Bill is an accountant for a small machine shop. His boss has asked him to calculate the
shop’s total fixed cost. Which method will give Bill the correct answer?
a.subtracting marginal cost from total cost
b.calculating the product of average total cost and quantity
c.determining what the shop would pay for if they produced zero output
d.adding the total variable cost to the total cost
e.subtracting total variable cost from total revenue
132. Suppose a firm has an output of 10,000 cans and a total fixed cost of $2,000. At an output
of 5,000 the difference between the total cost and the total variable cost is
c.the average fixed cost
133. The average total cost curve and the average variable cost curve grow closer as output
a.the marginal cost of production intersects these curves at their minimum points
b.in the long run all costs are variable
c.the cost of labor dominates the cost of raw material inputs at high levels of output
d.the total variable costs are constant
e.the average fixed cost decreases as output increases
134. Suppose there is a firm with a fixed cost of $10 and the firm produces furniture that
requires wood and labor as inputs. When does the firm’s average total cost curve intersect
the average variable cost curve?
a.when the price of furniture falls below $10
b.at the minimum of the average total cost curve
c.at the point of greatest labor efficiency
d.when the marginal cost curve intersects the average variable cost curve
135. If producing just one more tube of toothpaste makes Crest’s average total cost fall, the
marginal cost of that tube of toothpaste is
a.less than one
b.greater than the average total cost of the previous tubes
c.greater than the average variable cost of the previous tubes
d.less than the average total cost of the previous tubes
e.less than the marginal cost of the previous tube
136. When the average total cost is rising, it must be the case that the
a.average total cost is below average fixed cost
b.fixed cost is not very high
c.marginal cost is greater than the average variable cost
d.average fixed cost exceeds average variable cost
e.average variable cost exceeds average total cost
137. Suppose that the average total cost of producing 5,000 Corvettes is $30,000 and the
average total cost of producing 10,000 Corvettes is also $30,000. Assuming this cost
structure continues to hold, what can you say about the change in General Motors’ total
cost of Corvette production when they make the 10,001st car?
a.The total cost of production does not change at all.
b.The total cost of production will increase by the average variable cost of the next car.
c.The change is negative because there are diseconomies of scale.
d.There is not enough information to answer this question.
e.The total cost of production will increase by $30,000.
138. Suppose the fixed cost of building a nuclear power plant is $1 billion. Suppose also that
the only variable cost is the labor of Homer Simpson, and he earns $10 per hour. If the
plant generates 1,000 kilowatts each hour, and has already generated 1 billion kilowatts,
what can you say about the marginal cost of the next kilowatt?
a.The marginal cost is equal to $10.
b.The marginal cost is equal to $.01.
c.The marginal cost is equal to $1.01.
d.The marginal cost is rising.
e.The marginal cost is falling.
139. The minimum point of the average total cost curve occurs at an output level that
a.the maximum possible total cost
b.an average total cost equal to the marginal cost of the next unit
c.an average variable cost that is greater than the marginal cost of the next unit
d.a marginal cost that is decreasing
e.a constant average fixed cost
140. The marginal cost is the
a.same as the variable cost when output is increasing
b.change in total cost as the quantity changes by one unit
c.change in average variable cost as the quantity changes by one unit
d.change in total fixed cost as the quantity changes by one unit
e.same as the fixed cost when average fixed cost is at a minimum
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