Question 1

When a firm does more of something, it gets better at it. This learning-by-doing is

Accepted Answer

A)   a source of diseconomies of scale.
B)   a source of economies of scale.
C)   called the principle of natural progression.
D)   called "spreading the overhead."E) B) and C)
F) B) and D)

Question 2

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes.  In the long run, the firm should use plant size "A" for

Accepted Answer

A)   all possible levels of output.
B)   10 to 30 units of output.
C)   30 to 60 units of output.
D)   all outputs greater than or equal to 40.E) A) and C)
F) C) and D)

Question 3

The table shows the relationship between total cost and output for a firm.  The firm has a U-shaped

Accepted Answer

A)   total cost curve.
B)   marginal cost curve.
C)   average fixed cost curve.
D)   total variable cost curve.E) A) and D)
F) A) and C)

Question 4

The range over which average variable cost is increasing is the same as the range over which

Accepted Answer

A)   marginal cost is decreasing.
B)   average fixed cost is increasing.
C)   average product is increasing.
D)   average product is decreasing.E) A) and C)
F) B) and C)

Question 5

Which of the following is correct?

Accepted Answer

A)   When total product is rising, both average product and marginal product must also be rising.
B)   When marginal product is falling, total product must be falling.
C)   When marginal product is falling, average product must also be falling.
D)   Marginal product rises faster than average product and also falls faster than average product.E) A) and D)
F) B) and C)

Question 6

An industry is expected to expand if firms in the industry are earning positive

Accepted Answer

A)   normal profits.
B)   economic profits.
C)   accounting profits.
D)   total revenues.E) C) and D)
F) B) and D)

Question 7

The following data show the relationship between total costs and output in the short run.  The firm's marginal costs are equal to average total cost somewhere between units

Accepted Answer

A)   1 and 2.
B)   2 and 3.
C)   3 and 4.
D)   4 and 5.E) B) and D)
F) None of the above

Question 8

The following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000
Annual revenue from operations = $380,000 Payments to workers = $120,000
Utilities (electricity, water, disposal)  costs = $8,000
Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000
Creamy Crisp's total revenues exceed its total costs, including a normal profit, by

Accepted Answer

A)   $150,000.
B)   $94,000.
C)   $80,000.
D)   $230,000.E) C) and D)
F) All of the above

Question 9

The table shows three short-run cost schedules for three plants of different sizes that a firm might build in the long run.  If the three plant sizes shown are the only ones possible, then there are economies of scale in producing

Accepted Answer

A)   up to 10 units of output, and diseconomies of scale after that.
B)   up to 20 units of output, and diseconomies of scale after that.
C)   up to 30 units of output, and diseconomies of scale after that.
D)   up to 40 units of output, and diseconomies of scale after that.E) B) and D)
F) A) and C)

Question 10

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes.  In the long run, the firm should use plant size "C" for

Accepted Answer

A)   all possible levels of output.
B)   10 to 30 units of output.
C)   40 to 70 units of output.
D)   all units of output greater than or equal to 80.E) A) and C)
F) None of the above

Question 11

Minimum efficient scale varies by industry.

Accepted Answer

A) True 
 B)False

Question 12

Marginal product of labor refers to the

Accepted Answer

A)   last unit of output produced by labor at the end of each period.
B)   increase in output resulting from employing one more unit of labor.
C)   total output divided by the number of labor employed.
D)   smallest unit of the output produced by labor.E) All of the above
F) A) and B)

Question 13

The basic difference between the short run and the long run is that

Accepted Answer

A)   all costs are fixed in the short run, but all costs are variable in the long run.
B)   the law of diminishing returns applies in the long run but not in the short run.
C)   at least one resource is fixed in the short run, while all resources are variable in the long run.
D)   economies of scale may be present in the short run but not in the long run.E) A) and B)
F) A) and C)

Question 14

If the price of a variable resource increased for the typical firm, there would be

Accepted Answer

A)   a downward shift in the AVC curve.
B)   an upward shift in the AFC curve.
C)   a downward shift in the AFC curve.
D)   an upward shift in the MC curve.E) A) and B)
F) A) and C)

Question 15

If a technological advance increases a firm's labor productivity, we would expect its

Accepted Answer

A)   average total cost curve to rise.
B)   average total cost curve to fall.
C)   total cost curve to rise.
D)   average total cost curve to be unaffected.E) B) and C)
F) All of the above

Question 16

If the average product of labor equals 4 at all levels of output, the marginal product of labor is also equal to 4 at all levels of output.

Accepted Answer

A) True 
 B)False

Question 17

To economists, the main difference between the short run and the long run is that

Accepted Answer

A)   the law of diminishing returns applies in the long run, but not in the short run.
B)   in the long run all resources are variable, while in the short run at least one resource is fixed.
C)   fixed costs are more important to decision making in the long run than they are in the short run.
D)   in the short run all resources are fixed, while in the long run all resources are variable.E) A) and B)
F) B) and D)

Question 18

When a firm is experiencing diseconomies of scale,

Accepted Answer

A)   it should increase the amount of labor it hires.
B)   it should lower its price to the competitive level.
C)   its average total costs will decline if it reduces its scale of operations.
D)   it should increase the size of its plant to decrease its average total costs.E) A) and B)
F) A) and C)

Question 19

A firm with fixed costs produces at the lowest point on its U-shaped average variable cost curve. If it raises output by 1 unit, then average

Accepted Answer

A)   fixed cost will increase.
B)   total cost will decrease.
C)   fixed cost will necessarily be below average variable cost.
D)   total cost will be less than average variable cost.E) A) and C)
F) All of the above

Question 20

If a more efficient technology was discovered by a firm, there would be

Accepted Answer

A)   an upward shift in the AVC curve.
B)   an upward shift in the AFC curve.
C)   a downward shift in the AFC curve.
D)   a downward shift in the MC curve.E) B) and C)
F) A) and D)

Exam 9: Businesses and the Costs of Production

An industry is expected to expand if firms in the industry are earning positive

Correct Answer
verified

The range over which average variable cost is increasing is the same as the range over which

Correct Answer
verified

Minimum efficient scale varies by industry.

Correct Answer
verified

The following data show the relationship between total costs and output in the short run. The firm's marginal costs are equal to average total cost somewhere between units

Correct Answer
verified

If a technological advance increases a firm's labor productivity, we would expect its

Correct Answer
verified

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes. In the long run, the firm should use plant size "C" for

Correct Answer
verified

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes. In the long run, the firm should use plant size "A" for

Correct Answer
verified

Correct Answer
verified

When a firm does more of something, it gets better at it. This learning-by-doing is

Correct Answer
verified

To economists, the main difference between the short run and the long run is that

Correct Answer
verified

If the average product of labor equals 4 at all levels of output, the marginal product of labor is also equal to 4 at all levels of output.

Correct Answer
verified

If a more efficient technology was discovered by a firm, there would be

Correct Answer
verified

The table shows three short-run cost schedules for three plants of different sizes that a firm might build in the long run. If the three plant sizes shown are the only ones possible, then there are economies of scale in producing

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

A firm with fixed costs produces at the lowest point on its U-shaped average variable cost curve. If it raises output by 1 unit, then average

Correct Answer
verified

If the price of a variable resource increased for the typical firm, there would be

Correct Answer
verified

The basic difference between the short run and the long run is that

Correct Answer
verified

Marginal product of labor refers to the

Correct Answer
verified

The table shows the relationship between total cost and output for a firm. The firm has a U-shaped

Correct Answer
verified

When a firm is experiencing diseconomies of scale,

Correct Answer
verified

Exam 9: Businesses and the Costs of Production

An industry is expected to expand if firms in the industry are earning positive

Correct AnswerverifiedShow Answer

The range over which average variable cost is increasing is the same as the range over which

Correct AnswerverifiedShow Answer

Minimum efficient scale varies by industry.

Correct AnswerverifiedShow Answer

The following data show the relationship between total costs and output in the short run. The firm's marginal costs are equal to average total cost somewhere between units

Correct AnswerverifiedShow Answer

If a technological advance increases a firm's labor productivity, we would expect its

Correct AnswerverifiedShow Answer

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes. In the long run, the firm should use plant size "C" for

Correct AnswerverifiedShow Answer

Use the following data to answer the question. The letters A, B, and C designate three successively larger plant sizes. In the long run, the firm should use plant size "A" for

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a firm does more of something, it gets better at it. This learning-by-doing is

Correct AnswerverifiedShow Answer

To economists, the main difference between the short run and the long run is that

Correct AnswerverifiedShow Answer

If the average product of labor equals 4 at all levels of output, the marginal product of labor is also equal to 4 at all levels of output.

Correct AnswerverifiedShow Answer

If a more efficient technology was discovered by a firm, there would be

Correct AnswerverifiedShow Answer

The table shows three short-run cost schedules for three plants of different sizes that a firm might build in the long run. If the three plant sizes shown are the only ones possible, then there are economies of scale in producing

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

A firm with fixed costs produces at the lowest point on its U-shaped average variable cost curve. If it raises output by 1 unit, then average

Correct AnswerverifiedShow Answer

If the price of a variable resource increased for the typical firm, there would be

Correct AnswerverifiedShow Answer

The basic difference between the short run and the long run is that

Correct AnswerverifiedShow Answer

Marginal product of labor refers to the

Correct AnswerverifiedShow Answer

The table shows the relationship between total cost and output for a firm. The firm has a U-shaped

Correct AnswerverifiedShow Answer

When a firm is experiencing diseconomies of scale,

Correct AnswerverifiedShow Answer

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