Module 3 Quiz - 5 POINTS EACH

1. Question
If the output levels at which short-run marginal and average cost curves reach a minimum are listed in
order from largest to smallest, then the order would be:

ATC, AVC, MC
MC, ATC, AVC
ATC, MC, AVC
MC, AVC, ATC

2. Question
Of all forms of business organizations, corporations are the only form which never face the long run.

True
False

3. Question
Short-run average variable cost is equal to:

Total variable cost divided by input

Average total cost minus average fixed cost
Marginal cost divided by output

4. Question
For our course, the symbol π represents economic profit. Accounting profit is denoted by the symbol π Accy.
Which of the following is true?

π is equal to πAccy plus opportunity costs.

π is larger than πAccy and π is equal to πAccy plus opportunity costs.
π is larger than πAccy.
π and πAccy are identical in value.
π is equal to πAccy minus opportunity costs.

5. Question
Which of the following short-run cost curves decreases continuously?
 Average variable cost
Marginal cost
Average total cost
Average fixed cost

6. Question
Of the three forms of business organizations, sole proprietorship, partnership, and corporation, the
corporation is the most frequently observed type of firm.

True
False

7. Question
The law of diminishing product begins at the level of output where:

Average variable cost is at a minimum

None of the other options are correct.
Average fixed cost is at a maximum
Marginal cost is at a minimum

8. Question
Which one of the following short-run cost curves would not be affected by an increase in the wage paid to a
firm's labor?

ATC
AFC
MC
AV
9. Question: Good Product Corporation has a production function of Q = f(L,K), where K is capital and
L is labor, the firm’s only inputs. Which of the following are true? Select all that apply.
The period of time known as the long run for this firm is 365 days.
The firm has the ability to change both L and K in the long run.
If the firm can change L but not K, the firm is in the short run.
If the firm is unable to change either L or K, the firm is in the short run.
10. Question: Output as a function of inputs __________ at ___________ rate initially and then
___________ at ____________ rate.
Increases, a decreasing, decreases, an increasing
Increases, a decreasing, increases, an increasing
Decreases, a decreasing, increases, an increasing
Increases, an increasing, increases, a decreasing

11. Question: Variable cost as a function of output __________ at ___________ rate initially and then
___________ at ____________ rate.
Increases, an increasing, increases, a decreasing
Decreases, a decreasing, increases, an increasing
Increases, a decreasing, decreases, an increasing
Increases, a decreasing, increases, an increasing

12. Question: As we increase output, the vertical distance between AVC and ATC curves also
increases.
True
False

13. Question: Which of the following is not a reason for the U-shape of ATC curve?
AFC declines continuously
Output as a function of input increases at an increasing rate and then increases at a decreasing rate
TC as a function of output rises at a decreasing rate and then increases at an increasing rate
Law of diminishing marginal product holds

14. Question: In some industries, the emergence of new technological advances have eliminated the
Law of Diminishing Marginal Product.
True
False

15. Question: If a firm organized as a corporation is making long run decisions, which of the following
is true?
ATC > AVC and AFC may be greater than or less than AVC.
None of the other options are correct.
ATC = AVC and AFC is downward sloping.
ATC > AVC and FC are some constant amount.
ATC > AVC > AFC