Cost Curves

Short run marginal costs eventually increase because of the effects of:

• increasing marginal product
• diminishing marginal product
• increasing fixed costs
• diseconomies of scale

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

The most profitable level of output for any firm operating in the short run is the level of output at which:

• marginal revenue exceeds marginal cost by the highest amount 
• marginal revenue equals marginal cost 
• price exceeds average cost by the highest amount
  
• price equals marginal cost 

If a new tax on capital increases a firm’s fixed cost of production, which of the following will occur in the short run? 

• Average total cost will increase
  
• Marginal cost will increase
  
• Average variable cost will increase
  
• The profit-maximizing level of output will increase
  

An entrepreneur has earned enough total revenue to cover her accounting costs, but economic losses are being incurred. What must be true? 

• Her accounting costs are larger than her economic costs 
• Her implicit costs are less than her accounting costs
• Her accounting profits are greater than her economic costs
• Her accounting profits are less than her implicit costs 

When total physical product is at its maximum, marginal physical product must be:

• greater than one
• equal to one
• equal to zero
• less than one

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 

The graph above shows the marginal product (MP) and the average product (AP) of labor for a firm that uses labor as the only variable input. At which quantity of labor does marginal cost change from decreasing to increasing? 

• L1
• L2
• L2
• L5

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

A firm is producing 100 units of output at a total cost of $400. The firm’s average variable cost is $3 per unit. What is the firm’s total fixed cost? 

• $100
• $1
• $300
• $50