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Chapter 13 Practice Questions



Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 
 
Figure 13-4
chapter_13_practice_files/i0020000.jpg
 

1. 

Refer to Figure 13-4. Which of the following can be inferred from the figure above?
(i)
Marginal cost is increasing at all levels of output.
(ii)
Marginal product is increasing at low levels of output.
(iii)
Marginal product is decreasing at high levels of output.
a.
(i) and (ii)
b.
(ii) and (iii)
c.
(i) and (iii)
d.
All of the above are correct.
 
 
The curves below reflect information about the cost structure of a firm. Use the figure to answer the following questions.

Figure 13-5
chapter_13_practice_files/i0040000.jpg
 

2. 

Refer to Figure 13-5. Which of the curves is most likely to represent average total cost?
a.
A
b.
B
c.
C
d.
D
 

3. 

For a construction company that builds houses, which of the following costs would be a fixed cost?
a.
the $50,000 per year salary paid to a construction foreman
b.
the $30,000 per year salary paid to the company's bookkeeper
c.
the $10,000 per year premium paid to an insurance company
d.
All of the above are correct.
 

4. 

The firm's efficient scale is the quantity of output that minimizes
a.
average total cost.
b.
average fixed cost.
c.
average variable cost.
d.
marginal cost.
 
 
Use the following information to answer the following questions.

Table 13-1
Measures of Cost for ABC Inc. Widget Factory
Quantity
of Widgets
Variable
Costs
Total
Costs
Fixed
Costs
0
  
$10
1
$ 1
  
2
$ 3
$13
 
3
$ 6
$16
 
4
$10
  
5
 
$25
 
6
$21
 
$10
 

5. 

Refer to Table 13-1. The average fixed cost of producing five widgets is
a.
$1.00.
b.
$2.00.
c.
$3.00.
d.
None of the above are correct.
 

6. 

Refer to Table 13-1. The average variable cost of producing four widgets is
a.
$2.00
b.
$2.50
c.
$3.33
d.
$5.00
 

7. 

Refer to Table 13-1. The marginal cost of producing the sixth widget is
a.
$1.00.
b.
$3.50.
c.
$5.00.
d.
$6.00.
 

8. 

Harry's Hotdogs is a small street vendor business owned by Harry Huggins. Harry is trying to get a better understanding of his costs by categorizing them as fixed or variable. Which of the following costs are most likely to be considered fixed costs?
a.
the cost of mustard
b.
the cost of hotdog buns
c.
wages paid to workers that sell hotdogs
d.
the cost of bookkeeping services
 

9. 

Thirsty Thelma owns and operates a small lemonade stand. When Thelma is producing a small quantity of lemonade she has few workers and her equipment is not being fully utilized. Because she can easily put her idle resources to use,
a.
the marginal cost of an extra worker is large.
b.
the marginal cost of one more glass of lemonade is small.
c.
the marginal product of an extra worker is small.
d.
her lemonade stand is likely to be crowded with workers.
 

10. 

At Bert's Bootery, the total cost of producing twenty pairs of boots is $400. The marginal cost of producing the twenty-first pair of boots is $83. We can conclude that the average
a.
variable cost of 21 pairs of boots is $23.
b.
total cost of 21 pairs of boots is $23.
c.
total cost of 21 pairs of boots is $15.09.
d.
total cost of 21 pairs of boots cannot be calculated from the information given.
 
 
The figure below depicts average total cost functions for a firm that produces automobiles. Use the figure to answer the following questions.

Figure 13-7
chapter_13_practice_files/i0150000.jpg
 

11. 

Refer to Figure 13-7. Which of the curves is most likely to characterize the short-run average total cost curve of the smallest factory?
a.
ATCA
b.
ATCB
c.
ATCC
d.
ATCD
 

12. 

Refer to Figure 13-7. This firm experiences diseconomies of scale at what output levels?
a.
output levels above N
b.
output levels between M and N
c.
output levels below M
d.
All of the above are correct, if the firm is operating in the long run.
 



 
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