Question 1

The minimum efficient scale is same across all industries irrespective of the types of goods they produce.

Accepted Answer

A) True 
 B)False

Question 2

Why does the law of diminishing return not apply in the long run?

Accepted Answer

A) All the factors of production are fixed 
B) There are no fixed factors of production 
C) There are some fixed and some variable factors 
D) The producer is required to produce a fixed level of output 
E) The producer can change the level of output only by changing the variable factors,fixed factors remaining unchanged 
A) All the factors of production are fixed 
B) There are no fixed factors of production 
C) There are some fixed and some variable factors 
D) The producer is required to produce a fixed level of output 
E) The producer can change the level of output only by changing the variable factors,fixed factors remaining unchanged

Question 3

The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm. Figure 7.3  
- Refer to the Figure 7.3.In the long run,an increase in production from Q1 to Q3 would:

Accepted Answer

A) increase average cost by C4 - C1. 
B) increase average cost by C3 - C1. 
C) increase average cost by C3 - C2. 
D) decrease average cost by C3 - C1. 
E) decrease average cost by C3 - C2. 
A) increase average cost by C4 - C1. 
B) increase average cost by C3 - C1. 
C) increase average cost by C3 - C2. 
D) decrease average cost by C3 - C1. 
E) decrease average cost by C3 - C2.

Question 4

If the cost borne by a firm when output is zero is $100 and that of producing 5 units is $250,then the variable cost of the firm is equal to $150.

Accepted Answer

A) True 
 B)False

Question 5

The figure given below shows the average fixed cost (AFC) and the average variable cost (AVC) curves of a competive firm. Figure 7.1  
- Refer to Figure 7.1.Compute the total cost of producing 4 units of the output.

Accepted Answer

A) $64. 
B) $72. 
C) $80. 
D) $84. 
E) $90. 
A) $64. 
B) $72. 
C) $80. 
D) $84. 
E) $90.

Question 6

The table given below shows the total cost of producing different units of the output by a competitive firm. Table 7.4
 
- In Table 7.4,at 4 units of output marginal cost is:

Accepted Answer

A) $10. 
B) $15. 
C) $20. 
D) $25 
E) $30. 
A) $10. 
B) $15. 
C) $20. 
D) $25 
E) $30.

Question 7

Which of the following statements is true?

Accepted Answer

A) When long-run average total costs are increasing,the firm enjoys economies of scale. 
B) Most industries exhibit long-run average costs that are shaped like an upside-down U. 
C) Constant returns to scale occur when the short-run average-total-cost curve is horizontal. 
D) When long-run average total costs are increasing,the firm has diseconomies of scale. 
E) Constant returns to scale are never present in the real world. 
A) When long-run average total costs are increasing,the firm enjoys economies of scale. 
B) Most industries exhibit long-run average costs that are shaped like an upside-down U. 
C) Constant returns to scale occur when the short-run average-total-cost curve is horizontal. 
D) When long-run average total costs are increasing,the firm has diseconomies of scale. 
E) Constant returns to scale are never present in the real world.

Question 8

Assume that one laborer produces 6 units of output,two laborers produce 14 units,three laborers 22 units,four laborers 24 units,and five laborers 25 units.Diminishing returns set in when the firm hires:

Accepted Answer

A) the first laborer. 
B) the second laborer. 
C) the third laborer. 
D) the fourth laborer. 
E) the fifth laborer. 
A) the first laborer. 
B) the second laborer. 
C) the third laborer. 
D) the fourth laborer. 
E) the fifth laborer.

Question 9

The table given below shows the average total cost of production of a firm at different levels of the output. Table 7.5
  
-In Table 7.5,if the total fixed cost is $3,what is the total variable cost of producing 5 units?

Accepted Answer

A) $38 
B) $32 
C) $3 
D) $8 
E) Cannot be determined from the information given. 
A) $38 
B) $32 
C) $3 
D) $8 
E) Cannot be determined from the information given.

Question 10

When the marginal-cost curve lies above the average-total-cost curve,the average-total-cost curve slopes up and the average-variable-cost curve slopes down.

Accepted Answer

A) True 
 B)False

Question 11

The following table shows the cost of producing different units of ball point pens by a firm. Table 7.1
 
- According to Table 7.1,the total fixed cost of the firm equals:

Accepted Answer

A) $18. 
B) $10. 
C) $2. 
D) $12. 
E) $8. 
A) $18. 
B) $10. 
C) $2. 
D) $12. 
E) $8.

Question 12

The difference between average total cost and average variable cost decreases with an increase in output.

Accepted Answer

A) True 
 B)False

Question 13

The marginal cost curve intersects the average total cost curve at the firm's most efficient point of production.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not correct?

Accepted Answer

A) If Average Variable Cost (AV
C)  are decreasing,Average Total Cost (AT
C)  must be decreasing. 
B) AVC reaches minimum before ATC. 
C) If ATC is increasing,AVC must be increasing. 
D) If AVC is increasing,Marginal Cost (M
C)  is increasing. 
E) If Average Fixed Cost (AF
C)  is decreasing,ATC must be decreasing. 
A) If Average Variable Cost (AV
C)  are decreasing,Average Total Cost (AT
C)  must be decreasing. 
B) AVC reaches minimum before ATC. 
C) If ATC is increasing,AVC must be increasing. 
D) If AVC is increasing,Marginal Cost (M
C)  is increasing. 
E) If Average Fixed Cost (AF
C)  is decreasing,ATC must be decreasing.

Question 15

The long-run average-total- cost curve represents:

Accepted Answer

A) the maximum cost of producing any level of output when all the factors are fixed. 
B) the lowest cost of producing any level of output when all the factors are variable. 
C) the maximum cost of producing any level of output when all the factors are variable. 
D) the lowest cost of producing any level of output when all the factors are fixed. 
E) he lowest cost of producing any level of output when at least one factor fixed. 
A) the maximum cost of producing any level of output when all the factors are fixed. 
B) the lowest cost of producing any level of output when all the factors are variable. 
C) the maximum cost of producing any level of output when all the factors are variable. 
D) the lowest cost of producing any level of output when all the factors are fixed. 
E) he lowest cost of producing any level of output when at least one factor fixed.

Question 16

If a company is producing at a level of output at which the long-run average-total-cost curve reaches a minimum,the company:

Accepted Answer

A) is experiencing economies of scale. 
B) is at minimum efficient scale. 
C) is experiencing increasing returns to scale. 
D) will shut down. 
E) is experiencing diseconomies of scale. 
A) is experiencing economies of scale. 
B) is at minimum efficient scale. 
C) is experiencing increasing returns to scale. 
D) will shut down. 
E) is experiencing diseconomies of scale.

Question 17

The law of diminishing returns applies:

Accepted Answer

A) in the long run because all inputs are variable. 
B) in the short run because some inputs remain fixed. 
C) in both the short run and the long run. 
D) to fixed inputs in the long run. 
E) to fixed inputs in the short run. 
A) in the long run because all inputs are variable. 
B) in the short run because some inputs remain fixed. 
C) in both the short run and the long run. 
D) to fixed inputs in the long run. 
E) to fixed inputs in the short run.

Question 18

When a firm is experiencing economies of scale,it will:

Accepted Answer

A) under use a larger plant size than is indicated by short-run efficiency concerns. 
B) under use a smaller plant than is indicated by short-run efficiency concerns. 
C) overuse a larger plant size than is indicated by short-run efficiency concerns. 
D) overuse a smaller plant size than is indicated by short-run efficiency concerns. 
E) produce at the minimum short-run and long-run average costs. 
A) under use a larger plant size than is indicated by short-run efficiency concerns. 
B) under use a smaller plant than is indicated by short-run efficiency concerns. 
C) overuse a larger plant size than is indicated by short-run efficiency concerns. 
D) overuse a smaller plant size than is indicated by short-run efficiency concerns. 
E) produce at the minimum short-run and long-run average costs.

Question 19

When a firm expands in size such that its workers can specialize in any one activity,the long run average total cost of the firm gradually increases.

Accepted Answer

A) True 
 B)False

Question 20

The figure given below shows the average fixed cost (AFC) and the average variable cost (AVC) curves of a competive firm. Figure 7.1  
- Using Figure 7.1 determine the average total cost of producing the first unit of the output.

Accepted Answer

A) $10. 
B) $20. 
C) $30. 
D) $40. 
E) $50. 
A) $10. 
B) $20. 
C) $30. 
D) $40. 
E) $50.

Exam 7: Supply: The Costs of Doing Business

The minimum efficient scale is same across all industries irrespective of the types of goods they produce.

Why does the law of diminishing return not apply in the long run?

The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm. Figure 7.3 - Refer to the Figure 7.3.In the long run,an increase in production from Q1 to Q3 would:

If the cost borne by a firm when output is zero is $100 and that of producing 5 units is $250,then the variable cost of the firm is equal to $150.

The figure given below shows the average fixed cost (AFC) and the average variable cost (AVC) curves of a competive firm. Figure 7.1 - Refer to Figure 7.1.Compute the total cost of producing 4 units of the output.

The table given below shows the total cost of producing different units of the output by a competitive firm. Table 7.4 - In Table 7.4,at 4 units of output marginal cost is:

Which of the following statements is true?

Assume that one laborer produces 6 units of output,two laborers produce 14 units,three laborers 22 units,four laborers 24 units,and five laborers 25 units.Diminishing returns set in when the firm hires:

The table given below shows the average total cost of production of a firm at different levels of the output. Table 7.5 -In Table 7.5,if the total fixed cost is $3,what is the total variable cost of producing 5 units?

When the marginal-cost curve lies above the average-total-cost curve,the average-total-cost curve slopes up and the average-variable-cost curve slopes down.

The following table shows the cost of producing different units of ball point pens by a firm. Table 7.1 - According to Table 7.1,the total fixed cost of the firm equals:

The difference between average total cost and average variable cost decreases with an increase in output.

The marginal cost curve intersects the average total cost curve at the firm's most efficient point of production.

Which of the following is not correct?

The long-run average-total- cost curve represents:

If a company is producing at a level of output at which the long-run average-total-cost curve reaches a minimum,the company:

The law of diminishing returns applies:

When a firm is experiencing economies of scale,it will:

When a firm expands in size such that its workers can specialize in any one activity,the long run average total cost of the firm gradually increases.

The figure given below shows the average fixed cost (AFC) and the average variable cost (AVC) curves of a competive firm. Figure 7.1 - Using Figure 7.1 determine the average total cost of producing the first unit of the output.

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Consumer Choice

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm. Figure 7.3 - Refer to the Figure 7.3.In the long run,an increase in production from Q₁to Q₃would: