Question 1 As long as there are __________ costs, we are in the short run. A. variable B. fixed C. marginal D. average Question 2 If price is between the break-even point and the shutdown point, in the long run the firm will: A. operate. B. make a profit. C. stay in business. D. go out of business. Question 3 XXXXX XXXXX used a pin factory to demonstrate: A. the advantages of economies of scale. B. diseconomies of scale. C. the long-run average cost curve. D. the advantage of being established. Question 1 As output rises: A. AFC rises. B. AFC falls. C. AFC remains the same. D. There is no way of determining what happens to AFC. Question 2 When average total cost is declining, then: A. marginal cost must be less than average total cost. B. marginal cost must be greater than average total cost. C. average total cost must be greater than average fixed cost. D. average variable cost must be declining. Question 3 The law of diminishing returns: A. is completely invalid. B. states that if units of a resource are added to a fixed proportion of other resources, eventually marginal output will decline. C. states that if any two resources are combined, production will fall. D. states that profit margins decline as output rises. Question 1 Which of the following cost curves will NOT shift downward if the price of a variable input decreases? A. Total cost B. Average cost C. Marginal cost D. Average fixed cost Question 2 When output is 0, total cost equals __________ cost. A. total variable B. total fixed C. marginal D. average variable Question 3 Which of the following is the most likely to be a variable cost? A. Raw material costs B. Leasing payments of tour buses for rock and roll bands C. Interest on bonded indebtedness D. Real estate taxes Question 1 If fixed cost is $8,000, variable cost is $5,000 at an output of 2 and $9,000 at an output of 3, how much is marginal cost at an output of 3? A. $3,000 B. $4,000 C. $5,000 D. $8,000 Question 2 Which statement is true? A. AFC declines with output. B. ATC declines with output. C. AFC – AVC = ATC. D. Output divided by fixed cost = AFC. Question 3 The average fixed cost curve: A. is a vertical line. B. is a horizontal line. C. slopes downward to the right as output rises. D. is U-shaped (it declines as output rises, reaches a minimum, and then rises). Question 1 When output is 0, total cost equals __________ cost. A. total variable B. total fixed C. marginal D. average variable Question 2 At an output of 1, marginal cost is: A. $0. B. $200. C. $300. D. $400. Question 3 The law of diminishing marginal returns implies: A. the more hours you spend studying economics the less you will know. B. your understanding of economics will be increased by decreasing your marginal study time. C. after a certain point, the more hours you spend studying economics per day, the less you will learn with each added hour. D. the more hours you spend studying economics per day, the more you will learn with each added hour.