Study guide

True/False Questions 1. Explicit costs are payments to hire productive resources that the firm does not own. 2. The marginal product of an input is the output produced per unit of that input hired. 3. Whenever marginal cost is less than average variable cost, average variable cost is falling. . Average fixed cost does not vary with output. 5. Marginal cost is defined as the additional cost incurred as a result of hiring one more unit of input. 6. Average total cost reaches a minimum where it intersects average variable cost. Multiple-Choice Questions 1. The relationship between factor inputs used in the production process of a good and the quantity of output of that good is called a. the production possibilities frontier b. the cost function c. the production function d. the economic function 2. The sum of the marginal cost of all units produced is a. average total cost. b. Average variable cost. C. Total cost. d. Total variable cost. Use the following data for XYZ auto trader to answer questions 3-9. NUMBER SOLD PER WEEK TOTAL COST OF OPERATION (excluding value of automobiles) 0 $1000 10 $1400 20 $1600 30 $1700 40 $2000 50 $2600 3. Which one of the following is the variable cost of selling 30 automobiles? a. $700 b. $1400 c. $1600 d. $1700 TEST, ECON 1501 4. Which one of the following is the fixed cost of selling 40 automobiles? a. $1000 b. $1400 c. $1600 d. $1700 5. Which one of the following is the marginal cost of the 20th automobile? a. $10 b. $20 c. $30 d. $40 6. Which one of the following is the average total cost of selling 40 automobiles? a. $25 b. $30 c. $32 d. $50 7. Which one of the following is the average variable cost of selling 20 automobiles? a. $25 b. $30 C. $32 d. $50 8. Which one of the following is the average fixed cost of selling 50 automobiles? . $20 b. $25 c. $30 d. $50