1. Which of the following is a variable cost?

a. Interest payments

b. Raw materials costs

c. Sales taxes

d. All of the above are variable costs.

2. The law of decreasing returns can explain the shape of a _____________.

a. short run marginal cost curve.

b. long run marginal cost curve.

c. short run average cost curve.

d. falling total fixed cost curve.

3. From the theory of production, economic efficiency refers to _____________.

a. the combination of inputs that will maximize outputs.

b. the combination of inputs that involves minimal costs.

c. the combination of inputs that involves decreasing costs.

d. the combination of inputs that involves a constant cost.

4. The marginal product of an input is:

a. total product divided by the amount of the input used to produce this amount of output.

b. the addition to total output that adds nothing to total revenue.

c. the addition to total output that adds nothing to profit.

d. the addition to total output due to the addition of one unit of all other inputs.

e. the addition to total output due to the addition of the last unit of an input, holding all other inputs constant.

5. An isoquant:

a. must be linear cannot have a negative slope.

b. is a curve that shows all the combinations of inputs that yield the same total output.

c. is a curve that shows the maximum total output as a function of the level of labor input.

d. is a curve that shows all possible output levels that can be produced at the same cost.

6. The law of diminishing returns states that:

a. as a firm uses more of a variable resource, given the quantity of fixed resources,

the average product of the firm will increase.

b. as a firm uses more of a variable resource, given the quantity of fixed resources, marginal product of the firm will eventually decrease.

c. in the short run, the average total costs of the firm will eventually diminish.

d. in the long run, the average total costs of the firm will eventually diminish.

7. Variable costs are:

a. sunk costs.

b. multiplied by fixed costs.

c. costs that change with the level of production.

d. defined as the change in total cost resulting from the production of an additional unit of output.

8. Which is not a fixed cost?

a. monthly rent of $1,000 contractually specified in a one-year lease

b.an insurance premium of $50 per year, paid last month

c.an attorney's retainer of $50,000

d. a worker's wage of $15 per hour per year

9. When a firm doubles its inputs and finds that its output has more than doubled, this is known as:

a. economies of scale.

b. constant returns to scale.

c. diseconomies of scale.

d. a violation of the law of diminishing returns.

10. The law of diminishing returns only applies in cases where:

a. there is increasing scarcity of factors of production.

b. the price of extra units of a factor is increasing.

c. there is at least one fixed factor of production.

d. capital is a variable input.

13. If you know that with 8 units of output, average fixed cost is $12.50 and average variable cost is $81.25, then total cost at this output level is:

a. $93.75 b. $97.78 c. $750 d. $880

14. With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50. Its output is:

A) 200 units. B) 400 units. C) 800 units. D) 1,600 units.

15. The short run production s a time period in which:

A) all resources are fixed.

B) the level of output is fixed.

C) the size of the production plant is variable.

D) one or more resources are fixed and others are variable.