Choose the one alternative that best completes the statement or answers the question.

1)
In the short run
A)
existing firms do NOT face limits imposed by a fixed input.
B)
all firms have costs that they must bear regardless of their output.
C)
new firms can enter an industry.
D)
existing firms can exit an industry.
2)
Which statement is TRUE? Fixed costs
A)
do NOT exist in the long run.
B)
depend on the firms level of output.
C)
are zero if the firm is producing nothing.
D)
are the difference between total costs and average variable costs.
3)
Which statement is NOT true? Variable costs
A)
are equal to total costs in the long run.
B)
are zero if output is zero.
C)
are equal to the difference between total cost and total fixed cost.
D)
remain constant as output goes up.
4)
Economists usually assume that ________ is a fixed input in the ________ run.
A)
labor; short

B)
capital; short
C)
labor; long
D)

capital; long
5)
Economists usually assume that labor is ________ input in the ________ run.
A)
a fixed; short
B)
a fixed; long
C)
a variable; short
D)
part fixed and part variable; long
6)
The formula for total fixed cost is
A)
TFC = TC + TVC.
B)
TFC = TVC -TC.
C)
TFC = TC/TVC.
D)
TFC = TC -TVC.
7)
Total cost is calculated as
A)
the sum of total fixed cost and total variable cost.
B)
the product of average total cost and price.
C)
the sum of all the firm's explicit costs.
D)
the sum of average fixed cost and average variable cost.
8)
The Lawn Ranger, a landscaping company, has total costs of $4,000 and total variable costs of $1,000. The Lawn Rangers
total fixed costs are
A)
$0.
$3,000.
$5,000.

B)
C)

D)
indeterminate because the firms output level is not known.
9)
The Lawn Ranger, a landscaping company, has total costs of $5,000 and total fixed costs of $3,000. The Lawn Rangers total
variable costs are
A)
$2,000.
$3,000.
$5,000.

B)
C)
D)

indeterminate because the firms output level is not known.

10)
The Farley Farm, a dairy company, has total costs of $15,000 and total variable costs of $2,000. The Farley Farms total fixed
costs are
A)
$0.
$13,000.
$17,000.

B)
C)
D)

indeterminate because the firms output level is not known.

11)
Wilbur's Widgets, a widget company, produces 100 widgets. Its average fixed cost is $5 and its total variable cost is $300.
What is the total cost of producing 100 widgets?
A)
$300.
$305.
$500.

B)
C)
D)

$800.
12)
Amy spends $5,000 on remodeling a storefront that she then opens as a take-out deli. Business has not been very
successful, and she needs an additional $1,000 to keep the deli open. Which of the following is TRUE?
A)

The $5,000 Amy spent on remodeling represents a part of the total variable cost of her business.
B)
The $5,000 Amy spent is a fixed cost of her business.
C)
The $1,000 represents her marginal costs of production.
D)
The $1,000 Amy needs to keep the deli open represents her total fixed costs.
13)
Dana spends $10,000 on remodeling a storefront that she then opens as a shoe store. The business has not been very
successful, and she needs an additional $3,000 to keep the shoe store open. Which of the following is TRUE?
A)
The $10,000 Dana spent on remodeling represents a part of the total variable cost of her business.
B)
The $3,000 represents her marginal costs of production.
C)
The $10,000 Dana spent on remodeling is a fixed cost of her business.
D)
The $3,000 Dana needs to keep the deli open represents her total fixed costs.
14)
Firms have ________ over their ________ costs in the short run.
A)
control; fixed
B)
no control; fixed
C)
control; overhead
D)
no control; variable
15)
The formula for average fixed costs is
A)
TFC -q.
B)
TFC/q.
C)
q/TFC.
D)
q/TFC.