Question 1

What is the difference between 'diminishing marginal returns' and 'diseconomies of scale'?

Accepted Answer

A)  Both concepts explain why marginal cost increases after some point, but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
B)  Both concepts explain why average total cost increases after some point, but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
C)  Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why average cost increases. 
D)  Diminishing marginal returns, which applies only in the long run when all factors are variable, explains why average variable cost increases, while diseconomies of scale, which applies in the short run when at least one factor is fixed, explains why average total cost increases. 
A)  Both concepts explain why marginal cost increases after some point, but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
B)  Both concepts explain why average total cost increases after some point, but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
C)  Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why average cost increases. 
D)  Diminishing marginal returns, which applies only in the long run when all factors are variable, explains why average variable cost increases, while diseconomies of scale, which applies in the short run when at least one factor is fixed, explains why average total cost increases.

Question 2

Which of the following is not a source of technological advancement for a producer?

Accepted Answer

A)  Better trained workers 
B)  More efficient physical capital 
C)  Higher skill level of managers 
D)  Outsourcing some aspect of production 
A)  Better trained workers 
B)  More efficient physical capital 
C)  Higher skill level of managers 
D)  Outsourcing some aspect of production

Question 3

Table 6.2
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Number of } \
\text { Workers }
\end{array} & \begin{array} { c } 
\text { Apples per Day } \
\text { (bushels) }
\end{array} \
\hline 1 & 50 \
\hline 2 & 120 \
\hline 3 & 180 \
\hline 4 & 230 \
\hline 5 & 270 \
\hline 6 & 300 \
\hline
\end{array}$$ Table 6.2 summarises production at the Crunchy Apple Orchard for the month of April 2005.
-Refer to Table 6.2.The average product of labour when the orchard employs five workers is ________.

Accepted Answer

A)  270 bushels 
B)  54 bushels 
C)  40 bushels 
D)  8 bushels 
A)  270 bushels 
B)  54 bushels 
C)  40 bushels 
D)  8 bushels

Question 4

Average fixed cost is equal to _________.

Accepted Answer

A)  the amount of total cost that does not change as output changes in the short run 
B)  fixed cost divided by the quantity of output produced 
C)  fixed cost multiplied by the quantity of output produced 
D)  average total cost plus average variable cost 
A)  the amount of total cost that does not change as output changes in the short run 
B)  fixed cost divided by the quantity of output produced 
C)  fixed cost multiplied by the quantity of output produced 
D)  average total cost plus average variable cost

Question 5

Figure 6.1  
-Refer to Figure 6.1.What is the marginal product of the seventh worker?

Accepted Answer

A)  66 
B)  9.43 
C)  2 
D)  −2 
A)  66 
B)  9.43 
C)  2 
D)  −2

Question 6

Marginal cost is calculated for a particular increase in output by _________.

Accepted Answer

A)  multiplying the total cost by the change in output 
B)  multiplying the change in total cost by the change in output 
C)  dividing the total cost by the change in output 
D)  dividing the change in total cost by the change in output 
A)  multiplying the total cost by the change in output 
B)  multiplying the change in total cost by the change in output 
C)  dividing the total cost by the change in output 
D)  dividing the change in total cost by the change in output

Question 7

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 8

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 9

Figure 6.5  
-Refer to Figure 6.5.Identify the curves in the diagram.

Accepted Answer

A)  E = average fixed cost curve; F = variable cost curve; G = total cost curve; H = marginal cost curve 
B)  E = marginal cost curve; F = total cost curve; G = variable cost curve; H = average fixed cost curve 
C)  E = average fixed cost curve; F = average total cost curve; G = average variable cost curve; H = marginal cost curve 
D)  E = marginal cost curve; F = average total cost curve; G = average variable cost curve; H = average fixed cost curve 
A)  E = average fixed cost curve; F = variable cost curve; G = total cost curve; H = marginal cost curve 
B)  E = marginal cost curve; F = total cost curve; G = variable cost curve; H = average fixed cost curve 
C)  E = average fixed cost curve; F = average total cost curve; G = average variable cost curve; H = marginal cost curve 
D)  E = marginal cost curve; F = average total cost curve; G = average variable cost curve; H = average fixed cost curve

Question 10

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 11

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 12

Minimum efficient scale is defined as the level of output at which __________.

Accepted Answer

A)  all economies of scale are exhausted 
B)  diminishing returns affect average total cost 
C)  the firm's long-run average total cost starts falling 
D)  the maximum output is produced 
A)  all economies of scale are exhausted 
B)  diminishing returns affect average total cost 
C)  the firm's long-run average total cost starts falling 
D)  the maximum output is produced

Question 13

Which of the following is true if marginal product is greater than average product?

Accepted Answer

A)  Average product must be decreasing. 
B)  Marginal product must be decreasing. 
C)  Marginal product must be increasing. 
D)  Marginal product could either be increasing or decreasing. 
A)  Average product must be decreasing. 
B)  Marginal product must be decreasing. 
C)  Marginal product must be increasing. 
D)  Marginal product could either be increasing or decreasing.

Question 14

How is an explicit cost defined?

Accepted Answer

A)  As a cost that does not change as output changes 
B)  As a nonmonetary opportunity cost 
C)  As a cost that involves spending money 
D)  As a nonmonetary accounting cost 
A)  As a cost that does not change as output changes 
B)  As a nonmonetary opportunity cost 
C)  As a cost that involves spending money 
D)  As a nonmonetary accounting cost

Question 15

What are the processes called that a firm uses to turn inputs into outputs of goods and services?

Accepted Answer

A)  Technology 
B)  Technological change 
C)  Marginal analysis 
D)  Positive economic analysis 
A)  Technology 
B)  Technological change 
C)  Marginal analysis 
D)  Positive economic analysis

Question 16

If the average variable cost curve is above the marginal cost curve,then ________.

Accepted Answer

A)  marginal costs must be decreasing 
B)  average variable costs must be increasing 
C)  marginal costs must be increasing 
D)  marginal costs can be either increasing or decreasing 
A)  marginal costs must be decreasing 
B)  average variable costs must be increasing 
C)  marginal costs must be increasing 
D)  marginal costs can be either increasing or decreasing

Question 17

If production displays diseconomies of scale,the long-run average cost curve is _________.

Accepted Answer

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

Question 18

Suppose you have just opened a store to sell espresso machines.Both you and a competing store buy this machine from a manufacturer for $130 each.Your competitor,who has a store of the same size as yours,is currently selling about 10 machines a month at a price of $200 per machine.You expect to sell about 6 machines a month at a price of $220 per machine.If you lower your price,you expect to incur a loss.Which of the following could explain why your competitor is able to profitably sell the machine at a lower price although the cost of purchasing the machine is the same for the both of you?

Accepted Answer

A)  The competing store probably has a lower marginal cost of production. 
B)  The competing store probably has a lower average variable cost of production. 
C)  The competing store's goal is to maximise revenue and not profit. 
D)  The competing store probably has a lower average cost because average fixed cost falls as output increases. 
A)  The competing store probably has a lower marginal cost of production. 
B)  The competing store probably has a lower average variable cost of production. 
C)  The competing store's goal is to maximise revenue and not profit. 
D)  The competing store probably has a lower average cost because average fixed cost falls as output increases.

Question 19

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 20

As output increases,__________.

Accepted Answer

A)  average variable cost becomes smaller and smaller 
B)  the difference between average total cost and average variable cost decreases 
C)  marginal cost increases continuously 
D)  the difference between average total cost and average variable cost becomes greater and greater 
A)  average variable cost becomes smaller and smaller 
B)  the difference between average total cost and average variable cost decreases 
C)  marginal cost increases continuously 
D)  the difference between average total cost and average variable cost becomes greater and greater

What is the difference between 'diminishing marginal returns' and 'diseconomies of scale'?

Which of the following is not a source of technological advancement for a producer?

Table 6.2 Number of Workers Apples per Day (bushels) 1 50 2 120 3 180 4 230 5 270 6 300 Table 6.2 summarises production at the Crunchy Apple Orchard for the month of April 2005. -Refer to Table 6.2.The average product of labour when the orchard employs five workers is ________.

Average fixed cost is equal to _________.

Figure 6.1 -Refer to Figure 6.1.What is the marginal product of the seventh worker?

Marginal cost is calculated for a particular increase in output by _________.

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

Which of the following is an implicit cost of production?

Figure 6.5 -Refer to Figure 6.5.Identify the curves in the diagram.

Average fixed costs of production __________.

Minimum efficient scale is defined as the level of output at which __________.

Which of the following is true if marginal product is greater than average product?

How is an explicit cost defined?

What are the processes called that a firm uses to turn inputs into outputs of goods and services?

If the average variable cost curve is above the marginal cost curve,then ________.

If production displays diseconomies of scale,the long-run average cost curve is _________.

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

As output increases,__________.

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

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

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Exam 6: Technology,production and Costs

What is the difference between 'diminishing marginal returns' and 'diseconomies of scale'?

Which of the following is not a source of technological advancement for a producer?

Table 6.2 Number of Workers Apples per Day (bushels) 1 50 2 120 3 180 4 230 5 270 6 300 Table 6.2 summarises production at the Crunchy Apple Orchard for the month of April 2005. -Refer to Table 6.2.The average product of labour when the orchard employs five workers is ________.

Average fixed cost is equal to _________.

Figure 6.1 -Refer to Figure 6.1.What is the marginal product of the seventh worker?

Marginal cost is calculated for a particular increase in output by _________.

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

Which of the following is an implicit cost of production?

Figure 6.5 -Refer to Figure 6.5.Identify the curves in the diagram.

Average fixed costs of production __________.

Minimum efficient scale is defined as the level of output at which __________.

Which of the following is true if marginal product is greater than average product?

How is an explicit cost defined?

What are the processes called that a firm uses to turn inputs into outputs of goods and services?

If the average variable cost curve is above the marginal cost curve,then ________.

If production displays diseconomies of scale,the long-run average cost curve is _________.

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

As output increases,__________.

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

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters