Firm Costs

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost?

• the $20 million payment that the firm pays each year for accounting services

• the cost of the steel that is used in producing automobiles

• the rent that the firm pays for office space in a suburb of St. Louis

• All of the above are correct.

Cindy’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

• $100

• $200

• $300

• $500

Which of the following measures of cost is best described as "the cost of a typical unit of output if total cost is divided evenly over all the units produced?"

• average fixed cost

• average variable cost

• average total cost

• marginal cost

The Wacky Widget company has total fixed costs of $100,000 per year. The firm's average variable cost is $5 for 10,000 widgets. At that level of output, the firm's average total costs equal

• $10

• $15

• $100

• $150

Marginal cost equals

• total cost divided by quantity of output produced.

• total output divided by the change in total cost.

• the slope of the total cost curve.

• the slope of the line drawn from the origin to the total cost curve.

When marginal cost exceeds average total cost,

• average fixed cost must be rising.

• average total cost must be rising.

• average total cost must be falling.

• marginal cost must be falling.

When a firm is operating at an efficient scale,

• average variable cost is minimized.

• average fixed cost is minimized.

• average total cost is minimized.

• marginal cost is minimized.

Economies of scale occur when

• long-run average total costs rise as output increases.

• long-run average total costs fall as output increases.

• average fixed costs are falling.

• average fixed costs are constant.

In the long run Irene’s Ice Cream Parlor incurs total costs of $2,500 when output is 1,250 units and $4,000 when output is 1,500 units. For this range of output, Irine’s exhibits

• economies of scale.

• constant returns to scale.

• diseconomies of scale.

• efficient scale.

A production function is a relationship between inputs and

• quantity of output.

• revenue.

• costs.

• profit.