Question 1

A large aircraft manufacturer, like Boeing, may have a cost advantage over a new smaller manufacturer because

Accepted Answer

A)   of diseconomies of scale.
B)   of economies of scale.
C)   of diminishing returns to a fixed factor of production.
D)   the principal agent problem is generally less severe for larger firms.E) A) and C)
F) B) and C)

Question 2

In order for the law of diminishing returns to be present, we must have

Accepted Answer

A)   at least one factor of production to be fixed.
B)   output decreasing as more laborers are hired.
C)   the price of labor increasing as more workers are hired.
D)   simultaneous changes in labor and capital.
E)   double the output when labor input is doubled.F) A) and B)
G) A) and E)

Question 3

When the marginal product of labor diminishes,

Accepted Answer

A)   average fixed cost rises.
B)   average variable cost is constant.
C)   marginal cost rises.
D)   average total cost must rise.
E)   total cost rises at a diminishing rate.F) None of the above
G) B) and D)

Question 4

Use the figure to answer the following question(s) .
Figure 8-6
1 B)  q 2 C)  q 3 D)  an output beyond q 3" class="answers-bank-image d-inline" rel="preload" >
At what output does the firm depicted in Figure 8-6 begin to experience diminishing marginal returns to its variable factors of production?

Accepted Answer

A)   q 1
B)   q 2
C)   q 3
D)   an output beyond q 3E) None of the above
F) A) and B)

Question 5

An airline can increase its profit by offering standby customers an unsold seat at a substantial discount just before takeoff because

Accepted Answer

A)   additional passengers are needed to balance the load.
B)   the marginal cost of additional passengers is very small.
C)   additional passengers add little to fixed costs.
D)   such passengers add more to profits than do those with reserved seats.E) All of the above
F) None of the above

Question 6

Which of the following would shift a firm's short-run cost curves downward?

Accepted Answer

A)   an advance in technology
B)   an increase in employees' wages
C)   an increase in the demand for the firm's product
D)   an increase in excise taxes levied on the firm's productE) B) and C)
F) C) and D)

Question 7

If a firm has a U-shaped long-run average cost curve,

Accepted Answer

A)   its fixed cost rises as output rises.
B)   it must have increasing returns to scale at low levels of production and decreasing returns to scale at high levels of production.
C)   it must have increasing returns to each input at low levels of production and decreasing returns to each input at high levels of production.
D)   the firm can maximize its output by operating at the point of minimum long-run average cost.E) None of the above
F) All of the above

Question 8

Average fixed costs

Accepted Answer

A)   will remain unchanged as output expands.
B)   are defined as the change in total costs divided by the change in output.
C)   will always increase as output increases.
D)   will always decrease as output expands.E) None of the above
F) B) and C)

Question 9

The short-run average total cost (ATC)  curve of a firm will tend to be U-shaped because

Accepted Answer

A)   larger firms always have lower per-unit costs than smaller firms.
B)   at small output rates, AFC will be high, while at large output rates, MC will be high.
C)   diminishing returns will be present when output is small, while high AFC will push per-unit cost to high levels when output is large.
D)   diseconomies of scale will be present at both small and large output rates.E) A) and D)
F) A) and C)

Question 10

Use the figure to answer the following question(s) .
Figure 8-9

Using Figure 8-9, calculate the firm's approximate total cost when average total cost is at a minimum.

Accepted Answer

A)   $100
B)   $160
C)   $480
D)   $600E) A) and C)
F) All of the above

Question 11

If the government levies a $1 excise tax on each unit of a good sold, what will happen to the producer's cost curve?

Accepted Answer

A)   The average total cost and marginal cost curves will shift downward by the amount of the tax.
B)   The average total cost and marginal cost curves will shift upward by the amount of the tax.
C)   The marginal cost curve will shift upward by the amount of the tax; the average total cost curve will remain unchanged.
D)   Both the marginal cost and average total costs will remain the same since taxes are not a cost of production.E) All of the above
F) None of the above

Question 12

With respect to the average cost curves, the marginal cost curve

Accepted Answer

A)   intersects average total cost, average fixed cost, and average variable cost at their minimum points.
B)   intersects average total cost, average fixed cost, and average variable cost at their maximum points.
C)   intersects both average total cost and average variable cost at their minimum points.
D)   intersects average total cost where it is increasing and average variable cost where it is decreasing.
E)   intersects only average total cost at its minimum point.F) D) and E)
G) B) and C)

Question 13

Mr. Jones pays his employees by the hour. He believes they purposely work slowly to maximize their personal satisfaction. What can he do to provide them with a stronger incentive to work efficiently?

Accepted Answer

Mr. Jones needs to do something that wou...

Question 14

Use the figure to answer the following question(s) .
Figure 8-9

Using Figure 8-9, calculate the firm's approximate average total cost when it produces 50 units.

Accepted Answer

A)   $10
B)   $13
C)   $15
D)   $17E) A) and B)
F) A) and C)

Question 15

As Product Co. adds the first four workers to its production process in the short run, its output rises from 0 to 12 to 25 to 35 to 43. Addition of the fifth worker will most likely lead to an output rate

Accepted Answer

A)   greater than 51.
B)   equal to 51.
C)   less than 51.
D)   greater than 51 if the firm experiences diseconomies of scale.
E)   none of the above.F) A) and E)
G) A) and C)

Question 16

As output rises, marginal product eventually diminishes and

Accepted Answer

A)   marginal cost increases.
B)   total cost falls.
C)   fixed cost increases.
D)   average product becomes negative.E) A) and B)
F) None of the above

Question 17

The costs of a firm indicate the desire of consumers for

Accepted Answer

A)   the product produced by the firm.
B)   other goods that might have been produced with the same resources.
C)   goods that can be easily substituted for the good produced by the firm.
D)   goods that are complementary with the good produced by the firm.E) A) and B)
F) All of the above

Question 18

A profit-maximizing firm would

Accepted Answer

A)   consider opportunity costs rather than accounting costs when making decisions about output.
B)   expand current output if the revenues expected from doing so were less than the expected costs.
C)   enlarge its current plant size if present depreciation costs were less than average variable costs.
D)   increase output in the next period if accounting profits during the previous period were positive.E) A) and C)
F) B) and C)

Question 19

Economies of scale imply that within some range a firm can increase the size of operation and

Accepted Answer

A)   total cost will decrease.
B)   fixed cost will decrease.
C)   average total cost will decrease.
D)   average total cost will increase.
E)   average variable cost will decrease.F) B) and D)
G) B) and C)

Question 20

A fruit packing plant usually shuts down for three months each year. During that period, its

Accepted Answer

A)   fixed costs are greater than zero.
B)   variable costs are greater than zero.
C)   total costs are zero.
D)   fixed costs are zero.E) A) and B)
F) B) and C)

Exam 8: Costs and the Supply of Goods

As output rises, marginal product eventually diminishes and

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A large aircraft manufacturer, like Boeing, may have a cost advantage over a new smaller manufacturer because

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Use the figure to answer the following question(s) . Figure 8-9 Using Figure 8-9, calculate the firm's approximate average total cost when it produces 50 units.

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Use the figure to answer the following question(s) . Figure 8-9 Using Figure 8-9, calculate the firm's approximate total cost when average total cost is at a minimum.

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Economies of scale imply that within some range a firm can increase the size of operation and

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In order for the law of diminishing returns to be present, we must have

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Use the figure to answer the following question(s) . Figure 8-6 At what output does the firm depicted in Figure 8-6 begin to experience diminishing marginal returns to its variable factors of production?

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If the government levies a $1 excise tax on each unit of a good sold, what will happen to the producer's cost curve?

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The short-run average total cost (ATC) curve of a firm will tend to be U-shaped because

Correct AnswerverifiedShow Answer

As Product Co. adds the first four workers to its production process in the short run, its output rises from 0 to 12 to 25 to 35 to 43. Addition of the fifth worker will most likely lead to an output rate

Correct AnswerverifiedShow Answer

With respect to the average cost curves, the marginal cost curve

Correct AnswerverifiedShow Answer

Mr. Jones pays his employees by the hour. He believes they purposely work slowly to maximize their personal satisfaction. What can he do to provide them with a stronger incentive to work efficiently?

Correct AnswerverifiedMr. Jones needs to do something that wou...View AnswerShow Answer

An airline can increase its profit by offering standby customers an unsold seat at a substantial discount just before takeoff because

Correct AnswerverifiedShow Answer

A profit-maximizing firm would

Correct AnswerverifiedShow Answer

The costs of a firm indicate the desire of consumers for

Correct AnswerverifiedShow Answer

Which of the following would shift a firm's short-run cost curves downward?

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Average fixed costs

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A fruit packing plant usually shuts down for three months each year. During that period, its

Correct AnswerverifiedShow Answer

If a firm has a U-shaped long-run average cost curve,

Correct AnswerverifiedShow Answer

When the marginal product of labor diminishes,

Correct AnswerverifiedShow Answer

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Mr. Jones needs to do something that wou...
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