Which cost will continually decrease as a firm’s output increases in the short run?
average cost
average fixed cost
average variable cost
total cost
A firm has total production cost of $200 000. Its average fixed cost is $120 and its average variable cost is $80. What are the firm’s total fixed costs?
$12 000
$40 000
$80 000
$120 000
The table shows the costs for operating a new factory at the end of its first year. Assuming the short run is one year, what are the total variable costs?
$1m
$6m
$10m
$30m
The table shows the total costs at different levels of output for a firm producing chairs. What is the average variable cost when output is 4 chairs?
$11
$17
$44
$23.50
In the diagram, TC is a firm’s short-run total cost curve. Which statement is correct?
Average total cost is minimised at output OQ3.
Average variable cost is minimised at output OQ2.
Average variable cost is minimised at output OQ3.
Average fixed cost is minimised at output OQ1.
A Chinese firm has total fixed costs of 1000 Yuan. The firm’s average variable cost is 10 Yuan and its average total cost is 15 Yuan. What is the firm’s output?
10 units
66 units
200 units
5000 units
The following schedule gives information about a firm’s costs. Which output would be consistent with these costs?
32 units
50 units
64 units
80 units
What is an internal economy of scale?
efficient local transport networks
improved access to spare parts as a result of industry growth
lower risks from supplying a wider range of customers
the training of skilled labour at a college financed by local firms
What is most likely to rise as a firm expands?
energy costs per unit of output
the average cost of components
the cost of monitoring workers
the rate of interest paid on borrowing
Which is an internal economy of scale?
cheaper loans from a local bank resulting from a merger
efficient local transport networks
specialist training facilities provided by a local college
the reputation of an area for a particular product
A firm always operates with economies of scale in the long run. What is the shape of its long-run average cost curve?
It is horizontal.
It is ‘U’ shaped.
It slopes downwards.
It slopes upwards.
What is an external economy of scale?
cheaper costs from purchasing large quantities of inputs
decreased interest rates on borrowed funds
increased labour productivity
relevant training facilities at a local college
Which is not a reason for the existence of small firms in a market dominated by large companies?
Small firms can concentrate on providing specialist services.
Small firms enjoy greater economies of scale.
Small firms enter the market with new innovative ideas.
Small firms have good knowledge of local markets.
In many developed economies, both large and small firms may exist in the same industry. What is most likely to explain the survival of the small firms?
They each offer a much wider range of products.
They have a higher average cost of production.
They pay much higher wages to their staff.
They provide a more personal level of consumer service.
A smartphone manufacturing company takes over an electronic chip design company. This is an example of which type of growth?
horizontal
conglomerate
vertical backwards
vertical forwards