Essay on Costs and Total Cost

Submitted By NelsonLiang1
Words: 1402
Pages: 6
Open Document
NAME: ________________________________ Section:__________________

PART I - MULTIPLE CHOICE PROBLEMS
Read each of the following questions carefully and circle the letter of the one best answer. Note that diagrams are often helpful in determining the correct answer.

1) and 2) At present output levels, a perfectly competitive firm is profit maximizing and producing 3000 units of output, selling for $2 each. Total fixed costs are $4000 and total variable costs are $4000.

1) In the short-run this firm should
A) shut down
B) increase output produced
C) stay in business
D) unable to determine due to insufficient information

2) In the long-run this firm should
A) shut down
B) increase output produced
C) stay in business
D) unable to determine due to insufficient information

3) and 4) Initially, a perfectly competitive, constant cost industry, is in long run equilibrium. The industry demand curve shifts right and remains permanently at the new position.

3) In the short-run industry equilibrium following this shift in demand
A) both price and quantity are higher than they were initially.
B) both price and quantity are lower than they were initially.
C) price is higher than it was initially, but the quantity sold is lower.
D) price is lower than it was initially, and the quantity sold is higher.

4) When long-run industry equilibrium is restored following this shift in demand
A) both price and quantity are higher than they were initially.
B) both price and quantity are lower than they were initially.
C) both price and quantity are the same as they were initially.
D) price is the same as it was initially, and the quantity sold is higher.

5) A firm’s average total cost is $100, its average variable cost is $70, and its output is 100 units. Its total fixed cost is
A) $1,000.
B) $2,000.
C) $3,000.
D) can’t determine.

6) A firm’s average total cost is $100, its average variable cost is $70, and its output is 100 units. Its total cost is
A) $10,000.
B) $7,000.
C) $3,000.
D) can’t determine.

7) For a profit maximizing monopolistically competitive firm, all of the following are TRUE except:
A) there is deadweight loss
B) price equals marginal revenue
C) marginal revenue is equal to marginal cost
D) all of the above are true

8) For a profit maximizing monopoly, all of the following are TRUE except:
A) there is deadweight loss
B) price equals marginal revenue
C) marginal revenue is equal to marginal cost
D) all of the above are true

9) For a profit maximizing perfectly competitive firm:
A) price equals marginal cost
B) price equals marginal revenue
C) marginal revenue is equal to marginal cost
D) all of the above are true

10) If total fixed costs increase, then the average total cost curve ____ and the marginal cost curve ____.
A) does not shift; shifts upward/right
B) shifts upward/right; shifts upward/right
C) does not shift; does not shift
D) shifts upward/right; does not shift

11) If total variable costs (i.e., wages) increase, then the average total cost curve ____ and the marginal cost curve ____.
A) does not shift; shifts upward/right
B) shifts upward/right; shifts upward/right
C) does not shift; does not shift
D) shifts upward/right; does not shift

12) In the long run, a monopolistically competitive firm's profits
A) are positive.
B) are zero.
C) are negative.
D) both A) and B) are possible.

13) In the long run, a monopoly's profits
A) are positive.
B) are zero.
C) are negative.
D) both A) and B) are possible.

14) A monopolistically competitive firm is currently earning positive economic profits. From this information, we know the following must be true:
A) this is a short-run equilibrium
B) new firms will enter
C) price is greater than average total cost
D) all of the above are true
15) A perfectly competitive industry is in long-run equilibrium. Some firms adopt a new technology that reduces the average total cost
Show More

Related Documents: Essay on Costs and Total Cost

Business: Total Variable Cost Essay

contribution margin, to just cover short-term variable costs, what consequences could it experience? (5 marks) If Wilkerson were to cut costs based on contribution margin, it is actually using variable costing method. Under Variable costing method, products costs such as variable manufacturing costs are capitalized. In contrast, period costs such as fixed costs are expensed. In this particular case, direct material and direct labour are variable costs that will be capitalized. In fact, they are used…

Words 638 - Pages 3

Total Variable Cost Analysis Paper

You are a cost management consultant and you have been asked by a small business owner for business advice. Your client owns a chain of small, local operations that support larger caterers for special events. Your client provides the tents for outside events, the soft drinks and snacks for the children of events, along with floral and other decorative arrangements. This kind of business is extremely competitive, and your client would like to know how far she can lower her prices without losing money…

Words 1193 - Pages 5

Economics and Average Total Cost Essay

Chapter 12: 1. A budget line describes the limits to consumption possibilities. It shows the boundary between what people can and can’t afford. 2. The slope of the budget line is an opportunity cost (Relative price). The price of one good in terms of another good- an opportunity cost. It equals the price of one good divided by the price of another good. 3. The budget line has rotated inward. Page 295 12.4 graph. 4. The benefit or satisfaction that a person gets from the consumption of a good…

Words 397 - Pages 2

Solution: Futures Contract and Total Cost Essay

and take advantage of price movement in expected direction. The volatility in the market has increases leading to higher cost of the option. The total option premium for option with exercise price $0.00756 is $1,890.00 The amount paid for yen if option is exercised $94,500 Maximum amount to be paid when the call option with exercise price $0.00756 $96,390.00 The total option premium for option with exercise price $0.00792 is $1,417.50 The amount paid for yen if option is exercised $99…

Words 912 - Pages 4

Propaganda: Money and Total Estimated Cost Essay

internet connection and other utilities. The total estimated cost of tuition, other fees and books is $852.40 per month for the school year. I would love to eat healthy all of the time in college but in reality, I probably will end up eat cup of noodles for dinner everyday. I plan to do all of my grocery shopping and other needs at Vons. The price for everything is affordable and if I get the Vons club card I will be able to get discounts. The monthly cost of getting all of the goods or necessities…

Words 626 - Pages 3

Accounting: 1944 and Total Manufacturing Cost Essay

$261,300 Direct labor 390,000 Total prime costs incurred in January $651,300 2. Total prime cost incurred in January $651,300 Applied manufacturing overhead (70%  $390,000) 273,000 Total manufacturing cost for January $924,300 EXERCISE 3-24 (CONTINUED) 3. Total manufacturing cost for January $ 924,300 Add: Work-in-process inventory, January 1 305,500 Subtotal $1,229,800 Deduct: Work-in-process inventory, January 31 326,300 Cost of goods manufactured $ 903,500…

Words 439 - Pages 2

Case Analysis Of The Total Manufacturing Cost Of New Co

Case Analysis In this case, the total manufacturing cost of new product equal to the fixed manufacturing cost add the variable cost. As time goes on, the variable cost would change, but the fixed manufacturing cost would not. So the price of the new product needs according to the variable cost. Therefore, the price of the new product should be $16.00 in the Frank’s computation. The important case facts are the total manufacturing cost and the sell price of the productions would decide the sales…

Words 372 - Pages 2

Abnormal Profit-Occurs When The Total Revenue Is Greater Than Total Cost

1. Abnormal profit- occurs when the total revenue is greater then total costs 2. Adding value- occurs when the output created by transformation process is worth more the inputs used in the process 3. Aggregate demand- total planned demands for final goods and services in the economy at each price, with all other factors unchanged 4. aggregate supply shows the total level of planned output in the economy at each and every price 5. allocative efficiency- occurs when the price paid by…

Words 627 - Pages 3

Essay on Logistics 3

average cost with the cost of using a system such as EOQ, and discuss any other order policies as appropriate. Analysis: The table will is showing a comparison of the present annual average cost with the cost of using EOQ for parts A233 circuit board and P656 powder supply respectively. Conclusion: From the table we can see that cost of EOQ less than the present annual average cost. EOQ order policy can help Carl’s company minimize their annual total spent, and optimize their ordering cost and inventory…

Words 610 - Pages 3

Operations Assignment Essay

Initial hiring cost 3500 ------------------------------------------------- Workers fired 0 Initial firing cost 0 ------------------------------------------------- Total workers 10 Initial recruitment cost 3500 Straighttime cost 750000 ------------------------------------------------- cost ------------------------------------------------- Year Forecast Beginning Actual Ending Inventory ------------------------------------------------- Inventory Production Inventory Holding cost -------------------------------------------------…

Words 700 - Pages 3