15) Economic costs of production differ from accounting costs in that
A) economic costs include expenditures for hired resources while accounting costs do not.
B) economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.
C) accounting costs include expenditures for hired resources while economic costs do not.
D) accounting costs are always larger than economic cost.


16) A very large number of small sellers who sell identical products imply
A) a multitude of vastly different selling prices. C) the inability of one seller to influence price.
B) a downward sloping demand for each seller's product. D) zero profit in the long-run.


17) If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable
cost at that level of output is
A) $1,000. C) $300.
B) $700. D) impossible to determine without additional information.

Vipsana's Gyro House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a rent of $20 per day. Answer questions 17-10 accordingly.
18) Calculate Vipsana's variable cost per day when she produces 50 gyros using two workers?
A) $100 B) $124.40 C) $220 D) $240

19) Calculate Vipsana's total cost per day when she produces 50 gyros using two workers?
A) $100 B) $124.40 C) $220 D) $240

20) Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?
A) $2.00 B) $2.40 C) $0.40 D) $6.80

21) What is Vipsana's total cost per day when she does not produce any gyros and does not hire any workers?
A) $0 B) $2 C) $60 D) $20

22) The law of diminishing marginal returns states
A) that at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal
product of the variable input to decline.
B) that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal
product of the variable input to decline.
C) that in the presence of a fixed factor, at some point average product of labor starts to fall as more and more
variable inputs are added.
D) average total costs of production initially fall and after some point starts to rise at a decreasing rate as output
increases.

23) The law of diminishing marginal returns
A) explains why the average total cost and marginal cost curves are U-shaped in the short run.
B) explains why the average total cost, average fixed cost and marginal cost curves are U-shaped in the short run.
C) causes average total costs to rise at a decreasing rate as output increases.
D) causes the difference between average total cost and average variable cost to get smaller as output increases.

24) In the short run, if marginal product is at its maximum, then
A) average cost is at its minimum. C) marginal cost is at its minimum.
B) average variable cost is at its minimum. D) total cost is at its maximum.

25) Average fixed costs of production
A) remain constant as more is produced. C) graph as a U-shaped curve.
B) will rise at a fixed rate as more is produced. D) fall as long as output is increased.

26) When a firm produces 50,000 units of output, its total cost equals $6.5 million. When it increases its production
to 70,000 units of output, its total cost increases to $9.4 million. Within this range, the marginal cost of an
additional unit of output is
A) $41.43. B) $134.29. C) $135. D) $145