Question 1

If a firm is experiencing diminishing returns to labor,

Accepted Answer

A) marginal product of labor must be decreasing. 
B) it must be producing in the long run. 
C) marginal cost must be decreasing. 
D) the firm must be experiencing diseconomies of scale. 
E) the firm is apparently hiring less-qualified units of labor. 
A) marginal product of labor must be decreasing. 
B) it must be producing in the long run. 
C) marginal cost must be decreasing. 
D) the firm must be experiencing diseconomies of scale. 
E) the firm is apparently hiring less-qualified units of labor. A

Question 2

The combination of two inputs that results in a given quantity of output at least cost occurs where

Accepted Answer

A) an isocost line is tangent to the relevant isoquant. 
B) average total cost is at its minimum. 
C) long-run average total cost is at its minimum. 
D) an isoquant reaches its minimum. 
E) an isoquant is at its steepest. 
A) an isocost line is tangent to the relevant isoquant. 
B) average total cost is at its minimum. 
C) long-run average total cost is at its minimum. 
D) an isoquant reaches its minimum. 
E) an isoquant is at its steepest. C

Question 3

The slope of the average fixed curve is always negative.

Accepted Answer

A) True 
 B)False  True

Question 4

In the short run, total cost is zero when the firm produces nothing.

Accepted Answer

A) True 
 B)False

Question 5

The profit-maximizing decision in choosing the optimal levels of capital and labor in the long run is the same as the profit-maximizing decision in the short run.

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 8-10  
-Refer to Exhibit 8-10. Area A represents

Accepted Answer

A) diminishing returns. 
B) economies of scale. 
C) constant returns to scale. 
D) diseconomies of scale 
E) economic losses 
A) diminishing returns. 
B) economies of scale. 
C) constant returns to scale. 
D) diseconomies of scale 
E) economic losses

Question 7

Economies and diseconomies of scale are the reasons short-run average total cost decreases and then increases.

Accepted Answer

A) True 
 B)False

Question 8

Plot the following data for quantity of production and long-run average cost for a firm. Are there economies of scale, diseconomies of scale, or constant returns to scale? Indicate these areas in your diagram.

Accepted Answer

In the diagram, area A exhibit

Question 9

A merger between two firms producing different products may experience

Accepted Answer

A) increasing returns. 
B) economies of scale. 
C) economies of scope. 
D) increasing marginal product. 
E) decreasing marginal cost. 
A) increasing returns. 
B) economies of scale. 
C) economies of scope. 
D) increasing marginal product. 
E) decreasing marginal cost.

Question 10

Constant returns to scale occur when a firm's output remains constant regardless of its input.

Accepted Answer

A) True 
 B)False

Question 11

Average total cost, average variable cost, average fixed cost, and marginal cost curves all have U-shapes.

Accepted Answer

A) True 
 B)False

Question 12

A firm can earn a loss even if it produces at a price that is equal to its marginal cost.

Accepted Answer

A) True 
 B)False

Question 13

If a profit-maximizing, competitive firm is producing at a loss in the short run, then

Accepted Answer

A) P  AVC. 
A) P  AVC.

Question 14

The addition to total variable cost when one more unit of output is produced is

Accepted Answer

A) average variable cost. 
B) average fixed cost. 
C) total cost. 
D) fixed cost. 
E) marginal cost. 
A) average variable cost. 
B) average fixed cost. 
C) total cost. 
D) fixed cost. 
E) marginal cost.

Question 15

When marginal cost is less than average cost,

Accepted Answer

A) marginal cost is rising. 
B) average cost is rising. 
C) marginal cost is falling. 
D) average cost is falling. 
E) both marginal cost and average cost are rising. 
A) marginal cost is rising. 
B) average cost is rising. 
C) marginal cost is falling. 
D) average cost is falling. 
E) both marginal cost and average cost are rising.

Question 16

If the price of capital rises, the firm

Accepted Answer

A) tends to hire less capital and more labor. 
B) tends to hire more capital and less labor. 
C) tends to hire more capital and more labor. 
D) tends to hire less capital and less labor. 
E) does not change its hiring practices. 
A) tends to hire less capital and more labor. 
B) tends to hire more capital and less labor. 
C) tends to hire more capital and more labor. 
D) tends to hire less capital and less labor. 
E) does not change its hiring practices.

Question 17

When a firm increases the amount of capital it uses, the

Accepted Answer

A) average total cost curve shifts down. 
B) average total cost curve shifts up. 
C) average total cost curve twists, increasing ATC at low output levels and decreasing ATC at high output levels. 
D) average variable cost curve shifts up. 
E) average fixed cost decreases. 
A) average total cost curve shifts down. 
B) average total cost curve shifts up. 
C) average total cost curve twists, increasing ATC at low output levels and decreasing ATC at high output levels. 
D) average variable cost curve shifts up. 
E) average fixed cost decreases.

Question 18

Exhibit 8-4  
-Which curve passes through the minimum point of the average total cost curve?

Accepted Answer

A) The fixed cost curve 
B) The average variable cost curve 
C) The long-run average total cost curve 
D) The marginal cost curve 
E) The demand curve 
A) The fixed cost curve 
B) The average variable cost curve 
C) The long-run average total cost curve 
D) The marginal cost curve 
E) The demand curve

Question 19

Exhibit 8-9  
-An increase in the quantity of capital used by a firm

Accepted Answer

A) increases total costs at low levels of output but decreases total costs at high levels of output. 
B) does not affect total costs. 
C) increases fixed costs but has no effect on variable costs in the short run. 
D) decreases average fixed cost. 
E) decreases total costs at low levels of output but increases total costs at low levels of output. 
A) increases total costs at low levels of output but decreases total costs at high levels of output. 
B) does not affect total costs. 
C) increases fixed costs but has no effect on variable costs in the short run. 
D) decreases average fixed cost. 
E) decreases total costs at low levels of output but increases total costs at low levels of output.

Question 20

The short run begins when a firm increases its capital input.

Accepted Answer

A) True 
 B)False

Exam 8: Costs and the Changes at Firms Over Time

If a firm is experiencing diminishing returns to labor,

The combination of two inputs that results in a given quantity of output at least cost occurs where

The slope of the average fixed curve is always negative.

In the short run, total cost is zero when the firm produces nothing.

The profit-maximizing decision in choosing the optimal levels of capital and labor in the long run is the same as the profit-maximizing decision in the short run.

Exhibit 8-10 -Refer to Exhibit 8-10. Area A represents

Economies and diseconomies of scale are the reasons short-run average total cost decreases and then increases.

Plot the following data for quantity of production and long-run average cost for a firm. Are there economies of scale, diseconomies of scale, or constant returns to scale? Indicate these areas in your diagram.

A merger between two firms producing different products may experience

Constant returns to scale occur when a firm's output remains constant regardless of its input.

Average total cost, average variable cost, average fixed cost, and marginal cost curves all have U-shapes.

A firm can earn a loss even if it produces at a price that is equal to its marginal cost.

If a profit-maximizing, competitive firm is producing at a loss in the short run, then

The addition to total variable cost when one more unit of output is produced is

When marginal cost is less than average cost,

If the price of capital rises, the firm

When a firm increases the amount of capital it uses, the

Exhibit 8-4 -Which curve passes through the minimum point of the average total cost curve?

Exhibit 8-9 -An increase in the quantity of capital used by a firm

The short run begins when a firm increases its capital input.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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