Question 1

As a firm hires more labor in the short run,the

Accepted Answer

A) level of total product stays constant. 
B) output per worker rises. 
C) extra output of another worker may rise at first, but eventually must fall. 
D) costs of production are increasing at a fixed rate per unit of output. 
A) level of total product stays constant. 
B) output per worker rises. 
C) extra output of another worker may rise at first, but eventually must fall. 
D) costs of production are increasing at a fixed rate per unit of output.

Question 2

The River Rouge plant was built by the Ford Motor Company in the 1920s to produce the company's Model A car.Which of the following is evidence that the River Rouge plant suffered from diseconomies of scale?

Accepted Answer

A) Despite an expensive advertising campaign the Model A did not earn the company a profit. 
B) Model A cars made at the River Rouge plant failed to earn Ford a profit.Ford eventually constructed smaller plants to make the Model A at a lower average cost. 
C) Model A cars made at the River Rouge plant failed to earn a profit.Ford reduced the average cost of the Model A by cutting its employees' wages. 
D) Model A cars made at the River Rouge plant failed to earn a profit because the price of steel used to manufacture the Model A rose when workers in the steel industry went on strike. 
A) Despite an expensive advertising campaign the Model A did not earn the company a profit. 
B) Model A cars made at the River Rouge plant failed to earn Ford a profit.Ford eventually constructed smaller plants to make the Model A at a lower average cost. 
C) Model A cars made at the River Rouge plant failed to earn a profit.Ford reduced the average cost of the Model A by cutting its employees' wages. 
D) Model A cars made at the River Rouge plant failed to earn a profit because the price of steel used to manufacture the Model A rose when workers in the steel industry went on strike.

Question 3

Table 8-8
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (sets) }
\end{array} & \begin{array} { c } 
\text { Long Run } \
\text { Average Cost }
\end{array} \
\hline 100 & \$ 40 \
\hline 200 & 35 \
\hline 300 & 30 \
\hline 400 & 30 \
\hline 500 & 35 \
\hline
\end{array}$$ 
Elegant Settings manufactures stainless steel cutlery.Table 8-8 shows the company's cost data.
-Refer to Table 8-8.What is the minimum efficient scale of production?

Accepted Answer

A) 100 units 
B) 200 units 
C) 300 units 
D) 400 units 
A) 100 units 
B) 200 units 
C) 300 units 
D) 400 units

Question 4

Costs that change as output changes are called incremental costs.

Accepted Answer

A) True 
 B)False

Question 5

Table 8-8
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (sets) }
\end{array} & \begin{array} { c } 
\text { Long Run } \
\text { Average Cost }
\end{array} \
\hline 100 & \$ 40 \
\hline 200 & 35 \
\hline 300 & 30 \
\hline 400 & 30 \
\hline 500 & 35 \
\hline
\end{array}$$ 
Elegant Settings manufactures stainless steel cutlery.Table 8-8 shows the company's cost data.
-Refer to Table 8-8.Elegant Settings experiences

Accepted Answer

A) economies of scale up to an output level of 400. 
B) diminishing returns up to an output level of 400. 
C) increasing returns beyond an output level of 400. 
D) economies of scale at an output of 300 or less and diseconomies of scale at an output level above 400. 
A) economies of scale up to an output level of 400. 
B) diminishing returns up to an output level of 400. 
C) increasing returns beyond an output level of 400. 
D) economies of scale at an output of 300 or less and diseconomies of scale at an output level above 400.

Question 6

A characteristic of the long run is

Accepted Answer

A) there are fixed inputs. 
B) all inputs can be varied. 
C) plant capacity cannot be increased or decreased. 
D) there are both fixed and variable inputs. 
A) there are fixed inputs. 
B) all inputs can be varied. 
C) plant capacity cannot be increased or decreased. 
D) there are both fixed and variable inputs.

Question 7

As output increases,average fixed cost gets smaller and smaller.

Accepted Answer

A) True 
 B)False

Question 8

Diminishing marginal product of labor occurs when adding another unit of labor

Accepted Answer

A) decreases output. 
B) changes output by an amount smaller than the output added by the previous unit of labor. 
C) increases output by an amount larger than the output added by the previous unit of labor. 
D) decreases output by an amount smaller than the output added by the previous unit of labor. 
A) decreases output. 
B) changes output by an amount smaller than the output added by the previous unit of labor. 
C) increases output by an amount larger than the output added by the previous unit of labor. 
D) decreases output by an amount smaller than the output added by the previous unit of labor.

Question 9

If production displays economies of scale,the long-run average cost curve is

Accepted Answer

A) above the short-run average total cost curve. 
B) downward-sloping. 
C) upward sloping. 
D) below the long-run marginal cost curve. 
A) above the short-run average total cost curve. 
B) downward-sloping. 
C) upward sloping. 
D) below the long-run marginal cost curve.

Question 10

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) 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) level of operation where long-run average costs are lowest. 
D) the smallest output level where the firm finally reaches productive efficiency.

Question 11

The level of output at which all economies of scale have been exhausted is known as

Accepted Answer

A) constant returns to scale. 
B) minimum efficient scale. 
C) the economically efficient output level. 
D) optimal economic size. 
A) constant returns to scale. 
B) minimum efficient scale. 
C) the economically efficient output level. 
D) optimal economic size.

Question 12

In the long run,all of a firm's inputs are variable.

Accepted Answer

A) True 
 B)False

Question 13

A "stockout" occurs when

Accepted Answer

A) brokers run out of shares of stock to sell of a particular company. 
B) a disruption due to a power outage, etc., causes a temporary production shutdown. 
C) a company holds too many goods in inventories. 
D) a firm loses sales because goods consumers want are not available. 
A) brokers run out of shares of stock to sell of a particular company. 
B) a disruption due to a power outage, etc., causes a temporary production shutdown. 
C) a company holds too many goods in inventories. 
D) a firm loses sales because goods consumers want are not available.

Question 14

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,it was previously operating at

Accepted Answer

A) minimum efficient scale. 
B) more than minimum efficient scale. 
C) less than minimum efficient scale. 
D) minimum capacity. 
A) minimum efficient scale. 
B) more than minimum efficient scale. 
C) less than minimum efficient scale. 
D) minimum capacity.

Question 15

If production displays increasing marginal returns,then

Accepted Answer

A) total product rises by a constant amount throughout. 
B) each new worker hired adds more to output than previous hires. 
C) the firm must be adding new capital to keep boosting productivity. 
D) total product reaches a maximum sooner than if production displayed decreasing returns. 
A) total product rises by a constant amount throughout. 
B) each new worker hired adds more to output than previous hires. 
C) the firm must be adding new capital to keep boosting productivity. 
D) total product reaches a maximum sooner than if production displayed decreasing returns.

Question 16

The short run is the time period during which a firm has at least one input constraint.

Accepted Answer

A) True 
 B)False

Question 17

The difference between technology and technological change is that

Accepted Answer

A) technology refers to the processes used by a firm to transform inputs into output while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs. 
B) technology is carried out by firms producing physical goods but technological change is an intellectual exercise into seeking ways to improve production. 
C) technology is product-centered, that is, developing new products with our limited resources while technological change is process-centered in that it focuses on developing new production techniques. 
D) technology involves the use of capital equipment while technological change requires the use of brain power. 
A) technology refers to the processes used by a firm to transform inputs into output while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs. 
B) technology is carried out by firms producing physical goods but technological change is an intellectual exercise into seeking ways to improve production. 
C) technology is product-centered, that is, developing new products with our limited resources while technological change is process-centered in that it focuses on developing new production techniques. 
D) technology involves the use of capital equipment while technological change requires the use of brain power.

Question 18

Figure 8-10
  
-Refer to Figure 8-10.Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC₄.Now,following a permanent change in demand,it plans to cut production to Qc units.What will happen to its average cost of production?

Accepted Answer

A) In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37. 
B) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41. 
C) In the short run, its average cost falls from $47 to $37, and in the long run, average cost rises to $41. 
D) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37. 
A) In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37. 
B) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41. 
C) In the short run, its average cost falls from $47 to $37, and in the long run, average cost rises to $41. 
D) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37.

Question 19

Stan owns a software design business.He does not have time to expand his office space or redesign the layout of his office.He can increase the amount of work he does by working more hours,asking his current employees to work more hours,or hiring more employees.The relationship between Stan's inputs and the maximum output his firm can produce is called his

Accepted Answer

A) long-run production function. 
B) production possibilities frontier. 
C) short-run production function. 
D) cost function. 
A) long-run production function. 
B) production possibilities frontier. 
C) short-run production function. 
D) cost function.

Question 20

The additional output a firm produces by hiring one more worker is called the marginal product of labor.

Accepted Answer

A) True 
 B)False

As a firm hires more labor in the short run,the

The River Rouge plant was built by the Ford Motor Company in the 1920s to produce the company's Model A car.Which of the following is evidence that the River Rouge plant suffered from diseconomies of scale?

Table 8-8 Quantity (sets) Long Run Average Cost 100 \ 40 200 35 300 30 400 30 500 35 Elegant Settings manufactures stainless steel cutlery.Table 8-8 shows the company's cost data. -Refer to Table 8-8.What is the minimum efficient scale of production?

Costs that change as output changes are called incremental costs.

Table 8-8 Quantity (sets) Long Run Average Cost 100 \ 40 200 35 300 30 400 30 500 35 Elegant Settings manufactures stainless steel cutlery.Table 8-8 shows the company's cost data. -Refer to Table 8-8.Elegant Settings experiences

A characteristic of the long run is

As output increases,average fixed cost gets smaller and smaller.

Diminishing marginal product of labor occurs when adding another unit of labor

If production displays economies of scale,the long-run average cost curve is

The minimum efficient scale is

The level of output at which all economies of scale have been exhausted is known as

In the long run,all of a firm's inputs are variable.

A "stockout" occurs when

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,it was previously operating at

If production displays increasing marginal returns,then

The short run is the time period during which a firm has at least one input constraint.

The difference between technology and technological change is that

Figure 8-10 -Refer to Figure 8-10.Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC₄.Now,following a permanent change in demand,it plans to cut production to Qc units.What will happen to its average cost of production?

The additional output a firm produces by hiring one more worker is called the marginal product of labor.

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

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Exam 8: Technology, production, and Costs

As a firm hires more labor in the short run,the

The River Rouge plant was built by the Ford Motor Company in the 1920s to produce the company's Model A car.Which of the following is evidence that the River Rouge plant suffered from diseconomies of scale?

Table 8-8 Quantity (sets) Long Run Average Cost 100 \ 40 200 35 300 30 400 30 500 35 Elegant Settings manufactures stainless steel cutlery.Table 8-8 shows the company's cost data. -Refer to Table 8-8.What is the minimum efficient scale of production?

Costs that change as output changes are called incremental costs.

Table 8-8 Quantity (sets) Long Run Average Cost 100 \ 40 200 35 300 30 400 30 500 35 Elegant Settings manufactures stainless steel cutlery.Table 8-8 shows the company's cost data. -Refer to Table 8-8.Elegant Settings experiences

A characteristic of the long run is

As output increases,average fixed cost gets smaller and smaller.

Diminishing marginal product of labor occurs when adding another unit of labor

If production displays economies of scale,the long-run average cost curve is

The minimum efficient scale is

The level of output at which all economies of scale have been exhausted is known as

In the long run,all of a firm's inputs are variable.

A "stockout" occurs when

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,it was previously operating at

If production displays increasing marginal returns,then

The short run is the time period during which a firm has at least one input constraint.

The difference between technology and technological change is that

Figure 8-10 -Refer to Figure 8-10.Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC₄.Now,following a permanent change in demand,it plans to cut production to Qc units.What will happen to its average cost of production?

The additional output a firm produces by hiring one more worker is called the marginal product of labor.

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