Question 1

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

Accepted Answer

A)  TFC/Q. 
B)  (TC - V
C) /Q. 
C)  Δ(TC - V
C) /ΔQ. 
D)  (TC/Q) - AVC.

Question 2

When a firm experiences a positive technological change

Accepted Answer

A)  the price of a share of the firm's stock rises. 
B)  the firm is able to produce more output using the same inputs, or the same output using fewer inputs. 
C)  the value of the firm's assets rises. 
D)  the firm will hire additional workers in order to increase production.

Question 3

If a firm's long-run average total curve shows that it can produce 5000 DVDs at an average cost of $2.00 and 15 000 DVDs at an average cost of $1.50,this is evidence of

Accepted Answer

A)  diminishing returns. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  the law of supply.

Question 4

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.Constant returns to scale

Accepted Answer

A)  occur for output rates greater than 5000 picture frames. 
B)  occur between 5000 and 20 000 picture frames per month. 
C)  occur between 10 000 and 20 000 pictures frames per month. 
D)  will shift the long-run average cost curve downward.

Question 5

What are economies of scale? What are diseconomies of scale?

Accepted Answer

The answer of What are economies of scale? What are...

Question 6

If marginal cost is above the average variable cost,then average variable cost is decreasing.

Accepted Answer

A) True 
 B)False

Question 7

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 labour in farming 
D)  Declining productivity

Question 8

A curve showing the lowest cost at which a firm is able to produce a given level of output in the long run is

Accepted Answer

A)  a long-run production function. 
B)  a long-run marginal cost curve. 
C)  a minimum efficient scale curve. 
D)  a long-run average total cost curve.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is false?

Accepted Answer

A)  An explicit cost is a non-monetary opportunity cost. 
B)  In the short run, total cost = fixed cost + variable cost. 
C)  Variable costs are costs that change as output changes. 
D)  In the long run there are no fixed costs.

Question 11

Table 6-4
 
-Refer to Table 6-4.The table above shows the relationship between hours spent fishing and the quantity of fish caught for Juan,a commercial fisherman.
a.Complete the Marginal Product column in Table 6-4.
b.Characterise the production function,i.e.does the production function display increasing marginal returns,diminishing marginal returns,etc.
c.Using the data above,graph Juan's marginal product curve.Be sure to label the horizontal and vertical axes.Is your graph consistent with your answer to part (b)? Explain.
d.Juan uses the following inputs for fishing - a small wooden boat (B),a fishing pole (P)and of course,his labour (L).Treating the boat and the fishing pole as fixed inputs and using the data above,graph Juan's Total Product of Labour curve.Be sure to label the horizontal and vertical axes.
e.(Extra Credit)The opportunity cost of Juan's time is $8 per hour.If Juan receives $2 per kilogram for his fish,what is the optimal number of hours he should spend fishing? Explain how you arrived at your answer.Hint: Recall marginal benefit and marginal cost analysis.

Accepted Answer

The answer of Table 6-4
 
-Refer to Table 6-4.The table...

Question 12

If four workers can produce 18 chairs a day and five can produce 20 chairs a day,the marginal product of the fifth worker is

Accepted Answer

A)  2 chairs. 
B)  3 chairs. 
C)  4 chairs. 
D)  38 chairs.

Question 13

Which of the following statements is true?

Accepted Answer

A)  The average product of labour is at its maximum when the average product of labour equals the marginal product of labour. 
B)  The average product of labour is at its minimum when the average product of labour equals the marginal product of labour. 
C)  The average product of labour tells us how much output changes as the quantity of workers hired changes. 
D)  Whenever the marginal product of labour is greater than the average product of labour the average product of labour must be decreasing.

Question 14

Maria's Yiros House sells yiros.The cost of ingredients (pita,meat,spices,etc.)to make a yiros is $2.00.Maria pays her employees $60 per day.She also incurs a fixed cost of $120 per day.What is Maria's total cost per day when she does not produce any yiros and does not hire any workers?

Accepted Answer

A)  $0 
B)  $2 
C)  $60 
D)  $120

Question 15

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.

Question 16

The additional output a firm produces by hiring one more worker is called the marginal product of labour.

Accepted Answer

A) True 
 B)False

Question 17

As output increases,the distance between average total cost and average variable cost increases.

Accepted Answer

A) True 
 B)False

Question 18

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.

Question 19

Average total cost is

Accepted Answer

A)  total cost divided by the quantity of output produced. 
B)  total explicit costs divided by the quantity of output produced. 
C)  variable cost divided by the quantity of output produced. 
D)  the change in fixed plus variable cost divided by the quantity of output produced.

Question 20

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.If the firm chooses to produce and sell 25 000 frames per month by operating in the short run with a scale operation represented by ATCc

Accepted Answer

A)  the firm will not be operating efficiently. 
B)  the firm will be operating efficiently. 
C)  the firm would lower its average costs by reducing its scale of operation. 
D)  the firm will not be able to earn a profit.

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

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

When a firm experiences a positive technological change

If a firm's long-run average total curve shows that it can produce 5000 DVDs at an average cost of $2.00 and 15 000 DVDs at an average cost of $1.50,this is evidence of

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.Constant returns to scale

What are economies of scale? What are diseconomies of scale?

If marginal cost is above the average variable cost,then average variable cost is decreasing.

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?

A curve showing the lowest cost at which a firm is able to produce a given level of output in the long run is

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

Which of the following statements is false?

If four workers can produce 18 chairs a day and five can produce 20 chairs a day,the marginal product of the fifth worker is

Which of the following statements is true?

Maria's Yiros House sells yiros.The cost of ingredients (pita,meat,spices,etc.) to make a yiros is $2.00.Maria pays her employees $60 per day.She also incurs a fixed cost of $120 per day.What is Maria's total cost per day when she does not produce any yiros and does not hire any workers?

Increases in the marginal product of labour result from

The additional output a firm produces by hiring one more worker is called the marginal product of labour.

As output increases,the distance between average total cost and average variable cost increases.

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

Average total cost is