Question 1

If a firm is experiencing diseconomies of scale,its long-run average cost curve is increasing.

Accepted Answer

A) True 
 B)False

Question 2

Average variable cost can be calculated using any of the formulas below except

Accepted Answer

A) TVC/Q. 
B) (TC - F
C) /Q. 
C) Δ(TC - F
C) /ΔQ. 
D) (TC/Q)- AFC. 
A) TVC/Q. 
B) (TC - F
C) /Q. 
C) Δ(TC - F
C) /ΔQ. 
D) (TC/Q)- AFC.

Question 3

Which of the following is a factor of production that generally is fixed in the short run?

Accepted Answer

A) raw materials 
B) labor 
C) a factory building 
D) water 
A) raw materials 
B) labor 
C) a factory building 
D) water

Question 4

Which of the following statements is true?

Accepted Answer

A) An explicit cost is an actual cost; an implicit cost is a theoretical cost. 
B) Economic costs include both explicit costs and implicit costs. 
C) An explicit cost is more important, dollar for dollar, than an implicit cost. 
D) Explicit costs are accounting costs, not economic costs; implicit costs are economic costs, not accounting costs. 
A) An explicit cost is an actual cost; an implicit cost is a theoretical cost. 
B) Economic costs include both explicit costs and implicit costs. 
C) An explicit cost is more important, dollar for dollar, than an implicit cost. 
D) Explicit costs are accounting costs, not economic costs; implicit costs are economic costs, not accounting costs.

Question 5

Jayanthi moves her yoga studio from her home to a space she rents in Oakland,California.Holding everything else constant,as a result of this move

Accepted Answer

A) her explicit cost falls and her implicit cost rises. 
B) her implicit cost falls and her explicit cost rises. 
C) her economic cost rises. 
D) her opportunity cost rises. 
A) her explicit cost falls and her implicit cost rises. 
B) her implicit cost falls and her explicit cost rises. 
C) her economic cost rises. 
D) her opportunity cost rises.

Question 6

Two stores - Lazy Guys and Ralph's Recliners - are located in the same city.Both stores buy recliner chairs from the same manufacturer at the same price and both stores are about the same size,so that the fixed costs of production for both stores are the same.Ralph's Recliners sells more recliners per month and Ralph's has a lower average total cost of production.Which of the following can explain why the average total cost of production is lower for Ralph's Recliners?

Accepted Answer

A) Because Ralph's Recliners sells more output its average fixed costs are lower than Lazy Guy's average fixed cost. 
B) The rent Lazy Guys pays for its building is greater than the rent paid by Ralph's Recliners. 
C) Ralph's explicit costs are less because Ralph owns the land on which his building is located.Lazy Guy must make lease payments for the land on which its store is located. 
D) The price of recliners charged by Ralph's is greater than the price charged by Lazy Guys. 
A) Because Ralph's Recliners sells more output its average fixed costs are lower than Lazy Guy's average fixed cost. 
B) The rent Lazy Guys pays for its building is greater than the rent paid by Ralph's Recliners. 
C) Ralph's explicit costs are less because Ralph owns the land on which his building is located.Lazy Guy must make lease payments for the land on which its store is located. 
D) The price of recliners charged by Ralph's is greater than the price charged by Lazy Guys.

Question 7

Improvements in inventory control represent a positive technological change because they allow firms to produce the same output with fewer inputs.In recent years,many firms have adopted an inventory system in which firms accept shipments from suppliers as close as possible to the time they will be needed.Wal-Mart has been a pioneer in using inventory control systems to this in its stores.This type of inventory system is called a ________ inventory system.

Accepted Answer

A) first-in-first-out 
B) cash-and-carry 
C) just-in-time 
D) buy-now-pay-later 
A) first-in-first-out 
B) cash-and-carry 
C) just-in-time 
D) buy-now-pay-later

Question 8

The processes a firm uses to turn inputs into outputs of goods and services is called

Accepted Answer

A) technology. 
B) technological change. 
C) marginal analysis. 
D) positive economic analysis. 
A) technology. 
B) technological change. 
C) marginal analysis. 
D) positive economic analysis.

Question 9

Figure 8-5
  
-Refer to Figure 8-5.The vertical difference between curves F and G measures

Accepted Answer

A) average fixed costs. 
B) marginal costs. 
C) fixed costs. 
D) sunk costs. 
A) average fixed costs. 
B) marginal costs. 
C) fixed costs. 
D) sunk costs.

Question 10

The law of diminishing marginal returns states

Accepted Answer

A) that at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline. 
B) that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline. 
C) that in the presence of a fixed factor, at some point average product of labor starts to fall as more and more variable inputs are added. 
D) average total costs of production initially fall and after some point starts to rise at a decreasing rate as output increases. 
A) that at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline. 
B) that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline. 
C) that in the presence of a fixed factor, at some point average product of labor starts to fall as more and more variable inputs are added. 
D) average total costs of production initially fall and after some point starts to rise at a decreasing rate as output increases.

Question 11

A characteristic of the long run that is not available in the short run is that a firm is free to vary its output.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements regarding a firm's long-run average total cost (LRATC)curve and its short-run average total cost (SRATC)curve is true?

Accepted Answer

A) The shape of the LRATC is affected by the law of diminishing returns. 
B) The SRATC, but not the LRATC, can be used by a firm's managers for planning. 
C) The LRATC shows the lowest cost at which a firm is able to produce a given level of output when no inputs are fixed. 
D) The contribution of average fixed cost to LRATC is greater than its contribution to SRATC. 
A) The shape of the LRATC is affected by the law of diminishing returns. 
B) The SRATC, but not the LRATC, can be used by a firm's managers for planning. 
C) The LRATC shows the lowest cost at which a firm is able to produce a given level of output when no inputs are fixed. 
D) The contribution of average fixed cost to LRATC is greater than its contribution to SRATC.

Question 13

Average total cost is equal to average variable cost minus average fixed cost.

Accepted Answer

A) True 
 B)False

Question 14

Long-run cost curves are U-shaped because

Accepted Answer

A) of the law of demand. 
B) of the law of diminishing returns. 
C) of economies and diseconomies of scale. 
D) of the law of supply. 
A) of the law of demand. 
B) of the law of diminishing returns. 
C) of economies and diseconomies of scale. 
D) of the law of supply.

Question 15

The president of Toyota's Georgetown plant was quoted as saying,"Demand for high volumes saps your energy.Over a period of time,it eroded our focus [and] thinned out the expertise and knowledge we painstakingly built up over the years." Based on this quote,what must be true of the plant's average cost of production curve?

Accepted Answer

A) It is upward-sloping. 
B) It is downward-sloping. 
C) It is a ray from the origin. 
D) It is U-shaped. 
A) It is upward-sloping. 
B) It is downward-sloping. 
C) It is a ray from the origin. 
D) It is U-shaped.

Question 16

Adam spent $10,000 on new equipment for his small business,"Adam's Fitness Studio." Membership at his fitness center is very low and at this rate,Adam needs an additional $12,000 per year to keep his studio open.Which of the following is true?

Accepted Answer

A) The fixed cost of running the studio is $22,000. 
B) The variable cost of running the studio is $22,000. 
C) The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost. 
D) The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need to continue operations is a marginal cost. 
A) The fixed cost of running the studio is $22,000. 
B) The variable cost of running the studio is $22,000. 
C) The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost. 
D) The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need to continue operations is a marginal cost.

Question 17

Which of the following is the best example of a short run adjustment?

Accepted Answer

A) A local bakery purchases another commercial oven as part of its capacity expansion. 
B) Your local Wal-Mart hires two more associates. 
C) Smith University completed negotiations to acquire a large piece of land to build its new library. 
D) Toyota builds a new assembly plant in Texas. 
A) A local bakery purchases another commercial oven as part of its capacity expansion. 
B) Your local Wal-Mart hires two more associates. 
C) Smith University completed negotiations to acquire a large piece of land to build its new library. 
D) Toyota builds a new assembly plant in Texas.

Question 18

The long-run average cost curve shows

Accepted Answer

A) the lowest average cost of producing every level of output in the long run. 
B) where the most profitable level of output occurs. 
C) the average cost of producing where diminishing returns are not present. 
D) the plant size or scale that the firm should build. 
A) the lowest average cost of producing every level of output in the long run. 
B) where the most profitable level of output occurs. 
C) the average cost of producing where diminishing returns are not present. 
D) the plant size or scale that the firm should build.

Question 19

An important reason why diseconomies of scale arise is because firms may have to hire lower skilled workers as firms expand.

Accepted Answer

A) True 
 B)False

Question 20

Figure 8-6
   
Figure 8-6 contains information about the short run cost structure of a firm.
-Refer to Figure 8-6.In the figure above which letter represents the average variable cost curve?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

If a firm is experiencing diseconomies of scale,its long-run average cost curve is increasing.

Average variable cost can be calculated using any of the formulas below except

Which of the following is a factor of production that generally is fixed in the short run?

Which of the following statements is true?

Jayanthi moves her yoga studio from her home to a space she rents in Oakland,California.Holding everything else constant,as a result of this move

The processes a firm uses to turn inputs into outputs of goods and services is called

Figure 8-5 -Refer to Figure 8-5.The vertical difference between curves F and G measures

The law of diminishing marginal returns states

A characteristic of the long run that is not available in the short run is that a firm is free to vary its output.

Which of the following statements regarding a firm's long-run average total cost (LRATC)curve and its short-run average total cost (SRATC)curve is true?

Average total cost is equal to average variable cost minus average fixed cost.

Long-run cost curves are U-shaped because

Adam spent $10,000 on new equipment for his small business,"Adam's Fitness Studio." Membership at his fitness center is very low and at this rate,Adam needs an additional $12,000 per year to keep his studio open.Which of the following is true?

Which of the following is the best example of a short run adjustment?

The long-run average cost curve shows

An important reason why diseconomies of scale arise is because firms may have to hire lower skilled workers as firms expand.

Figure 8-6 Figure 8-6 contains information about the short run cost structure of a firm. -Refer to Figure 8-6.In the figure above which letter represents the average variable cost curve?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 8: Technology, production, and Costs

If a firm is experiencing diseconomies of scale,its long-run average cost curve is increasing.

Average variable cost can be calculated using any of the formulas below except

Which of the following is a factor of production that generally is fixed in the short run?

Which of the following statements is true?

Jayanthi moves her yoga studio from her home to a space she rents in Oakland,California.Holding everything else constant,as a result of this move

The processes a firm uses to turn inputs into outputs of goods and services is called

Figure 8-5 -Refer to Figure 8-5.The vertical difference between curves F and G measures

The law of diminishing marginal returns states

A characteristic of the long run that is not available in the short run is that a firm is free to vary its output.

Which of the following statements regarding a firm's long-run average total cost (LRATC)curve and its short-run average total cost (SRATC)curve is true?

Average total cost is equal to average variable cost minus average fixed cost.

Long-run cost curves are U-shaped because

Adam spent $10,000 on new equipment for his small business,"Adam's Fitness Studio." Membership at his fitness center is very low and at this rate,Adam needs an additional $12,000 per year to keep his studio open.Which of the following is true?

Which of the following is the best example of a short run adjustment?

The long-run average cost curve shows

An important reason why diseconomies of scale arise is because firms may have to hire lower skilled workers as firms expand.

Figure 8-6 Figure 8-6 contains information about the short run cost structure of a firm. -Refer to Figure 8-6.In the figure above which letter represents the average variable cost curve?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters