AP Microeconomics Unit 3 Revision

The combination of which two concepts below explains why additional inputs will eventually generate less and less additional output?

• Fixed resources and the law of comparative advantage

• Variable resources and the law of supply

• Variable resources and the law of demand

• Fixed resources and the law of diminishing marginal utility

• Fixed resources and the law of diminishing marginal returns

The chart shows the number of inputs and outputs for a specific firm. After which worker does diminishing marginal returns first occur?

• 1st worker

• 2nd worker

• 3rd worker

• 4th worker

• Not enough information

Which of the following is the best definition of marginal cost?

• The difference between the average total cost and the average variable cost

• The change in total product from hiring an additional worker

• The change in total cost from hiring an additional worker

• The change in fixed cost as you produce additional units

• The change in total cost from producing an additional output

If the marginal cost of a specific unit is less than the average total cost (ATC) then...

• the firm should produce less but not shut down

• the marginal cost must be decreasing

• the marginal cost must be less than the ATC

• the marginal cost must be greater than the ATC

• the average fixed cost is constant

Which of the following best explains why average total cost (ATC) falls and then rises in the short-run?

• the law of diminishing marginal utility

• diminishing marginal returns and the substitute effect

• falling average fixed costs and diminishing marginal returns

• economies of scale and diseconomies of scale

• the fact that all resources are variable

Assume a firm utilizes mass production techniques. If the firm's output increased 50% as a result of increasing their inputs 20% this firm

• is experiencing economies of scale

• is experiencing diseconomies of scale

• has an upward sloping long-run average total cost curve

• will not experience diminishing marginal returns

• has no variable costs as a result of the increase in productivity

A firm is producing 10 units of output where the ATC is $20 , the AVC is $15, and the MC is $10. Which of the following is true?

• The firm is producing too much output

• The firm's total cost is $100

• The firm's average fixed costs is $10

• The firm's total fixed cost is $50

• The marginal cost must be decreasing

According to the chart, what is the fixed cost and average total cost of the 4th unit?

• $30 $30

• $30 $15

• $30 $20

• $120 $20

• Unknown $20

The chart above shows the costs for a perfectly competitive firm that sells a product with a price of $25. Identify the profit maximizing quantity and the amount of profit or loss.

• 0 Units $30 Loss

• 4 Units $20 Profit

• 4 Units $10 profit

• 4 Units $5 Profit

• 5 Units $10 profit

Assume a perfectly competitive firm is producing where the marginal revenue is less than the marginal cost. This firm should ...

• decrease the quantity they are producing

• decrease their price

• shut down

• increase their marginal cost

• decrease their fixed costs