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ECO 550 Final Test Bank

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ECO 550 Final Test Bank Chapter 9—Applications of Cost Theory MULTIPLE CHOICE 1. Evidence from empirical studies of short-run cost-output relationships lends support to the: a. existence of a no... n-linear cubic total cost function b. hypothesis that marginal costs first decrease, then gradually increase over the normal operating range of the firm c. hypothesis that total costs increase quadratically over the ranges of output examined d. hypothesis that total costs increase linearly over the range of output examined e. none of the above ANS: D PTS: 1 2. The short-run cost function is: a. where all inputs to the production process are variable b. relevant to decisions in which one or more inputs to the production process are fixed c. not relevant to optimal pricing and production output decisions d. crucial in making optimal investment decisions in new production facilities e. none of the above ANS: B PTS: 1 3. Theoretically, in a long-run cost function: a. all inputs are fixed b. all inputs are considered variable c. some inputs are always fixed d. capital and labor are always combined in fixed proportions e. b and d ANS: B PTS: 1 4. Break-even analysis usually assumes all of the following except: a. a. in the short run, there is no distinction between variable and fixed costs. b. b. revenue and cost curves are straight-lines throughout the analysis. c. c. there appears to be perfect competition since the price is considered to remain the same regardless of quantity. d. d. the straight-line cost curve implies that marginal cost is constant. e. e. both c and d [Show More]

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