Question 1

The law of diminishing returns states that as

Accepted Answer

A)  the size of a plant increases, the firm's fixed cost decreases. 
B)  the size of a plant increases, the firm's fixed cost increases. 
C)  a firm uses more of a variable input, given the quantity of fixed inputs, the marginal product of the variable input eventually diminishes. 
D)  a firm uses more of a variable input, given the quantity of fixed inputs, the firm's average total cost will decrease eventually. 
A)  the size of a plant increases, the firm's fixed cost decreases. 
B)  the size of a plant increases, the firm's fixed cost increases. 
C)  a firm uses more of a variable input, given the quantity of fixed inputs, the marginal product of the variable input eventually diminishes. 
D)  a firm uses more of a variable input, given the quantity of fixed inputs, the firm's average total cost will decrease eventually.

Question 2

An example of a variable factor of production in the short run is

Accepted Answer

A)  a building. 
B)  capital equipment. 
C)  an employee. 
D)  land. 
A)  a building. 
B)  capital equipment. 
C)  an employee. 
D)  land.

Question 3

In the short run,

Accepted Answer

A)  all inputs are variable. 
B)  all firms experience increasing returns to scale. 
C)  some firms experience economies of scale. 
D)  no firm experiences economies of scale. 
A)  all inputs are variable. 
B)  all firms experience increasing returns to scale. 
C)  some firms experience economies of scale. 
D)  no firm experiences economies of scale.

Question 4

Diseconomies of scale definitely means that as the firm increases its output, its

Accepted Answer

A)  long-run average total cost increases. 
B)  long-run average total cost decreases. 
C)  short-run average total cost increases. 
D)  short-run average total cost decreases. 
A)  long-run average total cost increases. 
B)  long-run average total cost decreases. 
C)  short-run average total cost increases. 
D)  short-run average total cost decreases.

Question 5

Cost schedule  
-Using the data in the above table, the average total cost of producing 16 units per day is

Accepted Answer

A)  $1.25. 
B)  $6.25. 
C)  $7.00 
D)  $7.50. 
A)  $1.25. 
B)  $6.25. 
C)  $7.00 
D)  $7.50.

Question 6

Explain the difference between increasing marginal returns and economies of scale.

Accepted Answer

Increasing marginal returns apply to the

Question 7

A firm's total product curve shows that at first it has

Accepted Answer

A)  economies of scale and then diseconomies of scale. 
B)  diseconomies of scale and then economies of scale. 
C)  increasing marginal returns and then diminishing marginal returns. 
D)  diminishing marginal returns and then increasing marginal returns. 
A)  economies of scale and then diseconomies of scale. 
B)  diseconomies of scale and then economies of scale. 
C)  increasing marginal returns and then diminishing marginal returns. 
D)  diminishing marginal returns and then increasing marginal returns.

Question 8

Which of the following statements is true?

Accepted Answer

A)  When marginal product is less than average product, average product is increasing. 
B)  When marginal product is less than average product, average product is decreasing. 
C)  When marginal product is falling, average product is decreasing. 
D)  When marginal product is rising, average product is decreasing. 
A)  When marginal product is less than average product, average product is increasing. 
B)  When marginal product is less than average product, average product is decreasing. 
C)  When marginal product is falling, average product is decreasing. 
D)  When marginal product is rising, average product is decreasing.

Question 9

In the long run all costs are variable costs. Why?

Accepted Answer

The long run is defined as the time fram

Question 10

-The table above gives costs at Jan's Bike Shop. Unfortunately, Jan's record keeping has been spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total fixed cost of producing 64 bikes?

Accepted Answer

A)  $200 
B)  $300 
C)  $400 
D)  $500 
A)  $200 
B)  $300 
C)  $400 
D)  $500

Question 11

-In the above figure, the long-run average cost curve exhibits constant returns to scale

Accepted Answer

A)  between 5 and 10 units per hour. 
B)  between 10 and 20 units per hour. 
C)  between 20 and 25 units per hour. 
D)  along the entire curve. 
A)  between 5 and 10 units per hour. 
B)  between 10 and 20 units per hour. 
C)  between 20 and 25 units per hour. 
D)  along the entire curve.

Question 12

-The above table gives some cost data for Peter's Pickles. Peter's fixed cost is $20. The marginal cost of increasing output from 3 to 4 barrels of pickles is

Accepted Answer

A)  $25. 
B)  $75. 
C)  $20. 
D)  $50. 
A)  $25. 
B)  $75. 
C)  $20. 
D)  $50.

Question 13

If all inputs are increased by 5 percent and output increases by 8 percent, then the

Accepted Answer

A)  firm experiences constant returns to scale. 
B)  long-run average cost curve slopes downward. 
C)  long-run average cost curve shifts downward. 
D)  firm experiences diseconomies of scale. 
A)  firm experiences constant returns to scale. 
B)  long-run average cost curve slopes downward. 
C)  long-run average cost curve shifts downward. 
D)  firm experiences diseconomies of scale.

Question 14

When economies of scale are present, the LRAC curve touches each short-run ATC curve

Accepted Answer

A)  to the left of the ATC curve's minimum point. 
B)  to the right of the ATC curve's minimum point. 
C)  at the ATC curve's minimum point. 
D)  at no points. 
A)  to the left of the ATC curve's minimum point. 
B)  to the right of the ATC curve's minimum point. 
C)  at the ATC curve's minimum point. 
D)  at no points.

Question 15

Marginal cost refers to the increase in cost attributable to hiring one more unit of labor, capital, or some other input.

Accepted Answer

A) True 
 B)False

Question 16

The long run

Accepted Answer

A)  means a long period of time, always longer than a year. 
B)  is a period of time in which all factors of production can be varied. 
C)  is different for different firms. 
D)  Both answers B and C are correct. 
A)  means a long period of time, always longer than a year. 
B)  is a period of time in which all factors of production can be varied. 
C)  is different for different firms. 
D)  Both answers B and C are correct.

Question 17

Total variable cost

Accepted Answer

A)  increases as output increases. 
B)  does not change as output changes. 
C)  decreases as output increases. 
D)  initially decreases and then increases as output increases. 
A)  increases as output increases. 
B)  does not change as output changes. 
C)  decreases as output increases. 
D)  initially decreases and then increases as output increases.

Question 18

-In the above figure, the intersection of curves A and C is the point at which

Accepted Answer

A)  average total cost is minimized. 
B)  average variable cost is minimized. 
C)  average fixed cost is minimized. 
D)  total product is maximized. 
A)  average total cost is minimized. 
B)  average variable cost is minimized. 
C)  average fixed cost is minimized. 
D)  total product is maximized.

Question 19

Which type of cost is does not change as the quantity of output produced changes?

Accepted Answer

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

Question 20

Which of the following statements is true?

Accepted Answer

A)  Average fixed cost equals average total cost plus average variable cost. 
B)  Average variable cost is always greater than average fixed cost. 
C)  Average fixed cost equals total fixed cost divided by total output. 
D)  Average total cost always falls as output increases. 
A)  Average fixed cost equals average total cost plus average variable cost. 
B)  Average variable cost is always greater than average fixed cost. 
C)  Average fixed cost equals total fixed cost divided by total output. 
D)  Average total cost always falls as output increases.

Exam 11: Output and Costs

The law of diminishing returns states that as

An example of a variable factor of production in the short run is

In the short run,

Diseconomies of scale definitely means that as the firm increases its output, its

Cost schedule -Using the data in the above table, the average total cost of producing 16 units per day is

Explain the difference between increasing marginal returns and economies of scale.

A firm's total product curve shows that at first it has

Which of the following statements is true?

In the long run all costs are variable costs. Why?

-The table above gives costs at Jan's Bike Shop. Unfortunately, Jan's record keeping has been spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total fixed cost of producing 64 bikes?

-In the above figure, the long-run average cost curve exhibits constant returns to scale

-The above table gives some cost data for Peter's Pickles. Peter's fixed cost is $20. The marginal cost of increasing output from 3 to 4 barrels of pickles is

If all inputs are increased by 5 percent and output increases by 8 percent, then the

When economies of scale are present, the LRAC curve touches each short-run ATC curve

Marginal cost refers to the increase in cost attributable to hiring one more unit of labor, capital, or some other input.

The long run

Total variable cost

-In the above figure, the intersection of curves A and C is the point at which

Which type of cost is does not change as the quantity of output produced changes?

Which of the following statements is true?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

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