Question 1

The short run is a time period such that:

Accepted Answer

A)  the existing firms in the market do not have sufficient time to change the amounts of any of the inputs that they employ. 
B)  the existing firms in the market do not have sufficient time to either increase or decrease their current rate of output. 
C)  the existing firms in the market do not have sufficient time to increase the size of their existing plant or build a new factory. 
D)  new firms may build plants and enter the industry. 
A)  the existing firms in the market do not have sufficient time to change the amounts of any of the inputs that they employ. 
B)  the existing firms in the market do not have sufficient time to either increase or decrease their current rate of output. 
C)  the existing firms in the market do not have sufficient time to increase the size of their existing plant or build a new factory. 
D)  new firms may build plants and enter the industry.

Question 2

Exhibit 6-15  Long-run average cost   If the firm represented in Exhibit 6-15 is operating with a plant whose size corresponds to short-run average total cost curve A, the level of output that would minimize its short-run average total cost is:

Accepted Answer

A)  500 units per week. 
B)  1,000 units per week. 
C)  1,500 units per week. 
D)  2,000 units per week. 
A)  500 units per week. 
B)  1,000 units per week. 
C)  1,500 units per week. 
D)  2,000 units per week.

Question 3

Exhibit 6-3  A marginal product curve   As shown in Exhibit 6-3, the marginal product of labor for the last worker hired when 2 workers are employed per day is:

Accepted Answer

A)  50. 
B)  100. 
C)  150. 
D)  175. 
A)  50. 
B)  100. 
C)  150. 
D)  175.

Question 4

In the short-run, total fixed costs always exceed total variable costs.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 6-4  A marginal product curve   As shown in Exhibit 6-4, the law of diminishing returns applies in the range of:

Accepted Answer

A)  over 10 workers per day. 
B)  over 5 workers per day. 
C)  over 2 workers per day. 
D)  between 0 and 5 workers per day. 
A)  over 10 workers per day. 
B)  over 5 workers per day. 
C)  over 2 workers per day. 
D)  between 0 and 5 workers per day.

Question 6

The long run is a period of time:

Accepted Answer

A)  that is too short to change the size of a firm's plant. 
B)  that is long enough to permit changes in all the firm's inputs, both fixed and variable. 
C)  in which production occurs beyond one year. 
D)  in which production occurs beyond five years. 
A)  that is too short to change the size of a firm's plant. 
B)  that is long enough to permit changes in all the firm's inputs, both fixed and variable. 
C)  in which production occurs beyond one year. 
D)  in which production occurs beyond five years.

Question 7

The change in total cost that results from the production of one additional unit is called:

Accepted Answer

A)  marginal revenue. 
B)  average variable cost. 
C)  marginal cost. 
D)  average total cost. 
A)  marginal revenue. 
B)  average variable cost. 
C)  marginal cost. 
D)  average total cost.

Question 8

Which of the following is an example of a fixed cost for a fishing company?

Accepted Answer

A)  The cost of hiring a fishing crew. 
B)  The fuel costs of running the boat. 
C)  The monthly loan payment on the boat. 
D)  The supply of nets, hooks, and fishing lines. 
E)  Bait. 
A)  The cost of hiring a fishing crew. 
B)  The fuel costs of running the boat. 
C)  The monthly loan payment on the boat. 
D)  The supply of nets, hooks, and fishing lines. 
E)  Bait.

Question 9

If average fixed costs equal $60 and average total costs equal $120 when output is 100, the total variable cost must be:

Accepted Answer

A)  $40. 
B)  $60. 
C)  $6,000. 
D)  $8,000. 
A)  $40. 
B)  $60. 
C)  $6,000. 
D)  $8,000.

Question 10

A large aircraft manufacturer, like Boeing, may have a cost advantage over a new smaller manufacturer because of:

Accepted Answer

A)  diseconomies of scale. 
B)  economies of scale. 
C)  diminishing returns to a fixed factor of production. 
D)  the principal agent problem is generally less severe for larger firms. 
A)  diseconomies of scale. 
B)  economies of scale. 
C)  diminishing returns to a fixed factor of production. 
D)  the principal agent problem is generally less severe for larger firms.

Question 11

When the cost curves have U-shapes, at the point where marginal cost equals average total cost:

Accepted Answer

A)  b and c. 
B)  marginal cost is rising. 
C)  average total cost is at its minimum. 
D)  average variable cost is falling. 
E)  the fixed cost has been fully depreciated. 
A)  b and c. 
B)  marginal cost is rising. 
C)  average total cost is at its minimum. 
D)  average variable cost is falling. 
E)  the fixed cost has been fully depreciated.

Question 12

Distinguish economies and diseconomies of scale. How can the extent to which economies and diseconomies of scale explain the size and number of real world firms in an industry?

Accepted Answer

Economies of scale exist when a firm inc

Question 13

Exhibit 6-8  Costs schedules for producing pizza   By filling in the blanks in Exhibit 6-8, the average total cost of producing 5 pizzas is shown to be equal to:

Accepted Answer

A)  $12. 
B)  $15. 
C)  $32. 
D)  $85. 
E)  $160. 
A)  $12. 
B)  $15. 
C)  $32. 
D)  $85. 
E)  $160.

Question 14

The total fixed cost curve:

Accepted Answer

A)  varies with the quantity of inputs used. 
B)  decreases with output. 
C)  increases with output. 
D)  remains constant regardless of output. 
A)  varies with the quantity of inputs used. 
B)  decreases with output. 
C)  increases with output. 
D)  remains constant regardless of output.

Question 15

A car leasing company that expands its size by buying its competitors may run the risk of increasing production cost per unit due to:

Accepted Answer

A)  diseconomies of scale. 
B)  economies of scale. 
C)  diminishing returns. 
D)  greater use of large-volume purchases. 
A)  diseconomies of scale. 
B)  economies of scale. 
C)  diminishing returns. 
D)  greater use of large-volume purchases.

Question 16

If a firm's use of labor obeys the law of diminishing returns, then:

Accepted Answer

A)  it does not have enough time to hire or fire workers. 
B)  doubling the number of workers causes the firm's output to also double. 
C)  its marginal costs must be falling. 
D)  hiring additional workers adds less and less additional output. 
A)  it does not have enough time to hire or fire workers. 
B)  doubling the number of workers causes the firm's output to also double. 
C)  its marginal costs must be falling. 
D)  hiring additional workers adds less and less additional output.

Question 17

Which of the following is true if the total variable cost curve is rising?

Accepted Answer

A)  Average fixed cost is increasing. 
B)  Marginal cost is decreasing. 
C)  Marginal cost is increasing. 
D)  Average fixed cost is constant. 
A)  Average fixed cost is increasing. 
B)  Marginal cost is decreasing. 
C)  Marginal cost is increasing. 
D)  Average fixed cost is constant.

Question 18

Economies of scale exist over all ranges of output for which short-run average total cost exceeds long-run average cost.

Accepted Answer

A) True 
 B)False

Question 19

Diseconomies of scale exist over the range of output for which the long-run average cost curve is:

Accepted Answer

A)  constant. 
B)  falling. 
C)  rising. 
D)  none of the above. 
A)  constant. 
B)  falling. 
C)  rising. 
D)  none of the above.

Question 20

The primary source of scale diseconomies appears to be:

Accepted Answer

A)  a firm's inability to acquire quality resources. 
B)  too little demand for the firm's product. 
C)  consumers who resist dealing with large firms. 
D)  division of labor. 
E)  the organizational difficulties of managing an ever larger enterprise. 
A)  a firm's inability to acquire quality resources. 
B)  too little demand for the firm's product. 
C)  consumers who resist dealing with large firms. 
D)  division of labor. 
E)  the organizational difficulties of managing an ever larger enterprise.

Exam 6: Production Costs

The short run is a time period such that:

Exhibit 6-15 Long-run average cost If the firm represented in Exhibit 6-15 is operating with a plant whose size corresponds to short-run average total cost curve A, the level of output that would minimize its short-run average total cost is:

Exhibit 6-3 A marginal product curve As shown in Exhibit 6-3, the marginal product of labor for the last worker hired when 2 workers are employed per day is:

In the short-run, total fixed costs always exceed total variable costs.

Exhibit 6-4 A marginal product curve As shown in Exhibit 6-4, the law of diminishing returns applies in the range of:

The long run is a period of time:

The change in total cost that results from the production of one additional unit is called:

Which of the following is an example of a fixed cost for a fishing company?

If average fixed costs equal $60 and average total costs equal $120 when output is 100, the total variable cost must be:

A large aircraft manufacturer, like Boeing, may have a cost advantage over a new smaller manufacturer because of:

When the cost curves have U-shapes, at the point where marginal cost equals average total cost:

Distinguish economies and diseconomies of scale. How can the extent to which economies and diseconomies of scale explain the size and number of real world firms in an industry?

Exhibit 6-8 Costs schedules for producing pizza By filling in the blanks in Exhibit 6-8, the average total cost of producing 5 pizzas is shown to be equal to:

The total fixed cost curve:

A car leasing company that expands its size by buying its competitors may run the risk of increasing production cost per unit due to:

If a firm's use of labor obeys the law of diminishing returns, then:

Which of the following is true if the total variable cost curve is rising?

Economies of scale exist over all ranges of output for which short-run average total cost exceeds long-run average cost.

Diseconomies of scale exist over the range of output for which the long-run average cost curve is:

The primary source of scale diseconomies appears to be:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters