Chapter 7 Preliminary Quiz
Analysis of Costs

Multiple Choice Questions:

Enter your answer to each of the questions in the blank to the left of the question. Be sure to use lowercase letters only!

	1. Health insurance premiums paid for the employees by the firm are an example of: a. variable costs. b. fixed costs. c. both a and b. d. neither a nor b.
	2. Total costs equal a. MC + AC. b. MC + VC. c. FC + MC. d. FC + VC.
	3. At the local dollar store, are the checkout people considered fixed or variable inputs to production? a. fixed b. variable c. neither because they cannot be hired or fired under existing labor law d. none of the above.
	4. The extra cost associated with producing one additional unit of output is called: a. total cost. b. variable cost. c. marginal product. d. marginal cost.
	5. The cost of producing 5 units is $567. The cost of producing 6 units is $768. The marginal cost of producing the sixth unit is: a. $128 b. $113 c. $201 d. $768
	6. TC / Q = a. MC b. VC c. FC d. AC
	7. Average fixed cost equals: a. fixed cost divided by total output. b. the change in fixed cost divided by total output. c. total cost divided by fixed cost. d. total cost minus variable cost.
	8. Which of the following formulas is correct? a. AVC = (TC-FC)/Q b. AVC = FC/Q c. AVC = TC/Q d. AVC = (MC*Q-FC)/Q
	9. When marginal cost is above average cost, average cost is _______. Marginal cost will cross average cost at the point where: _______. a. decreasing; average cost is at its minimum b. increasing; average cost is at its maximum c. increasing; average cost is at its minimum d. decreasing; average cost is at its maximum
	10. To produce a given level of output at least cost, a firm should: a. buy inputs until it has equalized the marginal product per dollar spent on each input. b. buy inputs until it reaches the point where marginal product is equal to average product. c. both a and b. d. neither a nor b.
	11. There are two inputs (A and B) to the production of good X. If the price of input A rises and the price of B remains the same, we would expect that the firm would: a. produce more X. b. use more A and less B. c. use more B and less A. d. buy more A.
	12. Total profit equals: a. average revenue minus average cost. b. total product minus total cost. c. total revenue minus total cost. d. none of the above.
	13. The balance sheet of a firm shows _______ and _______. a. total costs; total revenue b. assets; total profit c. total costs; liabilities d. assets; liabilities and net worth.
	14. A flow variable measures: a. changes over time. b. levels at a certain time. c. profit. d. none of the above.
	15. You have two things you can do tonight. You can go to the movies with friends or you can study for your economics quiz. What is the opportunity cost of going to the movies with your friends? a. Having fun with your friends. b. Getting a good grade on your economics quiz. c. Both a and b. d. Neither a nor b.