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

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

When total product is at its maximum, marginal 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

• L3

• L5

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

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

Suppose that a firm begins to hire workers for a newly completed plant with a fixed amount of machinery. As the firm hires additional workers, one would expect the marginal product to: 

• fall initially, but eventually rise
  
• rise initially, but eventually fall
  
• rise consistently due to diminishing returns
• rise consistently due to the advantages of specialization
  

In the short run, which of the following costs must continuously decrease as output produced increases? 

• Total variable cost 
• Total fixed cost 
• Average total cost 
• Average fixed cost