Question 1

Which of the following is a reason why a firm would experience diseconomies of scale?

Accepted Answer

A)  To finance an increase in the size of its plant a firm must borrow more money or sell more shares of stock. 
B)  As the size of the firm increases, it becomes more difficult to find markets where it doesn't already have operations. 
C)  As the size of the firm increases it becomes more difficult to coordinate the operations of its manufacturing plants. 
D)  As the size of the firm increases, it must operate in other countries where differences in language, customs, and laws increase its average costs. 
A)  To finance an increase in the size of its plant a firm must borrow more money or sell more shares of stock. 
B)  As the size of the firm increases, it becomes more difficult to find markets where it doesn't already have operations. 
C)  As the size of the firm increases it becomes more difficult to coordinate the operations of its manufacturing plants. 
D)  As the size of the firm increases, it must operate in other countries where differences in language, customs, and laws increase its average costs.

Question 2

The shape of the average total cost curve is determined by the shape of

Accepted Answer

A)  the marginal cost curve. 
B)  the average fixed cost curve. 
C)  the average product curve. 
D)  the firm's production function. 
A)  the marginal cost curve. 
B)  the average fixed cost curve. 
C)  the average product curve. 
D)  the firm's production function.

Question 3

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays

Accepted Answer

A)  diminishing returns. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  declining fixed costs. 
A)  diminishing returns. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  declining fixed costs.

Question 4

Which of the following statements best describes the economic short run?

Accepted Answer

A)  It is a period of one year or less. 
B)  It is a period during which firms are free to vary all of their inputs. 
C)  It is a period during which at least one of the firm's inputs is fixed. 
D)  It is a period during which fixed inputs become variable inputs because of depreciation. 
A)  It is a period of one year or less. 
B)  It is a period during which firms are free to vary all of their inputs. 
C)  It is a period during which at least one of the firm's inputs is fixed. 
D)  It is a period during which fixed inputs become variable inputs because of depreciation.

Question 5

The change in a firm's total cost from producing one more unit of a good or service is

Accepted Answer

A)  the result of economies of scale. 
B)  the definition of marginal product 
C)  the definition of marginal cost. 
D)  impossible to observe in large firms with many manufacturing plants. 
A)  the result of economies of scale. 
B)  the definition of marginal product 
C)  the definition of marginal cost. 
D)  impossible to observe in large firms with many manufacturing plants.

Question 6

Economies of scale occur when

Accepted Answer

A)  a firm's long-run average total costs fall as it increases the quantity of output it produces. 
B)  the marginal product of labor is greater than the average product of labor. 
C)  short-run marginal cost falls. 
D)  the demand for a firm's output increases. 
A)  a firm's long-run average total costs fall as it increases the quantity of output it produces. 
B)  the marginal product of labor is greater than the average product of labor. 
C)  short-run marginal cost falls. 
D)  the demand for a firm's output increases.

Question 7

Figure 11-7   Figure 11-7 shows the cost structure for a firm.
-Refer to Figure 11-7. When output level is 100, what is the total cost of production?

Accepted Answer

A)  $20 
B)  $800 
C)  $1,200 
D)  $2,000 
A)  $20 
B)  $800 
C)  $1,200 
D)  $2,000

Question 8

Table 11-3
  
-Refer to Table 11-3. The table above refers to the relationship between the quantity of workers employed and the number of cardboard boxes produced per day by Manny's House of Boxes. The capital used to produce the boxes is fixed. The highest value of the average product is labor is ________ when Manny hires ________ workers.

Accepted Answer

A)  80; 3 
B)  100; 3 
C)  100; 2 
D)  80; 4 
A)  80; 3 
B)  100; 3 
C)  100; 2 
D)  80; 4

Question 9

Article Summary
Due to changing shopping habits and increased online sales, Macy's announced it would be closing 100 stores in early 2017. The stores represent about 15 percent of its total locations, and some analysts believe the company needs to close an additional 100 stores as well. Macy's sales fell by 7.5 percent in the fourth quarter of 2016, and by the end of 2017, the company was expected to have about 600 stores open, down from almost 800 in 2014.

-Refer to the Article Summary. Use a graph to illustrate average total cost curves for Macy's before and after closing the 100 stores. Assume that after closing the stores, Macy's will be producing at minimum average total cost.

Accepted Answer

@#IMG-DLM& Before closing the stores, Macy's would

Question 10

A firm's cost of production is determined by all of the following except

Accepted Answer

A)  the technology used to produce its output. 
B)  the productivity of its workers. 
C)  the cost of raw material used in production. 
D)  the amount of corporate taxes it must pay on its profit. 
A)  the technology used to produce its output. 
B)  the productivity of its workers. 
C)  the cost of raw material used in production. 
D)  the amount of corporate taxes it must pay on its profit.

Question 11

Figure 11-12  
-Refer to Figure 11-12. The movement from isoquant T to isoquant U depicts

Accepted Answer

A)  a change in preferences with regards to input usage. 
B)  an increase in the cost of production. 
C)  an increase in output. 
D)  an increase in labor usage holding capital and output constant. 
A)  a change in preferences with regards to input usage. 
B)  an increase in the cost of production. 
C)  an increase in output. 
D)  an increase in labor usage holding capital and output constant.

Question 12

Figure 11-11   Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCS1U1B1aS1U1B0, ATCS1U1B1bS1U1B0 and ATCS1U1B1cS1U1B0.
-Refer to Figure 11-11. In the short run, if the firm sells fewer than 5,000 picture frames per month

Accepted Answer

A)  it should produce with the scale of operation associated with ATCa. 
B)  it should produce with the scale of operation associated with ATCb. 
C)  it should produce with the scale of operation associated with ATCc. 
D)  it will experience constant returns to scale. 
A)  it should produce with the scale of operation associated with ATCa. 
B)  it should produce with the scale of operation associated with ATCb. 
C)  it should produce with the scale of operation associated with ATCc. 
D)  it will experience constant returns to scale.

Question 13

An explicit cost is defined as

Accepted Answer

A)  a cost that does not change as output changes. 
B)  a nonmonetary opportunity cost. 
C)  a cost that involves spending money. 
D)  a nonmonetary accounting cost. 
A)  a cost that does not change as output changes. 
B)  a nonmonetary opportunity cost. 
C)  a cost that involves spending money. 
D)  a nonmonetary accounting cost.

Question 14

Some colleges now offer massive open online courses (MOOCs), where students do not need to be in the same classroom as their instructors. The fixed cost of an online course is relatively ________, but after the courses are placed online, the marginal cost of providing instruction to an additional student is ________.

Accepted Answer

A)  high; low 
B)  high; high 
C)  low; low 
D)  low; high 
A)  high; low 
B)  high; high 
C)  low; low 
D)  low; high

Question 15

If average total cost is falling, marginal cost must also be falling.

Accepted Answer

A) True 
 B)False

Question 16

The long run refers to a time period

Accepted Answer

A)  during which a firm is able to purchase all of its inputs, including its plant and equipment. 
B)  long enough for a firm to vary all of its inputs, to adopt new technology, and change the size of its physical plant. 
C)  long enough for a firm to pay all of its creditors in full. 
D)  long enough for a firm to change the use of its variable inputs. 
A)  during which a firm is able to purchase all of its inputs, including its plant and equipment. 
B)  long enough for a firm to vary all of its inputs, to adopt new technology, and change the size of its physical plant. 
C)  long enough for a firm to pay all of its creditors in full. 
D)  long enough for a firm to change the use of its variable inputs.

Question 17

The slope of an isocost line determines the marginal rate of substitution.

Accepted Answer

A) True 
 B)False

Question 18

Economic costs of production differ from accounting costs in that

Accepted Answer

A)  economic costs include expenditures for hired resources while accounting costs do not. 
B)  economic costs add the opportunity costs of a firm using its own resources while accounting costs do not. 
C)  accounting costs include expenditures for hired resources while economic costs do not. 
D)  accounting costs are always larger than economic cost. 
A)  economic costs include expenditures for hired resources while accounting costs do not. 
B)  economic costs add the opportunity costs of a firm using its own resources while accounting costs do not. 
C)  accounting costs include expenditures for hired resources while economic costs do not. 
D)  accounting costs are always larger than economic cost.

Question 19

As a firm moves to higher isocost lines

Accepted Answer

A)  its profits increase. 
B)  its revenue increases. 
C)  its input price ratio increases. 
D)  its total cost increases. 
A)  its profits increase. 
B)  its revenue increases. 
C)  its input price ratio increases. 
D)  its total cost increases.

Question 20

The minimum efficient scale is

Accepted Answer

A)  the level of output where diminishing returns have not set in yet. 
B)  the plant size that yields the most profit. 
C)  the smallest level of operation where long-run average costs are lowest. 
D)  the smallest output level where the firm finally reaches productive efficiency. 
A)  the level of output where diminishing returns have not set in yet. 
B)  the plant size that yields the most profit. 
C)  the smallest level of operation where long-run average costs are lowest. 
D)  the smallest output level where the firm finally reaches productive efficiency.

Exam 11: Technology, Production, and Costs

Which of the following is a reason why a firm would experience diseconomies of scale?

The shape of the average total cost curve is determined by the shape of

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays

Which of the following statements best describes the economic short run?

The change in a firm's total cost from producing one more unit of a good or service is

Economies of scale occur when

Figure 11-7 Figure 11-7 shows the cost structure for a firm. -Refer to Figure 11-7. When output level is 100, what is the total cost of production?

A firm's cost of production is determined by all of the following except

Figure 11-12 -Refer to Figure 11-12. The movement from isoquant T to isoquant U depicts

An explicit cost is defined as

If average total cost is falling, marginal cost must also be falling.

The long run refers to a time period

The slope of an isocost line determines the marginal rate of substitution.

Economic costs of production differ from accounting costs in that

As a firm moves to higher isocost lines

The minimum efficient scale is

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