AP Micro 3.1 - 3.3 Quiz

The average total cost to a firm that is producing 2 units of output is

• $35

• $85

• $95

• $100

• $130

If the marginal cost of producing the first unit of a good is $20 and the marginal cost of producing a second unit of the good is $30, the average variable cost of producing 2 units of the good is

• $5

• $10

• $20

• $25

• $50

Assume that the fixed cost is $50. Based on the cost and output data in the table above, 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?

• MC: $35, ATC: $40

• MC: $35, ATC: $35

• MC: $25, ATC: $35

• MC: $25, ATC: $25

• MC: $10, ATC: $25

The relationship in the graph best illustrates the economic concept of

• opportunity cost

• diminishing marginal utility in consumption

• diminishing marginal returns in production

• production possibilities

• comparative advantage

Short-run marginal costs eventually increase due to the effects of

• increasing marginal product

• diminishing marginal product

• diseconomies of scale

• economies of scale

• increasing fixed costs

If labor is the only variable input of production, the short-run marginal cost curve is upward sloping because which of the following occurs as more labor is added?

• Output decreases, and thus marginal cost increases.

• Output increases, and thus marginal cost increases.

• Output increases at an increasing rate, and thus the cost of producing each additional unit of output increases.

• Output increases at a decreasing rate, and thus the cost of producing each additional unit of output increases.

• Output increases at a decreasing rate, and thus the cost of producing each additional unit of output decreases.

In the short run, which cost must continuously decrease as output produced increases?

• Total variable cost

• Total fixed cost

• Average variable cost

• Average fixed cost

• Average total cost

When marginal product is greater than average product, which must be true?

• Average product is increasing.

• Average product is decreasing.

• Marginal product is increasing.

• Total product is decreasing.

• Total product is at its maximum.

When a firm is producing zero output, total cost equals

• zero

• variable cost

• fixed cost

• average total coast

• marginal cost

Which of the following must be true if a firm is experiencing economies of scale?

• All costs are explicit.

• Long-run average total cost decreases as the firm’s output increases.

• Economic profits decrease as the firm’s output increases.

• Long-run average total cost remains constant as the firm’s output decreases.

• Proportionate increases in inputs result in less-than-proportionate increases in output.