Question 1

Diseconomies of scale occur when

Accepted Answer

A)  long-run average costs rise as a firm increases its output. 
B)  long-run average costs fall as a firm expands its plant size. 
C)  short-run average costs rise as a firm expands its plant size. 
D)  long-run labour costs rise as a firm increases its output. 
A)  long-run average costs rise as a firm increases its output. 
B)  long-run average costs fall as a firm expands its plant size. 
C)  short-run average costs rise as a firm expands its plant size. 
D)  long-run labour costs rise as a firm increases its output.

Question 2

If a firm experiences diminishing returns, its marginal product must be negative.

Accepted Answer

A) True 
 B)False

Question 3

Average fixed costs of production

Accepted Answer

A)  remain constant. 
B)  will rise at a fixed rate as more is produced. 
C)  graph as a U-shaped curve. 
D)  fall as long as output is increased. 
A)  remain constant. 
B)  will rise at a fixed rate as more is produced. 
C)  graph as a U-shaped curve. 
D)  fall as long as output is increased.

Question 4

-Refer to Figure 7-16. Assume that production isoquants are convex. Total cost and output produced must increase for each of the following movements except one. Which movement is the exception?

Accepted Answer

A)  point a to point b 
B)  point a to point c 
C)  point b to point c 
D)  point b to point d 
A)  point a to point b 
B)  point a to point c 
C)  point b to point c 
D)  point b to point d

Question 5

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays

Accepted Answer

A)  diminishing returns. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  declining fixed costs. 
A)  diminishing returns. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  declining fixed costs.

Question 6

The marginal rate of technical substitution is

Accepted Answer

A)  the rate at which a firm is able to substitute one input for another, while keeping total cost constant. 
B)  the rate at which a firm is able to substitute one input for another, while keeping the level of output constant. 
C)  the rate at which a firm is able to institute positive technological changes to its production process. 
D)  the rate at which a firm is able to increase its output by replacing labour with technology. 
A)  the rate at which a firm is able to substitute one input for another, while keeping total cost constant. 
B)  the rate at which a firm is able to substitute one input for another, while keeping the level of output constant. 
C)  the rate at which a firm is able to institute positive technological changes to its production process. 
D)  the rate at which a firm is able to increase its output by replacing labour with technology.

Question 7

Which of the following statements is false?

Accepted Answer

A)  Marginal cost will equal average total cost when marginal cost is at its lowest point. 
B)  When marginal cost is less than average total cost, average total cost will fall. 
C)  When marginal cost is greater than average total cost, average total cost will rise. 
D)  Marginal cost will equal average total cost when average total cost is at its lowest point. 
A)  Marginal cost will equal average total cost when marginal cost is at its lowest point. 
B)  When marginal cost is less than average total cost, average total cost will fall. 
C)  When marginal cost is greater than average total cost, average total cost will rise. 
D)  Marginal cost will equal average total cost when average total cost is at its lowest point.

Question 8

What is an isocost line? What is the slope of an isocost line?

Accepted Answer

The isocost line shows all the combinati

Question 9

The basic activity of a firm is

Accepted Answer

A)  to set the prices of its products as high as possible. 
B)  to compete with other firms that produce similar products. 
C)  to provide jobs for its employees. 
D)  to use inputs to produce outputs of goods and services. 
A)  to set the prices of its products as high as possible. 
B)  to compete with other firms that produce similar products. 
C)  to provide jobs for its employees. 
D)  to use inputs to produce outputs of goods and services.

Question 10

-Refer to Figure 7-6. In the figure above, which letter represents the average fixed cost curve?

Accepted Answer

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

Question 11

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 labour is greater than the average product of labour. 
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 labour is greater than the average product of labour. 
C)  short-run marginal cost falls. 
D)  the demand for a firm's output increases.

Question 12

The slope of a typical isoquant is negative because to produce a given output, a producer

Accepted Answer

A)  will use more of one input only if it uses more of another. 
B)  can use less of one input only if the productivity of that input increases 
C)  can use less of one input only if it uses more of another. 
D)  will use more of one input only if the price of that input falls. 
A)  will use more of one input only if it uses more of another. 
B)  can use less of one input only if the productivity of that input increases 
C)  can use less of one input only if it uses more of another. 
D)  will use more of one input only if the price of that input falls.

Question 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

Increases in the marginal product of labour result from

Accepted Answer

A)  the use of new technology. 
B)  hiring more efficient workers. 
C)  the division of labour and specialisation. 
D)  increasing the usage of all inputs. 
A)  the use of new technology. 
B)  hiring more efficient workers. 
C)  the division of labour and specialisation. 
D)  increasing the usage of all inputs.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

The slope of an isocost line ________ and equals the negative of ________.

Accepted Answer

A)  increases as we move down the line; the ratio of input prices 
B)  decreases as we move down the line; the ratio of the marginal products 
C)  is constant; the ratio of input prices 
D)  is constant; the ratio of the marginal products 
A)  increases as we move down the line; the ratio of input prices 
B)  decreases as we move down the line; the ratio of the marginal products 
C)  is constant; the ratio of input prices 
D)  is constant; the ratio of the marginal products

Question 17

When a firm experiences negative technological change, it can produce the same output with fewer inputs.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements best describes the economic short run?

Accepted Answer

A)  It is a period of one year or less. 
B)  It is a period during which firms are free to vary all of their inputs. 
C)  It is a period during which at least one of the firm's inputs is fixed. 
D)  It is a period during which fixed inputs become variable inputs because of depreciation. 
A)  It is a period of one year or less. 
B)  It is a period during which firms are free to vary all of their inputs. 
C)  It is a period during which at least one of the firm's inputs is fixed. 
D)  It is a period during which fixed inputs become variable inputs because of depreciation.

Question 19

-Refer to Figure 7-13. The lines shown in the diagram are isocost lines. Which of the following shows an increase in the price of labour while the price of capital remains unchanged?

Accepted Answer

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

Question 20

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.

Diseconomies of scale occur when

If a firm experiences diminishing returns, its marginal product must be negative.

Average fixed costs of production

-Refer to Figure 7-16. Assume that production isoquants are convex. Total cost and output produced must increase for each of the following movements except one. Which movement is the exception?

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays

The marginal rate of technical substitution is

Which of the following statements is false?

What is an isocost line? What is the slope of an isocost line?

The basic activity of a firm is

-Refer to Figure 7-6. In the figure above, which letter represents the average fixed cost curve?

Economies of scale occur when

The slope of a typical isoquant is negative because to produce a given output, a producer

-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

Increases in the marginal product of labour result from

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

The slope of an isocost line and equals the negative of .

When a firm experiences negative technological change, it can produce the same output with fewer inputs.

Which of the following statements best describes the economic short run?

-Refer to Figure 7-13. The lines shown in the diagram are isocost lines. Which of the following shows an increase in the price of labour while the price of capital remains unchanged?

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

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

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

Diseconomies of scale occur when

If a firm experiences diminishing returns, its marginal product must be negative.

Average fixed costs of production

-Refer to Figure 7-16. Assume that production isoquants are convex. Total cost and output produced must increase for each of the following movements except one. Which movement is the exception?

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays

The marginal rate of technical substitution is

Which of the following statements is false?

What is an isocost line? What is the slope of an isocost line?

The basic activity of a firm is

-Refer to Figure 7-6. In the figure above, which letter represents the average fixed cost curve?

Economies of scale occur when

The slope of a typical isoquant is negative because to produce a given output, a producer

-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

Increases in the marginal product of labour result from

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

The slope of an isocost line ________ and equals the negative of ________.

When a firm experiences negative technological change, it can produce the same output with fewer inputs.

Which of the following statements best describes the economic short run?

-Refer to Figure 7-13. The lines shown in the diagram are isocost lines. Which of the following shows an increase in the price of labour while the price of capital remains unchanged?

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

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

The slope of an isocost line and equals the negative of .