Recit, Homework # 5.

Write TRUE or FALSE inside ( ). Submit on or before January 18—during recit

class or at Carnaje pigeonhole at CEM MPR.

SHORT-RUN VS. LONG-RUN COSTS: WHAT MAKES AN INPUT VARIABLE?

20. The short run is that period during which there are no fixed commitments. (F)
21. The long run is a period long enough so that one of the firm’s commitments ends. (F)
22. In the short run, a firm has fixed costs but never any variable costs. (F)
23. In the short run the firm has at least one fixed input. (T)
24. In the short run the firm has no more than one fixed input. (F)
25. Fixed cost increases when output rises. (F)
26. Variable costs increase when output rises. (T)
27. In the long run, more costs become fixed. (F)

PRODUCTION, INPUT CHOICE, AND COST WITH ONE VARIABLE INPUT

28. In most businesses, there is only one way to produce output. (F)
29. Total physical product shows what happens to the quantity of an output when the firm changes the
quantity of an input. (T)
30. Marginal physical product measures the increase in total output that results from a one-unit increase
in an input. (T)
31. Average physical product measures the output per unit of input. (T)
32. Average physical product measures the increase in total output that results from a one-unit increase
in an input. (F)
33. Total physical product is maximized if marginal physical product is zero. (T)
34. The “law” of diminishing returns asserts that marginal returns will ultimately diminish when the
quantity of one input is increased. (T)
35. Marginal revenue product equals the marginal physical product multiplied by the quantity
demanded. (F)
36. Production technology determines the relationship of total cost to outputs. (T)
37. A total product curve shows the inputs needed to produce any level of output. (T)

COST AND ITS DEPENDENCE ON OUTPUT

38. A total cost curve shows the largest amount of a product a firm can produce with a minimum cost.
(F)
39. The marginal cost curve shows the per-unit cost associated with various levels of output. (F)
40. The average cost curve shows the total cost divided by quantity produced for various levels of
output. (T)
41. Total fixed cost falls as output expands. (F)
42. The average fixed cost curve increases as output increases. (F)
43. The average total cost curve of a firm is U-shaped. (T)
44. The principal determinants of total and average cost curves are the firm’s technology and the prices
of its inputs. (T)
45. The firm’s average cost curve is the result of cost minimization in the use of fixed inputs. (F)
46. For most industries, average costs decrease indefinitely as output expands. (F)
47. Cost curves in the long run differ from cost curves in the short run. (T)
48. The short-run average cost curve shows the lowest possible average cost corresponding to each
output level, assuming that all inputs are variable. (F)