Question 1

What happens to the shape of the marginal cost curve as output increases?

Accepted Answer

It eventually increases at an increasing rate

Answer

It decreases at an increasing rate

Answer

It becomes flat

Answer

It remains constant

Question 2

What is the shape of the average fixed cost curve?

Accepted Answer

It continually decreases as output increases

Answer

It has a J-shaped curve

Answer

It continually increases as output increases

Answer

It has a U-shaped curve

Question 3

What is the relationship between marginal cost and average total cost when marginal cost is less than average total cost?

Accepted Answer

The average total cost is falling

Answer

The average total cost is rising

Answer

The average total cost is constant

Answer

The average total cost is at its minimum

Question 4

What is the shape of the long-run average cost curve?

Accepted Answer

It has a U-shaped curve

Answer

It is a straight line

Answer

It is a flat curve

Answer

It has a J-shaped curve

Question 5

What is the name of the level of output where the long-run average cost curve is at its minimum?

Accepted Answer

The efficient scale of production

Answer

The optimal level of production

Answer

The marginal level of production

Answer

The equilibrium level of production

Question 6

What is the shape of the average variable cost curve?

Accepted Answer

Upward sloping

Answer

Flat

Answer

Downward sloping

Answer

U-shaped

Question 7

What is the relationship between the marginal cost curve and the average variable cost curve?

Accepted Answer

The marginal cost curve intersects the average variable cost curve at its minimum point.

Answer

The marginal cost curve is always above the average variable cost curve.

Answer

The marginal cost curve is independent of the average variable cost curve.

Answer

The marginal cost curve is always below the average variable cost curve.

Question 8

What is the definition of economies of scale?

Accepted Answer

When the average total cost of production decreases as the quantity of output produced increases.

Answer

When the marginal cost of production decreases as the quantity of output produced increases.

Answer

When the marginal cost of production increases as the quantity of output produced increases.

Answer

When the average total cost of production increases as the quantity of output produced increases.

Question 9

What is the definition of diseconomies of scale?

Accepted Answer

When the average total cost of production increases as the quantity of output produced increases.

Answer

When the average total cost of production decreases as the quantity of output produced increases.

Answer

When the marginal cost of production increases as the quantity of output produced increases.

Answer

When the marginal cost of production decreases as the quantity of output produced increases.

Question 10

What is the relationship between marginal cost and marginal revenue?

Accepted Answer

A profit-maximizing firm will produce at the quantity where marginal cost equals marginal revenue.

Answer

Marginal cost is always greater than marginal revenue

Answer

Marginal cost and marginal revenue are unrelated

Answer

Marginal cost is always less than marginal revenue

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