Question 1

Which of the following is an accurate statement about the envelope relationship?

Accepted Answer

A)  At the planned output level, short-run average total cost equals long-run average cost, but at all other output levels, short-run average total cost is lower than long-run average cost. 
B)  At the planned output level, short-run average total cost equals long-run average cost, but at all other output levels, short-run average total cost is higher than long-run average cost. 
C)  The long-run average cost curve touches the minimum point of each short-run average total cost curve. 
D)  The long-run average cost curve is identical to the lowest short-run average cost curve. 
A)  At the planned output level, short-run average total cost equals long-run average cost, but at all other output levels, short-run average total cost is lower than long-run average cost. 
B)  At the planned output level, short-run average total cost equals long-run average cost, but at all other output levels, short-run average total cost is higher than long-run average cost. 
C)  The long-run average cost curve touches the minimum point of each short-run average total cost curve. 
D)  The long-run average cost curve is identical to the lowest short-run average cost curve. B

Question 2

"For-benefit" corporations are created to pursue multiple goals, such as profitability, social responsibility, and value for the broader society. These firms provide examples of:

Accepted Answer

A)  non-entrepreneurial thinking. 
B)  long-run efficiency. 
C)  technical inefficiency. 
D)  social entrepreneurship. 
A)  non-entrepreneurial thinking. 
B)  long-run efficiency. 
C)  technical inefficiency. 
D)  social entrepreneurship. D

Question 3

Refer to the graph shown. The shift from SATC3 to SATC4 reflects:

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  diminishing marginal productivity. 
D)  increasing marginal productivity. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  diminishing marginal productivity. 
D)  increasing marginal productivity. B

Question 4

If a machine cost $50,000 initially and is expected to last for 20 years but is worth $60,000 after one year because it is in short supply, an economist most likely would say that:

Accepted Answer

A)  the machine's cost for each of its 20 years of existence is $2,500. 
B)  the machine's cost for each of its 20 years of existence is $3,000. 
C)  during the first year the machine had no cost; it provides an implicit revenue of $10,000 to the firm. 
D)  the value of the machine will continue to increase 20 percent per year for the next 20 years. 
A)  the machine's cost for each of its 20 years of existence is $2,500. 
B)  the machine's cost for each of its 20 years of existence is $3,000. 
C)  during the first year the machine had no cost; it provides an implicit revenue of $10,000 to the firm. 
D)  the value of the machine will continue to increase 20 percent per year for the next 20 years.

Question 5

The long-run average cost curve is horizontal when production exhibits:

Accepted Answer

A)  diminishing marginal returns. 
B)  diseconomies of scale. 
C)  economies of scale. 
D)  constant returns to scale. 
A)  diminishing marginal returns. 
B)  diseconomies of scale. 
C)  economies of scale. 
D)  constant returns to scale.

Question 6

Which of the following statements is true?

Accepted Answer

A)  Many different production processes can be economically efficient, but only the method that involves the lowest possible cost is technically efficient. 
B)  Many different production processes can be technically efficient, but only the method that involves the lowest possible cost is economically efficient. 
C)  There is only one production process that is technically efficient, and this process is also economically efficient. 
D)  There are many production processes that are both technically and economically efficient, but only one of these involves the lowest possible cost. 
A)  Many different production processes can be economically efficient, but only the method that involves the lowest possible cost is technically efficient. 
B)  Many different production processes can be technically efficient, but only the method that involves the lowest possible cost is economically efficient. 
C)  There is only one production process that is technically efficient, and this process is also economically efficient. 
D)  There are many production processes that are both technically and economically efficient, but only one of these involves the lowest possible cost.

Question 7

Refer to the graph shown. A firm can produce the same amount of output at points:

Accepted Answer

A)  A and B. 
B)  E and C. 
C)  B and C. 
D)  A and C. 
A)  A and B. 
B)  E and C. 
C)  B and C. 
D)  A and C.

Question 8

The economically efficient method of production:

Accepted Answer

A)  is the same in all countries. 
B)  is not influenced by the relative scarcity of inputs. 
C)  is influenced by the relative scarcity of inputs. 
D)  does not depend on input prices. 
A)  is the same in all countries. 
B)  is not influenced by the relative scarcity of inputs. 
C)  is influenced by the relative scarcity of inputs. 
D)  does not depend on input prices.

Question 9

The long-run average cost of producing 12 units of output is $54; the long-run average cost of producing 13 units is $56. These numbers illustrate:

Accepted Answer

A)  economies of scale. 
B)  diseconomies of scale. 
C)  economies of scope. 
D)  diminishing marginal productivity. 
A)  economies of scale. 
B)  diseconomies of scale. 
C)  economies of scope. 
D)  diminishing marginal productivity.

Question 10

Which of the following provides the best explanation for diseconomies of scale?

Accepted Answer

A)  Increased specialization 
B)  Diminishing marginal productivity 
C)  Monitoring costs 
D)  Indivisible setup costs 
A)  Increased specialization 
B)  Diminishing marginal productivity 
C)  Monitoring costs 
D)  Indivisible setup costs

Question 11

To manufacture 1,000 pairs of shoes in a week, a firm can use 1,500 workers and 50 machines or 100 machines and 2,000 workers. Which method is more technically efficient?

Accepted Answer

A)  1,500 workers and 50 machines 
B)  2,000 workers and 100 machines 
C)  Both are equally efficient. 
D)  Neither could be considered efficient. 
A)  1,500 workers and 50 machines 
B)  2,000 workers and 100 machines 
C)  Both are equally efficient. 
D)  Neither could be considered efficient.

Question 12

An isoquant is a curve that represents combinations of:

Accepted Answer

A)  factors of production that produce equal amounts of output. 
B)  factors of production that cost the same amount. 
C)  output that can be produced from the same quantity of inputs. 
D)  output that can be produced at the same cost. 
A)  factors of production that produce equal amounts of output. 
B)  factors of production that cost the same amount. 
C)  output that can be produced from the same quantity of inputs. 
D)  output that can be produced at the same cost.

Question 13

Refer to the graph shown. If labor costs $10 per unit and machines cost $15 per unit, the economically efficient cost of producing 500 units of output is:

Accepted Answer

A)  $100. 
B)  $150. 
C)  $300. 
D)  impossible to determine using the information given. 
A)  $100. 
B)  $150. 
C)  $300. 
D)  impossible to determine using the information given.

Question 14

Refer to the graph shown. If a firm expected to produce 300 units when it built its plant but now desires to expand its output to 500 units in the short run, it will use the plant size represented by:

Accepted Answer

A)  SATC1. 
B)  SATC2. 
C)  SATC3. 
D)  SATC4. 
A)  SATC1. 
B)  SATC2. 
C)  SATC3. 
D)  SATC4.

Question 15

If technological innovation occurs when a firm is experiencing diseconomies of scale:

Accepted Answer

A)  the long-run average total cost curve will shift down but will still rise as output expands. 
B)  long-run average total costs will remain the same as output expands. 
C)  short-run average total costs will fall as output expands. 
D)  product prices will rise, leading to inflation. 
A)  the long-run average total cost curve will shift down but will still rise as output expands. 
B)  long-run average total costs will remain the same as output expands. 
C)  short-run average total costs will fall as output expands. 
D)  product prices will rise, leading to inflation.

Question 16

Refer to the graph shown. The most economically efficient way to produce 500 units of output is to use:

Accepted Answer

A)  5 units of machines and 7.5 units of labor. 
B)  6 and 2/3 units of machines and 5 units of labor. 
C)  10 units of machines and 15 units of labor. 
D)  5 units of machines and 25 units of labor. 
A)  5 units of machines and 7.5 units of labor. 
B)  6 and 2/3 units of machines and 5 units of labor. 
C)  10 units of machines and 15 units of labor. 
D)  5 units of machines and 25 units of labor.

Question 17

Refer to the graph shown. If the seller expects a price of $52, the minimum amount the firm must produce to be profitable is:

Accepted Answer

A)  15. 
B)  16. 
C)  17. 
D)  18. 
A)  15. 
B)  16. 
C)  17. 
D)  18.

Question 18

The law of diminishing marginal productivity does not apply in the long run because:

Accepted Answer

A)  some inputs are fixed in the long run. 
B)  some inputs are variable in the long run. 
C)  no inputs are fixed in the long run. 
D)  all inputs are fixed in the long run. 
A)  some inputs are fixed in the long run. 
B)  some inputs are variable in the long run. 
C)  no inputs are fixed in the long run. 
D)  all inputs are fixed in the long run.

Question 19

Which of the following is most likely to be an example of economies of scale?

Accepted Answer

A)  The per-unit costs on Excel Publishing Company's manuals fall because it adopted a new technology after receiving a large order from the government. 
B)  Alpha-Beta Inc. raised its price by 10 percent after a 5 percent increase in production costs. 
C)  Widget Manufacturing doubled its production by opening a new plant that was identical to its old plant. 
D)  The XYZ Co. increased production 25 percent after a 30 percent increase in all inputs. 
A)  The per-unit costs on Excel Publishing Company's manuals fall because it adopted a new technology after receiving a large order from the government. 
B)  Alpha-Beta Inc. raised its price by 10 percent after a 5 percent increase in production costs. 
C)  Widget Manufacturing doubled its production by opening a new plant that was identical to its old plant. 
D)  The XYZ Co. increased production 25 percent after a 30 percent increase in all inputs.

Question 20

Using 100 workers and 10 machines, a firm can produce 10,000 units of output; using 250 workers and 25 machines, the firm produces 21,000 units of output. These facts are best explained by:

Accepted Answer

A)  economies of scope. 
B)  diseconomies of scale. 
C)  economies of scale. 
D)  diminishing marginal productivity. 
A)  economies of scope. 
B)  diseconomies of scale. 
C)  economies of scale. 
D)  diminishing marginal productivity.

Exam 12: Production and Cost Analysis II

Which of the following is an accurate statement about the envelope relationship?

"For-benefit" corporations are created to pursue multiple goals, such as profitability, social responsibility, and value for the broader society. These firms provide examples of:

Refer to the graph shown. The shift from SATC3 to SATC4 reflects:

If a machine cost $50,000 initially and is expected to last for 20 years but is worth $60,000 after one year because it is in short supply, an economist most likely would say that:

The long-run average cost curve is horizontal when production exhibits:

Which of the following statements is true?

Refer to the graph shown. A firm can produce the same amount of output at points:

The economically efficient method of production:

The long-run average cost of producing 12 units of output is $54; the long-run average cost of producing 13 units is $56. These numbers illustrate:

Which of the following provides the best explanation for diseconomies of scale?

To manufacture 1,000 pairs of shoes in a week, a firm can use 1,500 workers and 50 machines or 100 machines and 2,000 workers. Which method is more technically efficient?

An isoquant is a curve that represents combinations of:

Refer to the graph shown. If labor costs $10 per unit and machines cost $15 per unit, the economically efficient cost of producing 500 units of output is:

Refer to the graph shown. If a firm expected to produce 300 units when it built its plant but now desires to expand its output to 500 units in the short run, it will use the plant size represented by:

If technological innovation occurs when a firm is experiencing diseconomies of scale:

Refer to the graph shown. The most economically efficient way to produce 500 units of output is to use:

Refer to the graph shown. If the seller expects a price of $52, the minimum amount the firm must produce to be profitable is:

The law of diminishing marginal productivity does not apply in the long run because:

Which of the following is most likely to be an example of economies of scale?

Using 100 workers and 10 machines, a firm can produce 10,000 units of output; using 250 workers and 25 machines, the firm produces 21,000 units of output. These facts are best explained by:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Filters

Refer to the graph shown. The shift from SATC₃ to SATC₄ reflects: