AP Microeconomics Semester 2 - Costs Review

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1. The nature of a firm's cost (fixed or variable) depends on the

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time horizon under consideration

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2. One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

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the size of the factory is fixed

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3. When a factory is operating in the short run,

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it cannot adjust the quantity of fixed inputs

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4. The length of the short run

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is different for different types of firms

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5. How long does it take a firm to go from the short run to the long run?

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It depends on the nature of the firm

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6. A local potato chip company plans to operate out of its current factory, which is estimated to last 25 years. All cost decisions it plans to make during the 25-year period

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Are short-run decisions

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7. In the short run, a firm that produces and sells cell phones can adjust

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how many workers to hire

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8. The total cost to the firm of producing zero units of output is

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its fixed cost in the short run and zero in the long run

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9. In the long run, a firm that produces and sells electronic book readers gets to chose

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How many workers to hire, the size of its factories, and which short-run-average-total-costs curve to use

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10. In the long run,

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inputs that were fixed in the short run become variable

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11. In the long-run average total cost curve is always

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flatter than the short-run average total cost curve, but not necessarily horizontal

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12. When comparing short-run average total cost with long-run average total cost at a given level of output,

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short-run average total cost is typically above long-run average total cost

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13. Which explains why long-run average cost at first decreases as output increases

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Gains from specialization of trade

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14. The most likely explanation for economics of scale is

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Specialization of labor

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15. When a firm is experiencing economics of scale, long-run

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Average total cost is greater than the long-run marginal cost

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16. Economies of scale occur when a firm's

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Long-run average total costs are decreasing as output increases

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17. If Farmer Brown plants seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost. Farmer Brown's production function exhibits

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Diminishing marginal product

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18. If Farmer Brown plants seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost. Farmer Brown's total-cost curve is

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Increasing at an increasing rate

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19. Joan grows pumpkins. If Joan plants to seeds on her farm, she gets no harvest. If she. Plants 1 bag of seeds, she gets 500 pumpkins. If she plants 2 bags, she gets 800 pumpkins. If she plants 3 bags, she gets 900 pumpkins. A bag of seeds costs $100, and it is her only cost. Joan's production function function exhibits

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Decreasing marginal product

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20. Joan grows pumpkins. If Joan plants to seeds on her farm, she gets no harvest. If she. Plants 1 bag of seeds, she gets 500 pumpkins. If she plants 2 bags, she gets 800 pumpkins. If she plants 3 bags, she gets 900 pumpkins. A bag of seeds costs $100, and it is her only cost. Joan's total-cost curve is

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Increasing at an increasing rate

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21. Which of the following statements about a production function is correct for a firm that uses labor to produce output?

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The production function depicts the relationship between the quantity of labor and the quantity of output.
The slope of the production function

1 of 21

question

1. The nature of a firm's cost (fixed or variable) depends on the

answer

time horizon under consideration

question

2. One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

answer

the size of the factory is fixed

question

3. When a factory is operating in the short run,

answer

it cannot adjust the quantity of fixed inputs

question

4. The length of the short run

answer

is different for different types of firms

question

5. How long does it take a firm to go from the short run to the long run?

answer

It depends on the nature of the firm

question

6. A local potato chip company plans to operate out of its current factory, which is estimated to last 25 years. All cost decisions it plans to make during the 25-year period

answer

Are short-run decisions

question

7. In the short run, a firm that produces and sells cell phones can adjust

answer

how many workers to hire

question

8. The total cost to the firm of producing zero units of output is

answer

its fixed cost in the short run and zero in the long run

question

9. In the long run, a firm that produces and sells electronic book readers gets to chose

answer

How many workers to hire, the size of its factories, and which short-run-average-total-costs curve to use

question

10. In the long run,

answer

inputs that were fixed in the short run become variable

question

11. In the long-run average total cost curve is always

answer

flatter than the short-run average total cost curve, but not necessarily horizontal

question

12. When comparing short-run average total cost with long-run average total cost at a given level of output,

answer

short-run average total cost is typically above long-run average total cost

question

13. Which explains why long-run average cost at first decreases as output increases

answer

Gains from specialization of trade

question

14. The most likely explanation for economics of scale is

answer

Specialization of labor

question

15. When a firm is experiencing economics of scale, long-run

answer

Average total cost is greater than the long-run marginal cost

question

16. Economies of scale occur when a firm's

answer

Long-run average total costs are decreasing as output increases

question

answer

Diminishing marginal product

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Increasing at an increasing rate

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answer

Decreasing marginal product

question

answer

Increasing at an increasing rate

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21. Which of the following statements about a production function is correct for a firm that uses labor to produce output?

answer

The production function depicts the relationship between the quantity of labor and the quantity of output.
The slope of the production function

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AP Microeconomics Semester 2 – Costs Review

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