Understanding Microeconomics: Theory of Cost Explained
School
City University of Hong Kong**We aren't endorsed by this school
Course
CB 2400
Subject
Economics
Date
Dec 10, 2024
Pages
4
Uploaded by CorporalSummer4015
1 CB2400 Micro-Economics Theory of Cost 1.The short run is a time frame in which A)the quantities of some resources are fixed, and the quantities of other resources can be varied.B)the quantities of all resources can be varied.C)the quantities of all resources are fixed.D)all costs remain unchanged.2.Total variable cost is the sum of all A)costs of the firm’s fixed inputs.B)costs associated with the production of goods.C)costs that rise as output increases.D)implicit costs.3.The marginal cost (MC) curve intersects the A)ATC, AVC, and AFC curves at their minimum points.B)ATC and AFC curves at their minimum points.C)AVC and AFC curves at their minimum points.D)ATC and AVC curves at their minimum points.4.In the above figure, the relationship between costs indicates that the distance between curves A)A and B is equal to the fixed cost.B)A and B is equal to the variable cost.C)B and C is equal to the fixed cost.D)B and C is equal to the average total cost.
2 5.A technological change that increases productivity will A)decrease marginal product and increase marginal cost.B)decrease both marginal product and marginal cost.C)increase both marginal product and marginal cost.D)increase marginal product but decrease marginal cost.6.Which of the following statements about average costs is incorrect? A) The difference between average total cost and average variable cost does not change as output increasesB) Average variable cost first decreases and then increases as output increaseC) Average fixed cost decreases as output increasesD) Average total cost first decreases and then increases as output increasesE) The difference between average total cost and average variable cost is average fixed cost7.The long run A)means a long period of time, always longer than a year.B)is a period of time in which all resources can be varied.C)is different for different firms.D)Both answers B and C are correct.8.A firm is operating in its range of economies of scale and is on both its LRAC curve and its short-run ATC curve. At that level of output, the slope of its LRAC curve is A)zero and the slope of its ATC curve is zero.B)zero and the slope of its ATC curve is negative.C)negative and the slope of its ATC curve is zero.D)negative and the slope of its ATC curve is negative.
3 9.In the above figure, between 20 and 25 units per hour, the firm experiences A)economies of scale.B)diseconomies of scale.C)constant returns to scale.D)increasing total fixed costs.10.Mr. John Lai, a senior engineer, is planning for the long-term production of 1,000 electric cars daily at a new facility in California. In the figure above, ATCistands for short-term average total cost with i units of capital. To realize John’s target units, what is the plant size that John should use? John should choose the plant size with: A)10 units of capital B)20 units of capital C)30 units of capitalD)40 units of capital Cost Q (in terms of thousand vehicles per day) ATC10ATC20ATC30ATC40LAC 1 0.9 0.8 1.1 1.2
4 Short Question:Refer to the following table to answer the questions:Cost schedule Labor (workers) Output (units per day) Total variable cost (dollars) Total cost (dollars) 0 0 0 30 1 3 20 50 2 8 40 70 3 12 60 90 4 14 80 110 5 15 100 130 a) What is the fixed cost for 3 units of output?b) What is the (approximate) marginal cost when output increases from 8 to 12 units? c) What is the average total cost of producing 14 units of output?d) What do you observe the relationship between marginal product and marginal cost from the above table?