Question 1

A characteristic of the long run that is not available in the short run is that a firm is free to vary its output.

Accepted Answer

A) True 
 B)False

Question 2

The long-run average cost curve shows

Accepted Answer

A)  the lowest average cost of producing every level of output in the long run. 
B)  where the most profitable level of output occurs. 
C)  the average cost of producing where diminishing returns are not present. 
D)  the plant size or scale that the firm should build. 
A)  the lowest average cost of producing every level of output in the long run. 
B)  where the most profitable level of output occurs. 
C)  the average cost of producing where diminishing returns are not present. 
D)  the plant size or scale that the firm should build.

Question 3

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 labor starts to fall as more and more variable inputs are added. 
D)  average total costs of production initially fall and after some point starts 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 labor starts to fall as more and more variable inputs are added. 
D)  average total costs of production initially fall and after some point starts to rise at a decreasing rate as output increases.

Question 4

An isocost line shows

Accepted Answer

A)  all the possible combinations of two inputs that a firm can use to produce its output. 
B)  all the possible combinations of two inputs a firm can use that have the same total cost. 
C)  all the possible combinations of two inputs a firm can use that have the same marginal cost. 
D)  all the possible combinations of two inputs with constant returns to scale. 
A)  all the possible combinations of two inputs that a firm can use to produce its output. 
B)  all the possible combinations of two inputs a firm can use that have the same total cost. 
C)  all the possible combinations of two inputs a firm can use that have the same marginal cost. 
D)  all the possible combinations of two inputs with constant returns to scale.

Question 5

Which of the following is an implicit cost of production?

Accepted Answer

A)  interest paid on a loan to a bank 
B)  wages paid to labor plus the cost of carrying benefits for workers 
C)  the utility bill paid to water, electricity, and natural gas companies 
D)  rent that could have been earned on a building owned and used by the firm 
A)  interest paid on a loan to a bank 
B)  wages paid to labor plus the cost of carrying benefits for workers 
C)  the utility bill paid to water, electricity, and natural gas companies 
D)  rent that could have been earned on a building owned and used by the firm

Question 6

The slope of an isoquant measures

Accepted Answer

A)  the price ratio of the two inputs. 
B)  the average product of labor. 
C)  the ratio of the marginal utility of the two inputs. 
D)  the rate at which inputs can be substituted for each other keeping total output constant. 
A)  the price ratio of the two inputs. 
B)  the average product of labor. 
C)  the ratio of the marginal utility of the two inputs. 
D)  the rate at which inputs can be substituted for each other keeping total output constant.

Question 7

The explicit cost of production is also called

Accepted Answer

A)  variable cost. 
B)  accounting cost. 
C)  direct cost. 
D)  overhead cost. 
A)  variable cost. 
B)  accounting cost. 
C)  direct cost. 
D)  overhead cost.

Question 8

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 9

At the minimum efficient scale,

Accepted Answer

A)  all possible economies of scale have not been exhausted. 
B)  the firm has achieved the lowest possible average cost of production. 
C)  any increases in the scale of operation will encounter further economies of scale. 
D)  marginal cost is at its minimum. 
A)  all possible economies of scale have not been exhausted. 
B)  the firm has achieved the lowest possible average cost of production. 
C)  any increases in the scale of operation will encounter further economies of scale. 
D)  marginal cost is at its minimum.

Question 10

Average total cost is equal to average variable cost minus average fixed cost.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Over the past twenty years,the number of small family farms has fallen significantly and in their place there are fewer,but larger,farms owned by corporations.Which of the following best explains this trend?

Accepted Answer

A)  diseconomies of scale in farming 
B)  economies of scale in farming 
C)  diminishing returns to labor in farming 
D)  declining productivity 
A)  diseconomies of scale in farming 
B)  economies of scale in farming 
C)  diminishing returns to labor in farming 
D)  declining productivity

Question 13

If the firm is producing no output in the short run,then its total costs are zero.

Accepted Answer

A) True 
 B)False

Question 14

If,when a firm doubles all its inputs,its average cost of production increases,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 15

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 labor 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 labor with technology.

Question 16

Figure 11-2  
-Refer to Figure 11-2.Short run output is maximized at

Accepted Answer

A)  L1. 
B)  L2. 
C)  L3. 
D)  insufficient information to determine 
A)  L1. 
B)  L2. 
C)  L3. 
D)  insufficient information to determine

Question 17

Average variable cost can be calculated using any of the formulas below except

Accepted Answer

A)  TVC/Q. 
B)  (TC - F
C) /Q. 
C)  Δ(TC - F
C) /ΔQ. 
D)  (TC/Q) - AFC. 
A)  TVC/Q. 
B)  (TC - F
C) /Q. 
C)  Δ(TC - F
C) /ΔQ. 
D)  (TC/Q) - AFC.

Question 18

The difference between technology and technological change is that

Accepted Answer

A)  technology refers to the processes used by a firm to transform inputs into output while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs. 
B)  technology is carried out by firms producing physical goods but technological change is an intellectual exercise into seeking ways to improve production. 
C)  technology is product-centered, that is, developing new products with our limited resources while technological change is process-centered in that it focuses on developing new production techniques. 
D)  technology involves the use of capital equipment while technological change requires the use of brain power. 
A)  technology refers to the processes used by a firm to transform inputs into output while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs. 
B)  technology is carried out by firms producing physical goods but technological change is an intellectual exercise into seeking ways to improve production. 
C)  technology is product-centered, that is, developing new products with our limited resources while technological change is process-centered in that it focuses on developing new production techniques. 
D)  technology involves the use of capital equipment while technological change requires the use of brain power.

Question 19

When a firm's long-run average cost curve is horizontal for a range of output,then that range of production displays

Accepted Answer

A)  increasing returns to scale. 
B)  constant returns to scale. 
C)  decreasing returns to scale. 
D)  constant average fixed costs. 
A)  increasing returns to scale. 
B)  constant returns to scale. 
C)  decreasing returns to scale. 
D)  constant average fixed costs.

Question 20

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor.This is an example of

Accepted Answer

A)  investment in human capital. 
B)  economies of scale. 
C)  positive technological change. 
D)  inspired management. 
A)  investment in human capital. 
B)  economies of scale. 
C)  positive technological change. 
D)  inspired management.

Exam 11: Technology, production, and Costs

A characteristic of the long run that is not available in the short run is that a firm is free to vary its output.

The long-run average cost curve shows

The law of diminishing marginal returns states

An isocost line shows

Which of the following is an implicit cost of production?

The slope of an isoquant measures

The explicit cost of production is also called

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

At the minimum efficient scale,

Average total cost is equal to average variable cost minus average fixed cost.

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

Over the past twenty years,the number of small family farms has fallen significantly and in their place there are fewer,but larger,farms owned by corporations.Which of the following best explains this trend?

If the firm is producing no output in the short run,then its total costs are zero.

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

The marginal rate of technical substitution is

Figure 11-2 -Refer to Figure 11-2.Short run output is maximized at

Average variable cost can be calculated using any of the formulas below except

The difference between technology and technological change is that

When a firm's long-run average cost curve is horizontal for a range of output,then that range of production displays

A firm increased its production and sales because the firm's manager rearranged the layout of his factory floor.This is an example of

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

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Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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