Question 1

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 2

In the short run,if average product is at its maximum,then average variable cost is at its minimum.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is an implicit cost of production?

Accepted Answer

A)  the loss in the value of capital equipment due to wear and tear 
B)  the salary you pay yourself for running your business 
C)  the utility bill paid to water, electricity, and natural gas companies 
D)  the interest you pay your mother for the money she loaned you to start your business 
A)  the loss in the value of capital equipment due to wear and tear 
B)  the salary you pay yourself for running your business 
C)  the utility bill paid to water, electricity, and natural gas companies 
D)  the interest you pay your mother for the money she loaned you to start your business

Question 4

Accounting costs exclude implicit costs.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements explains the difference between diminishing returns and diseconomies of scale?

Accepted Answer

A)  Diminishing returns are the result of changes in explicit costs. Diseconomies of scale are the result of changes in explicit costs and implicit costs. 
B)  Diminishing returns refer to production while diseconomies of scale refer to costs. 
C)  Diminishing returns cause a firm's marginal cost curve to rise; diseconomies of scale cause a firm's marginal cost curve to fall. 
D)  Diminishing returns apply only to the short run; diseconomies of scale apply only in the long run. 
A)  Diminishing returns are the result of changes in explicit costs. Diseconomies of scale are the result of changes in explicit costs and implicit costs. 
B)  Diminishing returns refer to production while diseconomies of scale refer to costs. 
C)  Diminishing returns cause a firm's marginal cost curve to rise; diseconomies of scale cause a firm's marginal cost curve to fall. 
D)  Diminishing returns apply only to the short run; diseconomies of scale apply only in the long run.

Question 6

A firm's short-run average total cost curve is parallel to its short-run average variable cost curve.

Accepted Answer

A) True 
 B)False

Question 7

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 8

A U-shaped long-run average cost curve implies that a firm experiences economies of scale at low levels of production and diseconomies of scale at high levels of production.

Accepted Answer

A) True 
 B)False

Question 9

All of the following cost curves are U-shaped except

Accepted Answer

A)  the marginal cost curve. 
B)  the average fixed cost curve. 
C)  the average total cost curve. 
D)  the average variable cost curve. 
A)  the marginal cost curve. 
B)  the average fixed cost curve. 
C)  the average total cost curve. 
D)  the average variable cost curve.

Question 10

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 11

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 12

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 13

Figure 8-2
  
-Refer to Figure 8-2.The curve labeled "E" is

Accepted Answer

A)  the total product curve. 
B)  the average product curve. 
C)  the marginal product curve. 
D)  the output supply curve. 
A)  the total product curve. 
B)  the average product curve. 
C)  the marginal product curve. 
D)  the output supply curve.

Question 14

The formula for total fixed cost is

Accepted Answer

A)  TFC = TC + TVC. 
B)  TFC = TVC - TC. 
C)  TFC = TC/TVC. 
D)  TFC = TC - TVC. 
A)  TFC = TC + TVC. 
B)  TFC = TVC - TC. 
C)  TFC = TC/TVC. 
D)  TFC = TC - TVC.

Question 15

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 16

The production function shows

Accepted Answer

A)  the total cost of producing a given quantity of output. 
B)  the maximum output that can be produced from a set of inputs. 
C)  the technology used to produce output. 
D)  the incremental output gained by improving the production process. 
A)  the total cost of producing a given quantity of output. 
B)  the maximum output that can be produced from a set of inputs. 
C)  the technology used to produce output. 
D)  the incremental output gained by improving the production process.

Question 17

The process a firm uses to turn inputs into outputs of goods and services is called technology.

Accepted Answer

A) True 
 B)False

Question 18

A curve showing the lowest cost at which a firm is able to produce a given level of output in the long run is

Accepted Answer

A)  a long-run production function. 
B)  a long-run marginal cost curve. 
C)  a minimum efficient scale curve. 
D)  a long-run average total cost curve. 
A)  a long-run production function. 
B)  a long-run marginal cost curve. 
C)  a minimum efficient scale curve. 
D)  a long-run average total cost curve.

Question 19

In the short run,why does a production function eventually display diminishing returns to labor?

Accepted Answer

A)  As the number of workers increases it becomes difficult to monitor them. 
B)  As a firm hires more workers the skills and the work ethic of the additional workers will eventually decline. 
C)  As the number of workers increases eventually the gains from the division of labor and specialization are used up. 
D)  The opportunity cost of hiring additional workers must eventually rise. 
A)  As the number of workers increases it becomes difficult to monitor them. 
B)  As a firm hires more workers the skills and the work ethic of the additional workers will eventually decline. 
C)  As the number of workers increases eventually the gains from the division of labor and specialization are used up. 
D)  The opportunity cost of hiring additional workers must eventually rise.

Question 20

Table 8-3
 $\begin{array}{|c|c|c|c|}
\hline \begin{array}{c}
\text { Quantity of } \
\text { Workers }
\end{array} & \begin{array}{c}
\text { Quantity of } \
\text { Boxes }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Product of } \
\text { Labor }
\end{array} & \begin{array}{c}
\text { Average } \
\text { Product of } \
\text { Labor }
\end{array} \
\hline 0 & 0 & \cdots \cdots & \cdots \
\hline 1 & 50 & & \
\hline 2 & 200 & & \
\hline 3 & 240 & & \
\hline 4 & 264 & & \
\hline 5 & 284 & & \
\hline
\end{array}$
-Refer to Table 8-3.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 average product of labor will equal 66 boxes when Manny hires

Accepted Answer

A)  the second worker. 
B)  the third worker. 
C)  the fourth worker. 
D)  the fifth worker. 
A)  the second worker. 
B)  the third worker. 
C)  the fourth worker. 
D)  the fifth worker.

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

In the short run,if average product is at its maximum,then average variable cost is at its minimum.

Which of the following is an implicit cost of production?

Accounting costs exclude implicit costs.

Which of the following statements explains the difference between diminishing returns and diseconomies of scale?

A firm's short-run average total cost curve is parallel to its short-run average variable cost curve.

An explicit cost is defined as

A U-shaped long-run average cost curve implies that a firm experiences economies of scale at low levels of production and diseconomies of scale at high levels of production.

All of the following cost curves are U-shaped except

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

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?

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

Figure 8-2 -Refer to Figure 8-2.The curve labeled "E" is

The formula for total fixed cost is

Economies of scale occur when

The production function shows

The process a firm uses to turn inputs into outputs of goods and services is called technology.

A curve showing the lowest cost at which a firm is able to produce a given level of output in the long run is

In the short run,why does a production function eventually display diminishing returns to 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

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

In the short run,if average product is at its maximum,then average variable cost is at its minimum.

Which of the following is an implicit cost of production?

Accounting costs exclude implicit costs.

Which of the following statements explains the difference between diminishing returns and diseconomies of scale?

A firm's short-run average total cost curve is parallel to its short-run average variable cost curve.

An explicit cost is defined as

A U-shaped long-run average cost curve implies that a firm experiences economies of scale at low levels of production and diseconomies of scale at high levels of production.

All of the following cost curves are U-shaped except

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

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?

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

Figure 8-2 -Refer to Figure 8-2.The curve labeled "E" is

The formula for total fixed cost is

Economies of scale occur when

The production function shows

The process a firm uses to turn inputs into outputs of goods and services is called technology.

A curve showing the lowest cost at which a firm is able to produce a given level of output in the long run is

In the short run,why does a production function eventually display diminishing returns to 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