Production Function

At 100 units of output, a firm's total cost is $10,000. If the firm's total fixed cost is $4,000, its average variable cost is equal to:

• $140
• $100
• $60
• $40

As output of a firm increases, the difference between the firm’s average total cost and its average variable cost gets smaller because the firm’s

• total cost is increasing
  
• marginal cost is increasing
  
• average fixed cost is decreasing
  
• marginal product of labor is decreasing 

Shelby is an entrepreneur who has decided to open a small advertising firm. She rents office space at a cost of $25,000 per year, she has employed an assistant at a salary of $30,000 per year, and she incurs annual utility and office supply expenses of $20,000. Her best alternative is to work elsewhere and to earn a salary of $50,000 per year. How much annual revenue must her firm receive so that Shelby earns zero economic profit? 

• $50,000
• $75,000
• $100,000
• $125,000

A firm produces 400 books and sells each book for $15. If the explicit cost of producing the books is $4,500 and the implicit cost is $1,000, the firm’s economic profit is:

• $0
• $500
• $1,000
• $1,500

Assume that the fixed cost is $50. Based on the cost and output data in the table, what is the marginal cost when the firm increases its output from three to four units AND the average total cost of producing 4 units (respectively)? 

• MC=$35; ATC=$40
• MC=$35; ATC=$35
• MC=$25; ATC=$35
• MC=$25; ATC=$25

Change in Total Revenue/Change in Quantity
ΔTR/ΔQ = _____

• Marginal cost
• Marginal Revenue
• Profit
• Marginal Profit

The property whereby long-run average total cost falls as the quantity of output increases.

• Economies of Scale
• Efficient Scale
• Constant Returns to Scale
• Diseconomies of Scale

The marginal cost curve typically does which of the following?

• Increases at a fixed rate.
• Decreases and eventually increases.
• Decreases at a decreasing rate.
• Increases and eventually decreases.

What is the only curve that continues to fall as output increases?

• Average Fixed Cost
• Average Variable Cost
• Average Total Cost
• Marginal Cost

Which of the following is a condition of perfect competition?

• products produced by rival firms are perfect substitutes
• individual firms can affect market supply
• industry sales are small
• restricted entry and exit