Question 1

Which of the following provides the best explanation for diseconomies of scale?

Accepted Answer

A) Increased specialization 
B) Diminishing marginal productivity 
C) Monitoring costs 
D) Indivisible setup costs 
A) Increased specialization 
B) Diminishing marginal productivity 
C) Monitoring costs 
D) Indivisible setup costs

Question 2

Technical efficiency in production means a given level of output is produced with the minimum amount of inputs.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements is true?

Accepted Answer

A) Any technically efficient production process is always economically efficient. 
B) Any economically efficient production process is always technically efficient. 
C) A production process is either economically efficient or technically efficient but never both. 
D) A production process must always be both economically efficient and technically efficient. 
A) Any technically efficient production process is always economically efficient. 
B) Any economically efficient production process is always technically efficient. 
C) A production process is either economically efficient or technically efficient but never both. 
D) A production process must always be both economically efficient and technically efficient.

Question 4

To manufacture 1,000 pairs of shoes in a week, a firm must use at least 1,500 workers and 5 machines or 100 machines and 150 workers. Which method can be technically efficient?

Accepted Answer

A) 1,500 workers and 5 machines 
B) 150 workers and 100 machines 
C) Both 
D) Neither 
A) 1,500 workers and 5 machines 
B) 150 workers and 100 machines 
C) Both 
D) Neither

Question 5

Economies of scale occur when a firm's long-run average total cost curve is:

Accepted Answer

A) upward-sloping. 
B) vertical. 
C) downward-sloping. 
D) horizontal. 
A) upward-sloping. 
B) vertical. 
C) downward-sloping. 
D) horizontal.

Question 6

The long-run average cost curve is typically:

Accepted Answer

A) downward-sloping at first but then upward-sloping. 
B) upward-sloping at first but then downward-sloping. 
C) always downward-sloping. 
D) always upward-sloping. 
A) downward-sloping at first but then upward-sloping. 
B) upward-sloping at first but then downward-sloping. 
C) always downward-sloping. 
D) always upward-sloping.

Question 7

Refer to the graph shown. A firm planning to produce 1,500 units of output would choose the scale of operation represented by:

Accepted Answer

A) SATC1. 
B) SATC2. 
C) SATC3. 
D) SATC4. 
A) SATC1. 
B) SATC2. 
C) SATC3. 
D) SATC4.

Question 8

The graph shown exhibits constant returns to scale:

Accepted Answer

A) in region a. 
B) in region b. 
C) in region c. 
D) in regions a, b, and c. 
A) in region a. 
B) in region b. 
C) in region c. 
D) in regions a, b, and c.

Question 9

The upward-sloping portion of the long-run average total cost curve is caused by:

Accepted Answer

A) indivisible setup costs. 
B) diseconomies of scale. 
C) the absence of fixed inputs. 
D) the presence of fixed inputs. 
A) indivisible setup costs. 
B) diseconomies of scale. 
C) the absence of fixed inputs. 
D) the presence of fixed inputs.

Question 10

The level of production that minimizes long-run average total costs is referred to as the:

Accepted Answer

A) technically efficient level of production. 
B) economically efficient level of production. 
C) minimum efficient level of production. 
D) minimum profitable level of production. 
A) technically efficient level of production. 
B) economically efficient level of production. 
C) minimum efficient level of production. 
D) minimum profitable level of production.

Question 11

Which of the following provides the best explanation for constant returns to scale?

Accepted Answer

A) Replication of production techniques 
B) Diminishing marginal product 
C) Increasing marginal product 
D) Constant marginal product 
A) Replication of production techniques 
B) Diminishing marginal product 
C) Increasing marginal product 
D) Constant marginal product

Question 12

A firm can use 50 workers and 10 machines, 70 workers and 9 machines, or 75 workers and 9 machines to produce 40 chairs. If each worker costs $20 and each machine is rented for $500, the economically efficient input combination is:

Accepted Answer

A) 50 workers and 10 machines. 
B) 70 workers and 9 machines. 
C) 75 workers and 9 machines. 
D) 120 workers and 19 machines. 
A) 50 workers and 10 machines. 
B) 70 workers and 9 machines. 
C) 75 workers and 9 machines. 
D) 120 workers and 19 machines.

Question 13

Consider the following Long Run Average Total Cost (LRATC)curve diagram:   How will this diagram change (if at all)if the firm's workers "learn by doing"? Illustrate your answer with a diagram.

Accepted Answer

When workers learn by doing,this will lo

Question 14

The minimum efficient level of production refers to the production level in the long run that spreads setup costs out just enough to make production profitable.

Accepted Answer

A) True 
 B)False

Question 15

The long-run average cost curve is tangent to the short-run average total cost curve at the minimum point of the short-run average total cost curve when the:

Accepted Answer

A) long-run average cost curve is downward-sloping. 
B) long-run average cost curve is upward-sloping. 
C) firm is experiencing constant returns to scale. 
D) firm is experiencing economies of scale. 
A) long-run average cost curve is downward-sloping. 
B) long-run average cost curve is upward-sloping. 
C) firm is experiencing constant returns to scale. 
D) firm is experiencing economies of scale.

Question 16

The long-run average cost curve is horizontal when production exhibits:

Accepted Answer

A) diminishing marginal returns. 
B) diseconomies of scale. 
C) economies of scale. 
D) constant returns to scale. 
A) diminishing marginal returns. 
B) diseconomies of scale. 
C) economies of scale. 
D) constant returns to scale.

Question 17

As you move down an isoquant:

Accepted Answer

A) more of all inputs must be used to keep output constant. 
B) production remains technically efficient. 
C) production remains economically efficient. 
D) the marginal rate of substitution does not change. 
A) more of all inputs must be used to keep output constant. 
B) production remains technically efficient. 
C) production remains economically efficient. 
D) the marginal rate of substitution does not change.

Question 18

The relationship between long-run and short-run average total costs is known as the:

Accepted Answer

A) efficiency relationship. 
B) technical relationship. 
C) economic relationship. 
D) envelope relationship. 
A) efficiency relationship. 
B) technical relationship. 
C) economic relationship. 
D) envelope relationship.

Question 19

If labor costs $10 per unit and machines rent for $20 apiece, the slope of an isocost line might imply a substitution of:

Accepted Answer

A) one unit of labor for one unit of machinery. 
B) one unit of labor for two units of machinery. 
C) one unit of machinery for two units of labor. 
D) two units of machinery for three units of labor. 
A) one unit of labor for one unit of machinery. 
B) one unit of labor for two units of machinery. 
C) one unit of machinery for two units of labor. 
D) two units of machinery for three units of labor.

Question 20

What is an entrepreneur and what are the things that the entrepreneur must do to translate the cost of production into supply? Why is there a scarcity of entrepreneurial talent?

Accepted Answer

An entrepreneur is an individual with cr

Exam 12: Production and Cost Analysis II

Which of the following provides the best explanation for diseconomies of scale?

Technical efficiency in production means a given level of output is produced with the minimum amount of inputs.

Which of the following statements is true?

To manufacture 1,000 pairs of shoes in a week, a firm must use at least 1,500 workers and 5 machines or 100 machines and 150 workers. Which method can be technically efficient?

Economies of scale occur when a firm's long-run average total cost curve is:

The long-run average cost curve is typically:

Refer to the graph shown. A firm planning to produce 1,500 units of output would choose the scale of operation represented by:

The graph shown exhibits constant returns to scale:

The upward-sloping portion of the long-run average total cost curve is caused by:

The level of production that minimizes long-run average total costs is referred to as the:

Which of the following provides the best explanation for constant returns to scale?

A firm can use 50 workers and 10 machines, 70 workers and 9 machines, or 75 workers and 9 machines to produce 40 chairs. If each worker costs $20 and each machine is rented for $500, the economically efficient input combination is:

Consider the following Long Run Average Total Cost (LRATC)curve diagram: How will this diagram change (if at all)if the firm's workers "learn by doing"? Illustrate your answer with a diagram.

The minimum efficient level of production refers to the production level in the long run that spreads setup costs out just enough to make production profitable.

The long-run average cost curve is tangent to the short-run average total cost curve at the minimum point of the short-run average total cost curve when the:

The long-run average cost curve is horizontal when production exhibits:

As you move down an isoquant:

The relationship between long-run and short-run average total costs is known as the:

If labor costs $10 per unit and machines rent for $20 apiece, the slope of an isocost line might imply a substitution of:

What is an entrepreneur and what are the things that the entrepreneur must do to translate the cost of production into supply? Why is there a scarcity of entrepreneurial talent?

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

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