Question 1

Doubling the circumference of an oil pipeline more than doubles the volume of oil that can be pumped through.This is an example of

Accepted Answer

A)  production inefficiency
B)  diminishing marginal returns
C)  diseconomies of scale
D)  constant returns to scale
E)  economies of scaleF) All of the above
G) C) and D)

Question 2

Accounting profit is

Accepted Answer

A)  always less than economic profit
B)  never less than economic profit
C)  equal to economic profit if a normal profit is earned
D)  less than economic profit only when implicit costs are greater than explicit costs
E)  greater than economic profit only when implicit costs are greater than explicit costsF) C) and D)
G) A) and D)

Question 3

An example of an uncontrollable resource that contributes to diseconomies of scale for a movie theater is

Accepted Answer

A)  concession stand staff
B)  public roads congested with traffic
C)  volume discounts from movie distributors
D)  a single lobby in the theater
E)  bigger, more noticeable newspaper adsF) C) and D)
G) All of the above

Question 4

The minimum efficient scale for a firm is the

Accepted Answer

A)  lowest rate of output at which long-run average cost is at a minimum
B)  lowest rate of output at which short-run average total cost is at a minimum
C)  lowest rate of output at which short-run average variable cost is at a minimum
D)  average of the rates of output at which long-run average cost is at a minimum
E)  average of the rates of output at which short-run average total cost is at a minimumF) B) and E)
G) D) and E)

Question 5

A firm's long-run average cost curve is also called its

Accepted Answer

A)  profit curve
B)  explicit cost curve
C)  opportunity cost curve
D)  production curve
E)  planning curveF) C) and D)
G) B) and D)

Question 6

If a firm experiencing "economies of scale" decreases its output, its long-run average cost will decrease.

Accepted Answer

A) True 
 B)False

Question 7

Exhibit 7-6  In Exhibit 7-6, the marginal cost of the 40th unit of output is

Accepted Answer

A)  $20
B)  $35
C)  $200
D)  $350
E)  $1, 000F) A) and B)
G) B) and C)

Question 8

Exhibit 7-1  Sally owns a small business that she operates in a small building she owns.Given the information in Exhibit 7-1, Sally's accounting profit is

Accepted Answer

A)  $80, 000
B)  $50, 000
C)  $65, 000
D)  $35, 000
E)  $24, 000F) A) and E)
G) C) and D)

Question 9

Exhibit 7-3  In Exhibit 7-3, the total product of four workers is

Accepted Answer

A)  0
B)  10
C)  20
D)  140/4
E)  140F) C) and E)
G) None of the above

Question 10

Which of the following is a long-run adjustment?

Accepted Answer

A)  A new economics professor is hired on campus.
B)  General Motors increases its orders for steel.
C)  Microsoft cuts back its hiring of new graduates.
D)  Glow Electric disassembles one of its nuclear power plants.
E)  Texaco buys more crude oil to refine into gasoline.F) All of the above
G) C) and D)

Question 11

The marginal cost curve intersects the minimum point of the average variable cost curve.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 7-2  Given the information in Exhibit 7-2, what is the marginal product of the fourth unit of labor?

Accepted Answer

A)  5 pairs of shoes
B)  10 pairs of shoes
C)  20 pairs of shoes
D)  50 pairs of shoes
E)  80 pairs of shoesF) C) and E)
G) None of the above

Question 13

As output rises, marginal product eventually diminishes and

Accepted Answer

A)  marginal cost increases
B)  average cost falls
C)  total cost falls
D)  fixed cost is increasing
E)  average product is negativeF) C) and D)
G) A) and B)

Question 14

As output increases, diseconomies of scale

Accepted Answer

A)  lead to rising long-run average costs
B)  lead to declining long-run average costs
C)  lead to rising short-run average total costs
D)  lead to declining short-run total cost
E)  means the law of diminishing marginal returns is affecting productionF) C) and D)
G) All of the above

Question 15

The graph of average fixed cost is a horizontal line.

Accepted Answer

A) True 
 B)False

Question 16

iOn a graph of production costs, the vertical distance between the fixed cost curve and the total cost curve at a specific quantity represents

Accepted Answer

A)  variable cost
B)  average variable cost
C)  average total cost
D)  average fixed cost
E)  marginal costF) A) and B)
G) A) and E)

Question 17

For building contractors, doubling the size of an office building does not require double the inputs because there are common walls.This is an example of

Accepted Answer

A)  increasing marginal product
B)  diminishing marginal returns
C)  economies of scale
D)  diseconomies of scale
E)  constant returns to scaleF) None of the above
G) A) and C)

Question 18

Exhibit 7-6  In Exhibit 7-6, the average variable cost of producing 20 units is

Accepted Answer

A)  $20
B)  $25
C)  $22
D)  $250
E)  $350F) A) and B)
G) A) and C)

Question 19

If a firm is producing at its minimum efficient scale, increasing its output slightly will lead to diseconomies of scale.

Accepted Answer

A) True 
 B)False

Question 20

Fixed costs are defined as

Accepted Answer

A)  the total costs of a firm's production
B)  the additional cost of the last unit produced
C)  costs that increase proportionately as the quantity produced increases
D)  costs that do not vary as quantity produced increases
E)  implicit costs onlyF) B) and D)
G) None of the above

Exam 7: Production and Cost in the Firm

Accounting profit is

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Which of the following is a long-run adjustment?

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A firm's long-run average cost curve is also called its

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Doubling the circumference of an oil pipeline more than doubles the volume of oil that can be pumped through.This is an example of

Correct AnswerverifiedShow Answer

Exhibit 7-6 In Exhibit 7-6, the marginal cost of the 40th unit of output is

Correct AnswerverifiedShow Answer

If a firm experiencing "economies of scale" decreases its output, its long-run average cost will decrease.

Correct AnswerverifiedShow Answer

The graph of average fixed cost is a horizontal line.

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For building contractors, doubling the size of an office building does not require double the inputs because there are common walls.This is an example of

Correct AnswerverifiedShow Answer

iOn a graph of production costs, the vertical distance between the fixed cost curve and the total cost curve at a specific quantity represents

Correct AnswerverifiedShow Answer

The marginal cost curve intersects the minimum point of the average variable cost curve.

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As output increases, diseconomies of scale

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Exhibit 7-6 In Exhibit 7-6, the average variable cost of producing 20 units is

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Fixed costs are defined as

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If a firm is producing at its minimum efficient scale, increasing its output slightly will lead to diseconomies of scale.

Correct AnswerverifiedShow Answer

Exhibit 7-1 Sally owns a small business that she operates in a small building she owns.Given the information in Exhibit 7-1, Sally's accounting profit is

Correct AnswerverifiedShow Answer

An example of an uncontrollable resource that contributes to diseconomies of scale for a movie theater is

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Exhibit 7-2 Given the information in Exhibit 7-2, what is the marginal product of the fourth unit of labor?

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As output rises, marginal product eventually diminishes and

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The minimum efficient scale for a firm is the

Correct AnswerverifiedShow Answer

Exhibit 7-3 In Exhibit 7-3, the total product of four workers is

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