Question 1

If production displays constant returns to scale, then all economies of scale have been exhausted.

Accepted Answer

A) True 
 B)False  True

Question 2

Figure 7.7   Figure 7.7 shows the cost structure for a firm.
-Refer to Figure 7.7.If output is 100 units, fixed cost of production is

Accepted Answer

A) $8 
B) $800 
C) $1000 
D) This cannot be determined from the diagram. 
A) $8 
B) $800 
C) $1000 
D) This cannot be determined from the diagram. B

Question 3

Which of the following statements is false?

Accepted Answer

A) An implicit cost is a nonmonetary opportunity cost. 
B) Economic costs include both accounting costs and implicit costs. 
C) An explicit cost is a cost that involves spending money. 
D) Economists consider all costs to be implicit costs. 
A) An implicit cost is a nonmonetary opportunity cost. 
B) Economic costs include both accounting costs and implicit costs. 
C) An explicit cost is a cost that involves spending money. 
D) Economists consider all costs to be implicit costs. D

Question 4

The rate at which a firm is able to substitute one input for another while keeping the level of output constant is called the

Accepted Answer

A) opportunity cost of inputs. 
B) marginal rate of technical substitution. 
C) input trade-off rate. 
D) isoquant substitution rate. 
A) opportunity cost of inputs. 
B) marginal rate of technical substitution. 
C) input trade-off rate. 
D) isoquant substitution rate.

Question 5

Figure 7.1  
-Refer to Figure 7.1.What is the marginal product of the 7th worker?

Accepted Answer

A) 66. 
B) 9)43. 
C) 2) 
D) -2. 
A) 66. 
B) 9)43. 
C) 2) 
D) -2.

Question 6

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 7

All of the following statements are true of the minimum efficient scale except one.Which one?

Accepted Answer

A) All possible economies of scale have been exhausted. 
B) The short-run average total cost curve's minimum point is equal to the long-run average cost curve's minimum point. 
C) Any increase in the scale of operation will encounter diseconomies of scale. 
D) An increase in the output level will increase profit. 
A) All possible economies of scale have been exhausted. 
B) The short-run average total cost curve's minimum point is equal to the long-run average cost curve's minimum point. 
C) Any increase in the scale of operation will encounter diseconomies of scale. 
D) An increase in the output level will increase profit.

Question 8

The marginal cost curve has a U shape because

Accepted Answer

A) Initially, the marginal product of labour falls, then rises. 
B) Initially, the average product of labour rises, then falls. 
C) Initially, the marginal product of labour rises, then falls. 
D) Initially, the average cost of production rises, then falls. 
A) Initially, the marginal product of labour falls, then rises. 
B) Initially, the average product of labour rises, then falls. 
C) Initially, the marginal product of labour rises, then falls. 
D) Initially, the average cost of production rises, then falls.

Question 9

Figure 7.13  
-Refer to Figure 7.13.The lines shown in the diagram are isocost lines.Which of the following shows an increase in the firm's total cost while the price of labour and capital remain unchanged?

Accepted Answer

A) The movement from CE to BF 
B) The movement from CE to AF 
C) The movement from BD to AF 
D) The movement from BD to CE 
A) The movement from CE to BF 
B) The movement from CE to AF 
C) The movement from BD to AF 
D) The movement from BD to CE

Question 10

Figure 7.2  
-Refer to Figure 7.2.The average product of labour declines after L2 because

Accepted Answer

A) the marginal product of labour is below the average product of labour. 
B) the marginal product of labour is falling. 
C) the marginal product of labour is negative. 
D) the marginal product of labour is positive. 
A) the marginal product of labour is below the average product of labour. 
B) the marginal product of labour is falling. 
C) the marginal product of labour is negative. 
D) the marginal product of labour is positive.

Question 11

Assume that you observe the long-run average cost curve of a local Bookstores, a national chain.Starting from the point on the curve where output is zero and moving to the right, which of the following lists the behaviour of long-run average costs in the correct sequence (that is, which will be observed first, second, etc.)?

Accepted Answer

A) Minimum efficient scale; economies of scale; constant returns to scale; diseconomies of scale 
B) Economies of scale; constant returns to scale; diseconomies of scale; minimum efficient scale 
C) Constant returns to scale; economies of scale; minimum efficient scale; diseconomies of scale 
D) Economies of scale; minimum efficient scale; constant returns to scale; diseconomies of scale 
A) Minimum efficient scale; economies of scale; constant returns to scale; diseconomies of scale 
B) Economies of scale; constant returns to scale; diseconomies of scale; minimum efficient scale 
C) Constant returns to scale; economies of scale; minimum efficient scale; diseconomies of scale 
D) Economies of scale; minimum efficient scale; constant returns to scale; diseconomies of scale

Question 12

What happens when the marginal product of labour rises?

Accepted Answer

A) the marginal cost of production will exceed the average total cost. 
B) the marginal cost of production also rises. 
C) the marginal cost of production falls. 
D) the average total cost of production also rises. 
A) the marginal cost of production will exceed the average total cost. 
B) the marginal cost of production also rises. 
C) the marginal cost of production falls. 
D) the average total cost of production also rises.

Question 13

Figure 7.13  
-Refer to Figure 7.13.The lines shown in the diagram are isocost lines.If the price of labour is $50 per unit, then along the isocost AF, the total cost

Accepted Answer

A) is $500. 
B) is $750. 
C) is $1250. 
D) cannot be determined without the price of capital. 
A) is $500. 
B) is $750. 
C) is $1250. 
D) cannot be determined without the price of capital.

Question 14

Which of the following equations is correct?

Accepted Answer

A) AVC - ATC = AFC 
B) AVC + ATC = AFC 
C) AFC + AVC = ATC 
D) ATC + AVC = AFC 
A) AVC - ATC = AFC 
B) AVC + ATC = AFC 
C) AFC + AVC = ATC 
D) ATC + AVC = AFC

Question 15

Use the general relationship between marginal and average values to explain why a marginal cost curve must intersect an average total cost curve and an average variable cost curve at their minimum points.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The relationship between marginal and av

Question 16

The marginal cost curve is U-shaped because of the law of increasing opportunity costs.

Accepted Answer

A) True 
 B)False

Question 17

Economies of scale exist as a firm increases its size in the long run because of all of the following except

Accepted Answer

A) the firm can afford more sophisticated technology in production. 
B) labour and management can specialise even further in their tasks. 
C) as a larger input buyer, the firm can purchase inputs at a lower per unit cost. 
D) as a firm expands its production, its profit margin per unit of output increases. 
A) the firm can afford more sophisticated technology in production. 
B) labour and management can specialise even further in their tasks. 
C) as a larger input buyer, the firm can purchase inputs at a lower per unit cost. 
D) as a firm expands its production, its profit margin per unit of output increases.

Question 18

Figure 7.2  
-Refer to Figure 7.2.Diminishing returns to labour set in

Accepted Answer

A) after L1. 
B) after L2. 
C) after L3. 
D) immediately. 
A) after L1. 
B) after L2. 
C) after L3. 
D) immediately.

Question 19

Which of the following would be categorised as an opportunity cost? 
a.not being able to spend your $10 000 savings if you sink the money into your business
b.the cost of purchasing supplies for your house-cleaning business
c.the cost of purchasing auto insurance for your dry-cleaning delivery business

Accepted Answer

A) a only 
B) a and c only 
C) b and c only 
D) all of the above 
A) a only 
B) a and c only 
C) b and c only 
D) all of the above

Question 20

When a firm produces 50 000 units of output, its total cost equals $6.5 million.When it increases its production to 70 000 units of output, its total cost increases to $9.4 million.Within this range, the marginal cost of an additional unit of output is

Accepted Answer

A) $41.43. 
B) $134.29. 
C) $135. 
D) $145. 
A) $41.43. 
B) $134.29. 
C) $135. 
D) $145.

If production displays constant returns to scale, then all economies of scale have been exhausted.

Figure 7.7 Figure 7.7 shows the cost structure for a firm. -Refer to Figure 7.7.If output is 100 units, fixed cost of production is

Which of the following statements is false?

The rate at which a firm is able to substitute one input for another while keeping the level of output constant is called the

Figure 7.1 -Refer to Figure 7.1.What is the marginal product of the 7^th worker?

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

All of the following statements are true of the minimum efficient scale except one.Which one?

The marginal cost curve has a U shape because

Figure 7.13 -Refer to Figure 7.13.The lines shown in the diagram are isocost lines.Which of the following shows an increase in the firm's total cost while the price of labour and capital remain unchanged?

Figure 7.2 -Refer to Figure 7.2.The average product of labour declines after L₂ because

What happens when the marginal product of labour rises?

Figure 7.13 -Refer to Figure 7.13.The lines shown in the diagram are isocost lines.If the price of labour is $50 per unit, then along the isocost AF, the total cost

Which of the following equations is correct?

The marginal cost curve is U-shaped because of the law of increasing opportunity costs.

Economies of scale exist as a firm increases its size in the long run because of all of the following except

Figure 7.2 -Refer to Figure 7.2.Diminishing returns to labour set in

When a firm produces 50 000 units of output, its total cost equals $6.5 million.When it increases its production to 70 000 units of output, its total cost increases to $9.4 million.Within this range, the marginal cost of an additional unit of output is

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 7: Technology Production and Costs

If production displays constant returns to scale, then all economies of scale have been exhausted.

Figure 7.7 Figure 7.7 shows the cost structure for a firm. -Refer to Figure 7.7.If output is 100 units, fixed cost of production is

Which of the following statements is false?

The rate at which a firm is able to substitute one input for another while keeping the level of output constant is called the

Figure 7.1 -Refer to Figure 7.1.What is the marginal product of the 7th worker?

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

All of the following statements are true of the minimum efficient scale except one.Which one?

The marginal cost curve has a U shape because

Figure 7.13 -Refer to Figure 7.13.The lines shown in the diagram are isocost lines.Which of the following shows an increase in the firm's total cost while the price of labour and capital remain unchanged?

Figure 7.2 -Refer to Figure 7.2.The average product of labour declines after L2 because

What happens when the marginal product of labour rises?

Figure 7.13 -Refer to Figure 7.13.The lines shown in the diagram are isocost lines.If the price of labour is $50 per unit, then along the isocost AF, the total cost

Which of the following equations is correct?

The marginal cost curve is U-shaped because of the law of increasing opportunity costs.

Economies of scale exist as a firm increases its size in the long run because of all of the following except

Figure 7.2 -Refer to Figure 7.2.Diminishing returns to labour set in

When a firm produces 50 000 units of output, its total cost equals $6.5 million.When it increases its production to 70 000 units of output, its total cost increases to $9.4 million.Within this range, the marginal cost of an additional unit of output is

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Figure 7.1 -Refer to Figure 7.1.What is the marginal product of the 7^th worker?

Figure 7.2 -Refer to Figure 7.2.The average product of labour declines after L₂ because