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

Figure 6-4  
-Refer to Figure 6-4.What happens to the average fixed cost of production when the firm increases output from 150 to 200?

Accepted Answer

A)  It remains constant. 
B)  It rises. 
C)  It falls. 
D)  It could rise or fall depending on what happens to total cost. 
A)  It remains constant. 
B)  It rises. 
C)  It falls. 
D)  It could rise or fall depending on what happens to total cost.

Question 3

Which of the following statements is true?

Accepted Answer

A)  As output increases, average fixed cost becomes smaller and smaller. 
B)  Average fixed cost does not change as output increases. 
C)  The marginal cost curve intersects the average fixed cost curve at its minimum point. 
D)  When marginal cost is greater than average fixed cost, average fixed cost increases. 
A)  As output increases, average fixed cost becomes smaller and smaller. 
B)  Average fixed cost does not change as output increases. 
C)  The marginal cost curve intersects the average fixed cost curve at its minimum point. 
D)  When marginal cost is greater than average fixed cost, average fixed cost increases.

Question 4

Use a long-run average cost curve graph to illustrate how diseconomies of scale would not make it beneficial for two companies to go through with a merger.

Accepted Answer

Assume the two companies are o

Question 5

If the marginal product of labour is decreasing,then the marginal cost of production must be rising.

Accepted Answer

A) True 
 B)False

Question 6

As a firm hires more labour in the short run,the

Accepted Answer

A)  level of total product stays constant. 
B)  output per worker rises. 
C)  extra output of another worker may rise at first, but eventually must fall. 
D)  costs of production are increasing at a fixed rate per unit of output. 
A)  level of total product stays constant. 
B)  output per worker rises. 
C)  extra output of another worker may rise at first, but eventually must fall. 
D)  costs of production are increasing at a fixed rate per unit of output.

Question 7

Which of the following statements regarding a firm's long-run average total cost (LRATC)curve and its short-run average total cost (SRATC)curve is true?

Accepted Answer

A)  The shape of the LRATC is affected by the law of diminishing returns. 
B)  The SRATC, but not the LRATC, can be used by a firm's managers for planning. 
C)  The LRATC shows the lowest cost at which a firm is able to produce a given level of output when no inputs are fixed. 
D)  The contribution of average fixed cost to LRATC is greater than its contribution to SRATC. 
A)  The shape of the LRATC is affected by the law of diminishing returns. 
B)  The SRATC, but not the LRATC, can be used by a firm's managers for planning. 
C)  The LRATC shows the lowest cost at which a firm is able to produce a given level of output when no inputs are fixed. 
D)  The contribution of average fixed cost to LRATC is greater than its contribution to SRATC.

Question 8

Table 6-8
   Elegant Settings manufactures stainless steel cutlery. Table 7-8 shows the company's cost data.
-Refer to Table 6-8.What is the minimum efficient scale of production?

Accepted Answer

A)  100 units 
B)  200 units 
C)  300 units 
D)  400 units 
A)  100 units 
B)  200 units 
C)  300 units 
D)  400 units

Question 9

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 10

Figure 6-9  
-Refer to Figure 6-9 above to solve the following problems.
a.Calculate the fixed cost of production.
b.Calculate the average total cost of production when the firm produces 20 units of output.
c.Calculate the average variable cost of production when the firm produces 20 units of output.
d.Calculate the average fixed cost of production when the firm produces 20 units of output.
e.Calculate the average fixed cost of production when the firm produces 15 units of output.
f.If the firm increases output from 15 to 20 units what is the marginal cost of output?

Accepted Answer

a.$100
b.$

Question 11

Figure 6-6   Figure 6-6 contains information about the short-run cost structure of a firm.
-Refer to Figure 6-6.In the figure above,which letter represents the average total cost curve?

Accepted Answer

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

Question 12

Economic costs of production differ from accounting costs in that

Accepted Answer

A)  economic costs include expenditures for hired resources while accounting costs do not. 
B)  economic costs add the opportunity costs of a firm using its own resources while accounting costs do not. 
C)  accounting costs include expenditures for hired resources while economic costs do not. 
D)  accounting costs are always larger than economic costs. 
A)  economic costs include expenditures for hired resources while accounting costs do not. 
B)  economic costs add the opportunity costs of a firm using its own resources while accounting costs do not. 
C)  accounting costs include expenditures for hired resources while economic costs do not. 
D)  accounting costs are always larger than economic costs.

Question 13

The law of diminishing marginal returns states

Accepted Answer

A)  that at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline. 
B)  that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline. 
C)  that in the presence of a fixed factor, at some point average product of labour starts to fall as more and more variable inputs are added. 
D)  that average total costs of production initially fall and after some point start to rise at a decreasing rate as output increases. 
A)  that at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline. 
B)  that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline. 
C)  that in the presence of a fixed factor, at some point average product of labour starts to fall as more and more variable inputs are added. 
D)  that average total costs of production initially fall and after some point start to rise at a decreasing rate as output increases.

Question 14

Figure 6-1  
-Refer to Figure 6-1.Diminishing marginal productivity sets in after

Accepted Answer

A)  the 2nd worker is hired. 
B)  the 3rd worker is hired. 
C)  the 4th worker is hired. 
D)  the 5th worker is hired. 
A)  the 2nd worker is hired. 
B)  the 3rd worker is hired. 
C)  the 4th worker is hired. 
D)  the 5th worker is hired.

Question 15

After Suzie,owner of Suzie's Sweet Shop,hires her 8th worker,the average product of labour declines.Which of the following statements must be true?

Accepted Answer

A)  The marginal product of the 8th worker is negative. 
B)  The marginal product of the 8th worker is less than the average product of labour before the 8th worker was hired. 
C)  Suzie's profits would be greater if she did not hire the 8th worker. 
D)  The average product of labour is negative. 
A)  The marginal product of the 8th worker is negative. 
B)  The marginal product of the 8th worker is less than the average product of labour before the 8th worker was hired. 
C)  Suzie's profits would be greater if she did not hire the 8th worker. 
D)  The average product of labour is negative.

Question 16

Figure 6-6   Figure 6-6 contains information about the short-run cost structure of a firm.
-Refer to Figure 6-6.In the figure above,which letter represents the average variable cost curve?

Accepted Answer

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

Question 17

Academic book publishers hire editors,designers,and production and marketing managers who help prepare books for publication.Because these employees work on several books simultaneously,the number of people the company hires will not go up and down with the quantity of books the company publishes during any particular year.The salaries and benefits of people in these job categories will be included in

Accepted Answer

A)  fixed cost and marginal cost but not variable cost. 
B)  fixed cost but not variable cost and total cost. 
C)  marginal cost and total cost but not fixed cost. 
D)  fixed cost and total cost but not variable cost. 
A)  fixed cost and marginal cost but not variable cost. 
B)  fixed cost but not variable cost and total cost. 
C)  marginal cost and total cost but not fixed cost. 
D)  fixed cost and total cost but not variable cost.

Question 18

If average total cost is falling,marginal cost must also be falling.

Accepted Answer

A) True 
 B)False

Question 19

Figure 6-11   Figure 6-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc.
-Refer to Figure 6-11.In the short run,if the firm sells fewer than 5000 picture frames per month,

Accepted Answer

A)  it should produce with the scale of operation associated with ATCa. 
B)  it should produce with the scale of operation associated with ATCb. 
C)  it should produce with the scale of operation associated with ATCc. 
D)  it will experience constant returns to scale. 
A)  it should produce with the scale of operation associated with ATCa. 
B)  it should produce with the scale of operation associated with ATCb. 
C)  it should produce with the scale of operation associated with ATCc. 
D)  it will experience constant returns to scale.

Question 20

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

Diseconomies of scale occur when

Figure 6-4 -Refer to Figure 6-4.What happens to the average fixed cost of production when the firm increases output from 150 to 200?

Which of the following statements is true?

Use a long-run average cost curve graph to illustrate how diseconomies of scale would not make it beneficial for two companies to go through with a merger.

If the marginal product of labour is decreasing,then the marginal cost of production must be rising.

As a firm hires more labour in the short run,the

Which of the following statements regarding a firm's long-run average total cost (LRATC)curve and its short-run average total cost (SRATC)curve is true?

Table 6-8 Elegant Settings manufactures stainless steel cutlery. Table 7-8 shows the company's cost data. -Refer to Table 6-8.What is the minimum efficient scale of production?

Figure 6-6 Figure 6-6 contains information about the short-run cost structure of a firm. -Refer to Figure 6-6.In the figure above,which letter represents the average total cost curve?

Economic costs of production differ from accounting costs in that

The law of diminishing marginal returns states

Figure 6-1 -Refer to Figure 6-1.Diminishing marginal productivity sets in after

After Suzie,owner of Suzie's Sweet Shop,hires her 8th worker,the average product of labour declines.Which of the following statements must be true?

Figure 6-6 Figure 6-6 contains information about the short-run cost structure of a firm. -Refer to Figure 6-6.In the figure above,which letter represents the average variable cost curve?

If average total cost is falling,marginal cost must also be falling.

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.

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 Healthcare

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

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

Exam 6: Firms,the Stock Market,and Corporate Governance

Diseconomies of scale occur when

Figure 6-4 -Refer to Figure 6-4.What happens to the average fixed cost of production when the firm increases output from 150 to 200?

Which of the following statements is true?

Use a long-run average cost curve graph to illustrate how diseconomies of scale would not make it beneficial for two companies to go through with a merger.

If the marginal product of labour is decreasing,then the marginal cost of production must be rising.

As a firm hires more labour in the short run,the

Which of the following statements regarding a firm's long-run average total cost (LRATC)curve and its short-run average total cost (SRATC)curve is true?

Table 6-8 Elegant Settings manufactures stainless steel cutlery. Table 7-8 shows the company's cost data. -Refer to Table 6-8.What is the minimum efficient scale of production?

Figure 6-6 Figure 6-6 contains information about the short-run cost structure of a firm. -Refer to Figure 6-6.In the figure above,which letter represents the average total cost curve?

Economic costs of production differ from accounting costs in that

The law of diminishing marginal returns states

Figure 6-1 -Refer to Figure 6-1.Diminishing marginal productivity sets in after

After Suzie,owner of Suzie's Sweet Shop,hires her 8th worker,the average product of labour declines.Which of the following statements must be true?

Figure 6-6 Figure 6-6 contains information about the short-run cost structure of a firm. -Refer to Figure 6-6.In the figure above,which letter represents the average variable cost curve?

If average total cost is falling,marginal cost must also be falling.

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.

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 Healthcare

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

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