AP Micro Cost

At 100 units of a firm’s output, average total cost is $10, average variable cost is $8, average fixed cost is $2, and marginal cost is $12. How will each of the following change as the firm's output further increases?

• ATC:Increase

  AVC:Increase

  AFC:Increase

• ATC:Increase

  AVC:Increase

  AFC:Decrease

• ATC:Increase

  AVC:Decrease

  AFC:Decrease

• ATC:Decrease

  AVC:Increase

  AFC:Increase

• ATC: Decrease

  AVC: Decrease

  AFC: Decrease

At the current output level, a firm finds that it has the potential to increase its profit by expanding output. If P = price, MR = marginal revenue, and MC = marginal cost, which of the following must hold at the current output for this firm?

• P = MR < MC

• P = MR = MC

• MR=MC

• MR>MC

• MR<MC

Which of the following statements best describes the graph?

• Economic losses are incurred, and the firm will increase price until no losses are incurred.

• Economic losses are incurred, and exit of firms from the market will cause prices to increase in the long run.

• Economic profits are earned, and costs will increase until no profits are earned.

• Economic profits are earned, and entry of firms into the market will cause prices to decrease in the long run.

• Economic profits are earned, and neither exit nor entry of firms will occur in the long run.

Given the cost and demand schedules depicted above, if the firm increased output from q1 to q2, it would

• earn a normal profit

• experience an increase in profits

• experience a decline in profits

• increase revenues but not costs

• increase costs but not revenues

If the product price is $85, how many units of output must the firm produce in order to maximize profits?

• 0

• 3

• 4

• 5

• 6

What is the relationship between average total cost (ATC) and average variable cost (AVC) as quantity increases?

• ATC exceeds AVC

• ATC remains constant

• ATC approaches AVC

• ATC becomes zero

A company experiences a decrease in its average fixed cost (AFC) while its average variable cost (AVC) remains unchanged. Which of the following factors is most likely responsible for this change?

• Decreased raw material costs

• Increased labor cost

• Improved production efficiency

• Higher energy prices

4. Which cost curve does not shift when there is a change in fixed costs?

• Average fixed cost (AFC) curve

• Marginal cost (MC) curve

• Average total cost (ATC) curve

• Average variable cost (AVC) curve

What is the equation for total cost (TC)?

• TC = TR - Profit

• TC = FC + VC

• TC = AFC + AVC

• TC = MC + ATC

What is the relationship between revenue and profit?

• Profit is the sum of revenue and cost.

• Profit is unrelated to revenue.

• Profit is the difference between revenue and cost.

• Profit is equal to revenue divided by cost.