Question 1

Refer to the information provided in Figure 8.1 below to answer the question(s) that follow.  Figure 8.1
-Refer to Figure 8.1 above. If Cyndyʹs Floral Arrangements produces 100 silk flower arrangements, the average fixed costs are
A) $0.10.
B) $10.
C) $1,000.
D) There is not enough information in the graph to answer this question.

Accepted Answer

B

Question 2

Which type of cost does depend on a firm's output?
A) variable cost
B) total cost
C) marginal cost
D) all of the above

Accepted Answer

Variable cost, total cost, and marginal cost all depend on a firm's output. Variable costs change with the level of output, total cost includes both fixed and variable costs and thus changes as output changes, and marginal cost is the cost of producing one more unit of a good, which also varies with the level of production.

Question 3

Total variable cost ________ as output increases, and total fixed cost ________ as output increases.
A) increases; increases
B) increases; decreases
C) increases; does not change
D) does not change; does not change

Accepted Answer

Total variable cost increases as output increases because variable costs depend on the level of production. Total fixed cost does not change as output increases because fixed costs are incurred regardless of the level of production.

Question 4

Average fixed costs
A) are the costs associated with producing an additional unit of output.
B) provide a per unit measure of costs.
C) fall as output rises.
D) reach their minimum at the output level where the average fixed cost curve is intersected by the marginal cost curve.

Accepted Answer

Average fixed costs decrease as output increases because the total fixed costs are spread over a larger number of units, reducing the cost per unit.

Question 5

Total cost is calculated as
A) the sum of total fixed cost and total variable cost.
B) the product of average total cost and price.
C) the sum of all the firm's explicit costs.
D) the sum of average fixed cost and average variable cost.

Accepted Answer

Total cost in economics is calculated as the sum of total fixed costs (costs that do not change with the level of output) and total variable costs (costs that change with the level of output).

Question 6

Firms have ________ over their ________ costs in the short run.
A) control; fixed
B) no control; fixed
C) control; overhead
D) no control; variable

Accepted Answer

In the short run, firms have no control over their fixed costs, as these costs do not change with the level of output produced. Fixed costs, such as rent or salaries, must be paid regardless of the firm's level of production.

Question 7

Amy spends $5,000 on remodeling a storefront that she then opens as a take-out deli. Business has not been very successful, and she needs an additional $1,000 to keep the deli open. Which of the following is true?
A) The $5,000 Amy spent on remodeling represents a part of the total variable cost of her business.
B) The $5,000 Amy spent is a fixed cost of her business.
C) The $1,000 represents her marginal costs of production.
D) The $1,000 Amy needs to keep the deli open represents her total fixed costs.

Accepted Answer

CB) The $5,000 Amy spent on remodeling is a fixed cost because it does not change with the level of output or sales. It's a one-time expense that Amy will incur regardless of how many customers she serves.C) The additional $1,000 Amy needs to keep the deli open can be considered her marginal cost because it represents the cost of producing one more unit of output, in this case, keeping the deli operational for an additional period.

Question 8

The Lawn Ranger, a landscaping company, has total costs of $4,000 and total variable costs of $1,000. The Lawn Ranger's total fixed costs are
A) $0.
B) $3,000.
C) $5,000.
D) indeterminate because the firm's output level is not known.

Accepted Answer

Total fixed costs are calculated by subtracting total variable costs from total costs, which is $4,000 - $1,000 = $3,000.

Question 9

The Lawn Ranger, a landscaping company, has total costs of $5,000 and total fixed costs of $3,000. The Lawn Ranger's total variable costs are
A) $2,000.
B) $3,000.
C) $5,000.
D) indeterminate because the firm's output level is not known.

Accepted Answer

Total variable costs are calculated by subtracting total fixed costs from total costs, which is $5,000 - $3,000 = $2,000.

Question 10

Dana spends $10,000 on remodeling a storefront that she then opens as a shoe store. The business has not been very successful, and she needs an additional $3,000 to keep the shoe store open. Which of the following is true?
A) The $10,000 Dana spent on remodeling represents a part of the total variable cost of her business.
B) The $3,000 represents her marginal costs of production.
C) The $10,000 Dana spent on remodeling is a fixed cost of her business.
D) The $3,000 Dana needs to keep the deli open represents her total fixed costs.

Accepted Answer

The $10,000 Dana spent on remodeling is a fixed cost because it is a one-time expense that does not change with the level of output or sales in her business.

Question 11

Refer to the information provided in Figure 8.2 below to answer the question(s) that follow.  Figure 8.2
-Refer to Figure 8.2 above. The total fixed costs for The Barber Shop are $3,000. If The Barber Shop produces 300 haircuts, the average fixed costs are
A) $0.20.
B) $5.
C) $10.
D) $100.

Accepted Answer

Average fixed costs are calculated by dividing total fixed costs by the quantity of output. Here, $3,000 divided by 300 haircuts equals $10 per haircut.

Question 12

In the short run
A) existing firms do not face limits imposed by a fixed input.
B) all firms have costs that they must bear regardless of their output.
C) new firms can enter an industry.
D) existing firms can exit an industry.

Accepted Answer

In the short run, all firms have fixed costs that they must bear regardless of their output level, such as rent, salaries, and loan payments. These costs are incurred even if the firm produces nothing.

Question 13

The formula for total fixed cost is
A) TFC = TC + TVC.
B) TFC = TVC -TC.
C) TFC = TC/TVC.
D) TFC = TC -TVC.

Accepted Answer

Total Fixed Cost (TFC) is calculated by subtracting Total Variable Cost (TVC) from Total Cost (TC), hence the formula TFC = TC - TVC.

Question 14

The Farley Farm, a dairy company, has total costs of $15,000 and total variable costs of $2,000. The Farley Farm's total fixed costs are
A) $0.
B) $13,000.
C) $17,000.
D) indeterminate because the firm's output level is not known.

Accepted Answer

Total fixed costs are calculated by subtracting total variable costs from total costs, which is $15,000 - $2,000 = $13,000.

Question 15

The formula for average fixed costs is
A) TFC - q.
B) TFC/q.
C) q/TFC.
D) Δq/ΔTFC.

Accepted Answer

The formula for average fixed costs (AFC) is Total Fixed Costs (TFC) divided by the quantity (q) of output produced, which is represented as TFC/q.

Question 16

Wilbur's Widgets, a widget company, produces 100 widgets. Its average fixed cost is $5 and its total variable cost is $300. What is the total cost of producing 100 widgets?
A) $300
B) $305
C) $500
D) $800

Accepted Answer

The answer of Wilbur's Widgets, a widget company, produces 100...

Question 17

Refer to the information provided in Figure 8.1 below to answer the question(s) that follow.  Figure 8.1
-Refer to Figure 8.1 above. The total fixed costs for Cyndy's Floral Arrangements are $1,000. If Cyndy's Floral Arrangements produces 200 silk flower arrangements, the average fixed costs are
A) $0.20.
B) $5.
C) $20.
D) $200.

Accepted Answer

The average fixed cost is calculated by dividing the total fixed costs by the number of units produced. So, $1,000 / 200 = $5.

Question 18

Which type of cost does not depend on a firm's output?
A) fixed cost
B) variable cost
C) total cost
D) marginal cost

Accepted Answer

Fixed costs do not vary with the level of output produced by a firm. They are incurred even if the firm produces nothing, such as rent, salaries, and insurance.

Question 19

Economists usually assume that ________ is a fixed input in the ________ run.
A) labor; short
B) capital; short
C) labor; long
D) capital; long

Accepted Answer

In the short run, economists typically assume that capital (such as machinery, buildings, and other durable equipment) is a fixed input, meaning its quantity cannot be easily changed. Labor, on the other hand, is considered a variable input that can be adjusted more readily.

Question 20

Refer to the information provided in Figure 8.2 below to answer the question(s) that follow.  Figure 8.2
-Refer to Figure 8.2 above. If The Barber Shop produces more than 300 hair cuts, the average fixed costs are
A) < $10.
B) $10.
C) > $10.
D) There is not enough information in the graph to answer this question.

Accepted Answer

Average fixed costs decrease as the quantity of output increases because the total fixed costs are spread over a larger number of units. Therefore, if The Barber Shop produces more than 300 haircuts, the average fixed cost per haircut would be less than $10.

Quiz 8: Short-Run Costs and Output Decisions

Refer to the information provided in Figure 8.1 below to answer the question(s) that follow. Figure 8.1 -Refer to Figure 8.1 above. If Cyndyʹs Floral Arrangements produces 100 silk flower arrangements, the average fixed costs are

Which type of cost does depend on a firm's output?

Total variable cost as output increases, and total fixed cost as output increases.

Average fixed costs

Total cost is calculated as

Firms have over their costs in the short run.

Amy spends $5,000 on remodeling a storefront that she then opens as a take-out deli. Business has not been very successful, and she needs an additional $1,000 to keep the deli open. Which of the following is true?

The Lawn Ranger, a landscaping company, has total costs of $4,000 and total variable costs of $1,000. The Lawn Ranger's total fixed costs are

The Lawn Ranger, a landscaping company, has total costs of $5,000 and total fixed costs of $3,000. The Lawn Ranger's total variable costs are

Dana spends $10,000 on remodeling a storefront that she then opens as a shoe store. The business has not been very successful, and she needs an additional $3,000 to keep the shoe store open. Which of the following is true?

Refer to the information provided in Figure 8.2 below to answer the question(s) that follow. Figure 8.2 -Refer to Figure 8.2 above. The total fixed costs for The Barber Shop are $3,000. If The Barber Shop produces 300 haircuts, the average fixed costs are

In the short run

The formula for total fixed cost is

The Farley Farm, a dairy company, has total costs of $15,000 and total variable costs of $2,000. The Farley Farm's total fixed costs are

The formula for average fixed costs is

Wilbur's Widgets, a widget company, produces 100 widgets. Its average fixed cost is $5 and its total variable cost is $300. What is the total cost of producing 100 widgets?

Refer to the information provided in Figure 8.1 below to answer the question(s) that follow. Figure 8.1 -Refer to Figure 8.1 above. The total fixed costs for Cyndy's Floral Arrangements are $1,000. If Cyndy's Floral Arrangements produces 200 silk flower arrangements, the average fixed costs are

Which type of cost does not depend on a firm's output?

Economists usually assume that is a fixed input in the run.

Refer to the information provided in Figure 8.2 below to answer the question(s) that follow. Figure 8.2 -Refer to Figure 8.2 above. If The Barber Shop produces more than 300 hair cuts, the average fixed costs are