
3 REF: 13-3 NAT: Analytic TOP: Average fixed cost
36. A firm produces 300 units of output at a total cost of $1,000. If fixed costs are $100,
a. average fixed cost is $10. b. average variable cost is $3. c. average total cost is $4. d. average total cost is $5.
ANS: B DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-3 NAT: Analytic TOP: Average variable cost
37. Variable cost divided by quantity produced is
a. average total cost. b. marginal cost. c. profit.
d. None of the above is correct.
ANS: D DIF: LOC: Costs of production MSC: Definitional
2 REF: 13-3 NAT: Analytic TOP: Average variable cost
Chapter 13/The Costs of Production ? 891
38. Variable cost divided by the change in quantity produced is
a. average variable cost. b. marginal cost. c. average total cost.
d. None of the above is correct.
ANS: D DIF: LOC: Costs of production MSC: Definitional
2 REF: 13-3 NAT: Analytic TOP: Average variable cost
39. Charles’s Car Wash has average variable costs of $2 and average total costs of $3 when it produces 100 units
of output (car washes). The firm's total variable cost is a. $100. b. $200. c. $300. d. $500.
ANS: B DIF: LOC: Costs of production MSC: Applicative
2 REF: 13-3 NAT: Analytic TOP: Average variable cost
40. Marginal cost is equal to
a. TC/Q. b. ?ATC/Q. c. ?TC/?Q. d. ?Q/?TC.
ANS: C DIF: LOC: Costs of production MSC: Definitional
1 REF: 13-3 NAT: Analytic TOP: Marginal cost
41. The amount by which total cost rises when the firm produces one additional unit of output is called
a. average cost. b. marginal cost. c. fixed cost. d. variable cost.
ANS: B DIF: LOC: Costs of production MSC: Definitional
1 REF: 13-3 NAT: Analytic TOP: Marginal cost
42. The cost of producing an additional unit of output is the firm's
a. marginal cost. b. productivity offset. c. variable cost.
d. average variable cost.
ANS: A DIF: LOC: Costs of production MSC: Definitional
1 REF: 13-3 NAT: Analytic TOP: Marginal cost
43. Marginal cost equals
(i) change in total cost divided by change in quantity produced. (ii) change in variable cost divided by change in quantity produced. (iii) the average fixed cost of the current unit.
a.
b. c. d. (i) and (ii) only (ii) and (iii) only (i) only
(i), (ii), and (iii)
2
REF: 13-3 NAT: Analytic TOP: Marginal cost
ANS: A DIF:
LOC: Costs of production MSC: Definitional
892 ? Chapter 13/The Costs of Production
44. Marginal cost equals
a. total cost divided by quantity of output produced. b. total output divided by the change in total cost. c. the slope of the total cost curve.
d. the slope of the line drawn from the origin to the total cost curve.
ANS: C DIF: LOC: Costs of production MSC: Definitional
2 REF: 13-3 NAT: Analytic TOP: Marginal cost
45. Marginal cost tells us the
a. value of all resources used in a production process.
b. marginal increment to profitability when price is constant.
c. amount by which total cost rises when output is increased by one unit. d. amount by which output rises when labor is increased by one unit.
ANS: C DIF: LOC: Costs of production MSC: Interpretive
2 REF: 13-3 NAT: Analytic TOP: Marginal cost
46. Which of the following measures of cost is best described as \
extra unit of production?\ a. variable cost
b. average variable cost c. average total cost d. marginal cost
ANS: D DIF: LOC: Costs of production MSC: Definitional
1 REF: 13-3 NAT: Analytic TOP: Marginal cost
47. A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its
total costs are $3,500. When it produces 101 units of output, its total costs are $3,750. What is the marginal cost of producing the 101st unit of output? a. $250 b. $275 c. $340.91 d. $350
ANS: A DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-3 NAT: Analytic TOP: Marginal cost
48. A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its
total costs are $4,500. The marginal cost of producing the 101st unit of output is $300. What is the total cost of producing 101 units? a. $46.53 b. $800 c. $4,800 d. $5,300
ANS: C DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-3 NAT: Analytic TOP: Marginal cost
Chapter 13/The Costs of Production ? 893
49. A firm has a fixed cost of $700 in its first year of operation. When the firm produces 99 units of output, its
total costs are $4,000. The marginal cost of producing the 100th unit of output is $200. What is the total cost of producing 100 units? a. $42 b. $900 c. $4,200 d. $4,900
ANS: C DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-3 NAT: Analytic TOP: Marginal cost
50. A firm has a fixed cost of $200 in its first year of operation. When the firm produces 99 units of output, its
total costs are $4,000. The marginal cost of producing the 100th unit of output is $700. What is the total cost of producing 100 units? a. $900 b. $4,200 c. $4,700 d. $4,900
ANS: C DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-3 NAT: Analytic TOP: Marginal cost
Table 13-5
The Flying Elvis Copter Rides Quantity Total Cost Fixed Cost Variable Cost 0 1 2 3 Marginal Cost -- C $120 P $50 $150 G M $50 A H N $0 B I O Average Average Fixed Cost Variable Cost -- -- D E J K Q $120 Average Total Cost -- F L R 51. Refer to Table 13-5. What is the value of A?
a. $25 b. $50 c. $100 d. $200
ANS: B DIF: LOC: Costs of production 1 REF: 13-3
TOP: Fixed costs NAT: Analytic MSC: Analytical
52. Refer to Table 13-5. What is the value of B?
a. $25 b. $50 c. $100 d. $200
ANS: C DIF: LOC: Costs of production MSC: Analytical
1 REF: 13-3 NAT: Analytic TOP: Variable costs
53. Refer to Table 13-5. What is the value of C?
a. $25 b. $50 c. $100 d. $200
ANS: C DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-3 NAT: Analytic TOP: Marginal cost
894 ? Chapter 13/The Costs of Production
54. Refer to Table 13-5. What is the value of G?
a. $30 b. $120 c. $220 d. $270
ANS: D DIF: LOC: Costs of production MSC: Analytical
3 REF: 13-3 NAT: Analytic TOP: Total cost | Marginal cost
55. Refer to Table 13-5. What is the value of L?
a. $60 b. $135 c. $240 d. $270
ANS: B DIF: LOC: Costs of production MSC: Analytical
3 REF: 13-3 NAT: Analytic TOP: Average total cost | Marginal cost
56. Refer to Table 13-5. What is the value of O?
a. $40 b. $140 c. $360 d. $410
ANS: C DIF: LOC: Costs of production MSC: Analytical
3 REF: 13-3 NAT: Analytic TOP: Variable costs
Table 13-6 Quantity of Output 0 1 2 3 4 5 6 Fixed Cost $20 $20 $20 $20 $20 $20 $20 Variable Cost $0 $10 $40 $80 $130 $200 $300 57. Refer to Table 13-6. What is the average fixed cost of producing 5 units of output?
a. $4 b. $5 c. $40 d. $44
ANS: A DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-3 NAT: Analytic TOP: Average fixed cost
58. Refer to Table 13-6. What is the average variable cost of producing 5 units of output?
a. $4 b. $5 c. $40 d. $44
ANS: C DIF: LOC: Costs of production MSC: Analytical
2 REF: 13-3 NAT: Analytic TOP: Average variable cost