1) Total variable cost ________ as output increases, and total fixed cost ________ as output increases.

• A.increases; decreases
• B.increases; increases
• C.does not change; does not change
• D.increases; does not change

2) Short-run costs that depend on the level of output are

• A.both total variable costs and total costs.
• B.total fixed cost only.
• C.total costs only.
• D.total variable costs only.

2) If marginal cost is above average variable cost, then

• A.marginal cost must be decreasing.
• B.average variable cost is increasing.
• C.average variable cost is constant.
• D.average variable cost is decreasing.

3) The explanation for why marginal cost is positive and rising in the short run is ________ marginal product of labor in the production process.

• A.a zero
• B.a diminishing
• C.a constant
• D.an increasing

4) Diminishing marginal returns implies

• A.increasing marginal costs.
• B.decreasing average fixed costs.
• C.decreasing average variable costs.
• D.decreasing marginal costs.

5) A firm will begin to experience diminishing returns at the point where

• A.marginal product increases.
• B.marginal cost increases.
• C.marginal cost decreases.
• D.Both B and C are correct.

6) For Elliot's dog-walking service, the only variable input is labor. Elliot's labor costs are $300 a day and his service walks 30 dogs per day. To walk 31 dogs per day, his labor costs increase to $305 a day. The marginal cost of walking that 31st dog is

• A.$5.
• B.$9.83.
• C.$19.52.
• D.indeterminate from the information given.

7) If a firm's total costs are $100 when 10 units of output are produced and $103 when 11 units of output are produced, the marginal cost of the 11th unit is

• A.$1.
• B.$3.
• C.$5.
• D.$9.36.

8) If marginal cost is between average variable cost and average total cost, then

• A.both average variable cost and average total cost are decreasing.
• B.both average variable cost and average total cost are increasing.
• C.average variable cost is decreasing and average total cost is increasing.
• D.average variable cost is increasing and average total cost is decreasing.

9) If the marginal cost curve is below the average variable cost curve, then

• A.average variable costs are increasing.
• B.marginal cost must be decreasing.
• C.average variable costs are decreasing.
• D.average variable costs could either be increasing or decreasing.

10) The marginal cost curve intersects the ________ at its minimum.

• A.average variable cost curve
• B.average total cost curve
• C.average fixed cost curve
• D.A and B are both correct.

11) Average variable cost and average total costs get closer together as output increases because

• A.economies of scale become apparent.
• B.average fixed costs decrease as output increases.
• C.diminishing returns set in.
• D.marginal costs decrease as output increases.

12) The Framing Gallery frames posters. The Framing Gallery has total fixed costs of $500. The Framing Gallery's average variable cost is $20 and its average total cost is $25. The Framing Gallery is currently framing

• A.5 posters.
• B.25 posters.
• C.100 posters.
• D.a number of posters that is indeterminate from this information.

13) All of the following statements about variable costs are trueexcept

• A.they are equal to the product of average variable cost and the output level.
• B.they are zero if output is zero.
• C.they are constant as output increases.
• D.they are equal to total costs in the long run.

14) Fixed costs

• A.do not exist in the long run.
• B.are total costs minus average variable costs.
• C.depend on a firm's level of output.
• D.are zero if a firm produces no output.