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ECON 2106

Georgia Institute of Technology School of Economics ECON 2106 JK1&JK2 Principles of Microeconomics Fall 2012 Instructor: Dr. Johnson Kakeu (johnson.kakeu TAs: Joseph Greene ([email protected] "Winners must have two things: definite goals and a burning desire to achieve them." - Brad Burden - PREPTEST -3 1. A factor of production whose quantity can be changed during the short run is: A) a marginal factor of production. B) a fixed factor of production. C) an incremental factor of production. D) a variable factor of production. 2. The long run refers to the period for which: A) a fixed input exists. B) all inputs are variable. C) marginal costs are decreasing. D) diminishing returns causes marginal cost to increase. 3. Which of the following curves isnot affected by the existence of diminishing returns? A) the average fixed cost curve B) the average variable cost curve C) the average total cost curve D) the marginal cost curve 4. Average variable cost is the ratio of: A) total cost to the marginal cost. B) variable to fixed inputs. C) variable cost to the quantity of output. D) fixed costs to variable cost. Page 1 5. In the short run, as output gets larger and larger: A) fixed cost gets smaller. B) the average variable cost curve gets closer and closer to the average total cost curve. C) marginal cost gets smaller. D) average total cost decreases after the point of diminishing returns. Page 2 Use the following to answer question 6. Figure and Table: Variable, Fixed, and Total Costs 6. (Figure and Table: Variable, Fixed, and Total Costs) Look at the figure and table Variable, Fixed, and Total Costs. In the figure, when 51 bushels of wheat is produced, the average fixed cost is ________, average variable cost is ________, and average total cost is ________. A) $7.84; $11.76; $19.60 B) $133.33; $200; $333.33 C) $400; $600; $1,000 D) $5.33; $13.33; $18.67 Page 3 Use the following to answer question 7. Figure: Short-Run Costs II 7. (Figure: Short-Run Costs II) Look at the figure Short-Run Costs II. Curve 2 is the ________ cost curve. A) average total B) average variable C) marginal D) total Use the following to answer question 8. 8. (Table: Costs for Birthday Cakes) Annie has a bakery that specializes in birthday cakes, and her variable costs of producing cakes are shown in the table Costs of Birthday Cakes. Assume that her fixed costs are $10. What is the average total cost of 5 cakes? A) $110 B) $60 C) $12 D) $2 Page 4
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