Practice 41. In the short run marginal product is diminishing because: A. barriers to entry prevent new firms from entering the industry.B. the firm does not have sufficient time to change the size of its plant.C. the firm does not have sufficient time to cut its rate of output to zero.D. a firm does not have sufficient time to change the amounts of any of the resources it employs.2. The law of diminishing marginal product indicates that: A. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.B. because of economies and diseconomies of scale a competitive firm’s long-run average total cost curve will be U-shaped.C. the demand for goods produced by purely competitive industries is downsloping.D. beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.3. Fixed cost is: A. the cost of producing one more unit of capital, say, machinery.B. any cost which does not change when the firm changes its output.C. average cost multiplied by the firm’s output.D. usually zero in the short run.4. If you owned a small farm, which of the following would be a fixed cost? A. harvest laborB. hail insuranceC. fertilizerD. seed Answer the next question(s) on the basis of the following cost data. Notice that fixed cost is $24. 5. Refer to the above data. The variable cost of producing 5 units is: A. $61.B. $48.C. $37.D. $24. 6. Refer to the above data. The average total cost of producing 3 units of output is: A. $14.B. $12.C. $13.50.D. $16.7. Refer to the above data. The average fixed cost of producing 3 units of output is: A. $8.B. $7.40.C. $5.50.D. $6.8. Refer to the above data. The marginal cost of producing the sixth unit of output is: A. $24.B. $12.C. $16.D. $8.9. Refer to the above data. The profit-maximizing output for this firm: A. is 3.B. is 4.C. is 5.D. cannot be determined from the information given. 10. In the above diagram curves 1, 2, and 3 represent: A. average variable cost, marginal cost, and average fixed cost respectively.B. variable cost, fixed cost, and total cost respectively.C. fixed cost, variable cost, and total cost respectively.D. marginal product, average variable cost, and average total cost respectively. Answer the next question(s) on the basis of the following cost data: 11. Refer to the above data. Total fixed cost is: A. $6.25.B. $100.00.C. $150.00.D. $50.00.12. Refer to the above data. The average total cost of five units of output is: A. $69.B. $78.C. $3.D. $10.13. Refer to the above data. The total cost of four units of output is: A. $260.B. $77.50.C. $310.D. $215.14. Refer to the above data. If the firm shut down and produced zero units of output, its total cost would be: A. zero.B. $50.C. $150.D. $100. 15. Refer to the above data. The marginal cost of the fifth unit of output is: A. $3.B. $62.C. $80.D. $78. 16. Refer to the above data. The marginal cost curve would intersect the average variable cost curve at about: A. 2 units of output.B. 4 units of output.C. 6 units of output.D. 7 units of output.17. Refer to the above data. If the firm decided to increase its output from 6 to 7 units, its total costs would rise by: A. $87.14.B. $80.00.C. $6.67.D. $120.00. 18. Refer to the above diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down) is: A. P1.B. P2.C. P3.D. P4. 19. Refer to the above diagram for a purely competitive producer. The firm will produce at a loss at all prices: A. above P1.B. above P3.C. above P4.D. between P2 and P3. 20. Refer to the above diagram for a purely competitive producer. If product price is P3: A. the firm will maximize profit at point d.B. the firm will earn an economic profit.C. economic profits will be zero.D. new firms will enter this industry. 21. Refer to the above diagram for a purely competitive producer. The firm’s short-run supply curve is: A. the abcd segment and above on the MC curve.B. the bcd segment and above on the MC curve.C. the cd segment and above on the MC curve.D. not shown. 22. The short-run supply curve of a purely competitive producer is based primarily on its: A. AVC curve.B. ATC curve.C. AFC curve.D. MC curve.
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