Question 1

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 minimum 
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 minimum

Question 2

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

Question 3

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 scale 
A) increasing marginal product 
B) diminishing marginal returns 
C) economies of scale 
D) diseconomies of scale 
E) constant returns to scale

Question 4

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 scale 
A) production inefficiency 
B) diminishing marginal returns 
C) diseconomies of scale 
D) constant returns to scale 
E) economies of scale

Question 5

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. 
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.

Question 6

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 7

The graph of average fixed cost is a horizontal line.

Accepted Answer

A) True 
 B)False

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

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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 costs 
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 costs

Question 11

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 only 
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 only

Question 12

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) 140 
A) 0 
B) 10 
C) 20 
D) 140/4 
E) 140

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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 shoes 
A) 5 pairs of shoes 
B) 10 pairs of shoes 
C) 20 pairs of shoes 
D) 50 pairs of shoes 
E) 80 pairs of shoes

Question 15

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

Question 16

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

Question 17

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

Question 18

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 ads 
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 ads

Question 19

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 production 
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 production

Question 20

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

Exam 7: Production and Cost in the Firm

The minimum efficient scale for a firm is the

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

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

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

Which of the following is a long-run adjustment?

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

The graph of average fixed cost is a horizontal line.

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

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

Accounting profit is

Fixed costs are defined as

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

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

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

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

As output rises, marginal product eventually diminishes and

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

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

As output increases, diseconomies of scale

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

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

Filters