Costs of Production
100 questions· page 1 of 10
Which cost will continually decrease as a firm’s output increases in the short run?
Options
A average cost
B average fixed cost
C average variable cost
D marginal cost
What is an internal economy of scale?
Options
A efficient local transport networks
B improved access to spare parts as a result of industry growth
C lower risks from supplying a wider range of customers
D the training of skilled labour at a college financed by local firms
The diagrams show four average cost curves.
Which diagram illustrates diseconomies of scale?
Options
What is an internal economy of scale?
Options
A efficient local transport networks
B improved access to spare parts as a result of industry growth
C lower risks from supplying a wider range of customers
D the training of skilled labour at a college financed by local firms
A small European airline currently produces at point X on its long-run average cost curve (LRAC). It wants a bigger share of the European airline market and proposes to merge with another small European airline. The newly merged firm would produce at point Y on the long-run average cost curve, as shown.
Why might the newly merged firm be able to produce at point Y?
Options
A The new airline can negotiate discounts when buying fuel.
B The new airline has many layers of management.
C The new airline is unable to hire enough pilots.
D The workforce of the new airline lacks morale and is demotivated.
A firm has very high fixed costs but low marginal costs of production. It experiences continuous economies of scale so that the minimum efficient scale is not reached until the firm is very large in relation to total market demand.
In which type of market structure would the firm operate?
Options
A monopolistic competition
B monopsony
C natural monopoly
D oligopoly
The diagram shows the average total cost for a firm.
At what level of output does marginal cost exceed average total cost?
Options
A output level A on Fig. 4.1
B output level B on Fig. 4.1
C output level C on Fig. 4.1
D output level D on Fig. 4.1
A firm sells 10 000 units per month at a price of $10. The firm’s total fixed cost is $40 000 per month. The firm makes only normal profit.
What is the average variable cost for this output?
Options
A $2.00
B $4.00
C $6.00
D $8.00
The diagram shows the long-run total cost (LRTC) curve of a firm.
At which output is the long-run average total cost at its minimum?
Options
A OW
B OX
C OY
D OZ
A firm has fixed costs of $300 and can produce two units per hour. Its total variable costs are $200 for one unit and $300 for two units.
Which cost will fall by the lowest amount when the second unit is produced?
Options
A average fixed cost
B average total cost
C average variable cost
D marginal cost