5 Steps to a 5 AP Microeconomics, 2014-2015 Edition

12. In the short run, a firm employs labor and
    capital to produce gadgets. If the annual price of
    capital increases, what will happen to the short-
    run cost curves?

(A) The marginal cost and average variable cost

curves will shift upward.

(B) The average fixed cost and average total cost

curves will shift upward.

(C) The marginal cost and average fixed cost

curves will shift upward.

(D) The marginal cost, average fixed cost, average

variable cost, and average total cost curves

will all shift upward.

(E) Only the average fixed cost curve will shift

upward.

Questions 13 to 15 are based on the table of costs
below for a perfectly competitive firm.

AVERAGE AVERAGE

FIXED VARIABLE MARGINAL

OUTPUT COST COST COST

0

1 $10 $5 $5

2 $5 $3.50 $2

3 $3.33 $4.33 $6

4 $2.50 $5 $7

5 $2 $5.60 $8

13. The total fixed cost of producing a quantity of 4 is

(A) $5.

(B) $7.50.

(C) $7.

(D) $2.50.

(E) $10.

14. The first unit of output to exhibit diminishing
    marginal productivity is the _____unit.

(A) 1st

(B) 2nd

(C) 3rd

(D) 4th

(E) 5th

15. At a quantity of 4, what is the total cost of
    production?
    (A) $7.50
    (B) $2.50
    (C) $15
    (D) $30
    (E) $14.50


16. Monopolistic competition is often characterized by
    (A) strong barriers to entry.
    (B) a long-run price that exceeds average total
    cost.
    (C) a price that exceeds average variable cost,
    causing excess capacity.
    (D) a homogenous product.
    (E) many resources devoted to advertising.

Questions 17 to 18 are based on Figure D.3, which

illustrates the short-run cost curves of a perfectly

competitive firm.

17. The shutdown point is seen at:
    (A)P0, q 0
    (B)P1, q 1
    (C)P2, q 2
    (D)P3, q 3
    (E)P3, q 4

Take the Diagnostic Exam ‹ 25

Figure D.3

Output

Price $

AVC

MC AT C

P 3

P 2

P 1

P 0

q 0 q 1 q 2 q 3 q 4