Question 1

A firm finds that producing 30,000 vases costs $180,000 and producing 40,000 vases costs $200,000. This pattern might be explained by:

Accepted Answer

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

Question 2

Refer to the graph shown. The marginal rate of substitution at point B is:

Accepted Answer

A)  the same as the marginal rate of substitution at point A. 
B)  the same as the marginal rate of substitution at point C. 
C)  the same as the marginal rate of substitution at point D. 
D)  impossible to determine with the information given. 
A)  the same as the marginal rate of substitution at point A. 
B)  the same as the marginal rate of substitution at point C. 
C)  the same as the marginal rate of substitution at point D. 
D)  impossible to determine with the information given.

Question 3

Refer to the graph shown. The output range in region a is associated with:

Accepted Answer

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

Question 4

The production techniques available to real-world firms are constantly changing because of learning by doing and technological change.

Accepted Answer

A) True 
 B)False

Question 5

Refer to the graph shown. A firm planning to produce 1,500 units of output would choose the scale of operation represented by:

Accepted Answer

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

Question 6

Refer to the graph shown. A firm that shifts from SATC1 to SATC2 is most likely to do so because planned output increases:

Accepted Answer

A)  to 300. 
B)  from 300 to 900. 
C)  from 300 to 600. 
D)  from 600 to 900. 
A)  to 300. 
B)  from 300 to 900. 
C)  from 300 to 600. 
D)  from 600 to 900.

Question 7

Refer to the graph shown. If the firm's total cost is $375, labor must cost:

Accepted Answer

A)  $62.50 per unit. 
B)  $75 per unit. 
C)  $5 per unit. 
D)  $6 per unit. 
A)  $62.50 per unit. 
B)  $75 per unit. 
C)  $5 per unit. 
D)  $6 per unit.

Question 8

The relationship between long-run and short-run average total costs is known as the:

Accepted Answer

A)  efficiency relationship. 
B)  technical relationship. 
C)  economic relationship. 
D)  envelope relationship. 
A)  efficiency relationship. 
B)  technical relationship. 
C)  economic relationship. 
D)  envelope relationship.

Question 9

Which of the following provides the best explanation for constant returns to scale?

Accepted Answer

A)  Replication of production techniques 
B)  Diminishing marginal product 
C)  Increasing marginal product 
D)  Constant marginal product 
A)  Replication of production techniques 
B)  Diminishing marginal product 
C)  Increasing marginal product 
D)  Constant marginal product

Question 10

If the average total cost of supplying a good exceeds the price at which the good can be sold, then entrepreneurs have:

Accepted Answer

A)  an incentive to supply the good. 
B)  no incentive to supply the good. 
C)  an incentive to supply only a small amount of the good. 
D)  an incentive to raise the average total cost of producing the good. 
A)  an incentive to supply the good. 
B)  no incentive to supply the good. 
C)  an incentive to supply only a small amount of the good. 
D)  an incentive to raise the average total cost of producing the good.

Question 11

Economies of scale are associated with:

Accepted Answer

A)  indivisible setup costs. 
B)  zero setup costs. 
C)  the short run. 
D)  diminishing marginal productivity. 
A)  indivisible setup costs. 
B)  zero setup costs. 
C)  the short run. 
D)  diminishing marginal productivity.

Question 12

Economies of scale account for what part of a long-run average total cost curve?

Accepted Answer

A)  Downward-sloping 
B)  Horizontal 
C)  Upward-sloping 
D)  Vertical 
A)  Downward-sloping 
B)  Horizontal 
C)  Upward-sloping 
D)  Vertical

Question 13

Economies of scope cannot exist in:

Accepted Answer

A)  the presence of economies of scale. 
B)  the presence of diseconomies of scale. 
C)  firms that produce a single product. 
D)  firms that produce multiple products. 
A)  the presence of economies of scale. 
B)  the presence of diseconomies of scale. 
C)  firms that produce a single product. 
D)  firms that produce multiple products.

Question 14

Which of the following is most likely an example of constant returns to scale?

Accepted Answer

A)  The per-unit costs of Excel Publishing Company's manuals fell after a large order was received from the government. 
B)  Alpha-Beta Inc. raised its price 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 and experienced a 30 percent increase in its total cost. 
A)  The per-unit costs of Excel Publishing Company's manuals fell after a large order was received from the government. 
B)  Alpha-Beta Inc. raised its price 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 and experienced a 30 percent increase in its total cost.

Question 15

Refer to the graph shown. If the firm wishes to double output from 500 to 1,000:

Accepted Answer

A)  average total costs will fall. 
B)  average total costs will remain the same. 
C)  average total costs will rise. 
D)  it is impossible to determine what will happen to average total costs. 
A)  average total costs will fall. 
B)  average total costs will remain the same. 
C)  average total costs will rise. 
D)  it is impossible to determine what will happen to average total costs.

Question 16

Positive expected profits:

Accepted Answer

A)  discourage people from supplying goods. 
B)  encourage people to supply goods. 
C)  have no effect on supply decisions. 
D)  increase product demand. 
A)  discourage people from supplying goods. 
B)  encourage people to supply goods. 
C)  have no effect on supply decisions. 
D)  increase product demand.

Question 17

Some children in Siliguri, India, work as low-wage professional rock breakers. The rocks they break with a hammer are used in buildings and roads. In terms of the idea of efficiency, having children break rocks with hammers:

Accepted Answer

A)  is not efficient because modern equipment could crush stone with far less effort. 
B)  is technically efficient but not economically efficient because the job does not pay a living wage. 
C)  is economically efficient but not technically efficient because it uses too much labor relative to capital. 
D)  could be efficient given the extremely low price of labor and high price of capital. 
A)  is not efficient because modern equipment could crush stone with far less effort. 
B)  is technically efficient but not economically efficient because the job does not pay a living wage. 
C)  is economically efficient but not technically efficient because it uses too much labor relative to capital. 
D)  could be efficient given the extremely low price of labor and high price of capital.

Question 18

Since capital is relatively scarce in India, the economically efficient method of producing food would probably:

Accepted Answer

A)  be land intensive. 
B)  be capital intensive. 
C)  not be labor intensive. 
D)  not be capital intensive. 
A)  be land intensive. 
B)  be capital intensive. 
C)  not be labor intensive. 
D)  not be capital intensive.

Question 19

An entrepreneur would be least likely to develop a product if expected average total cost is:

Accepted Answer

A)  $50 and expected price is $75. 
B)  $60 and expected price is $65. 
C)  $65 and expected price is $40. 
D)  $50 and expected price is $50. 
A)  $50 and expected price is $75. 
B)  $60 and expected price is $65. 
C)  $65 and expected price is $40. 
D)  $50 and expected price is $50.

Question 20

Refer to the graph shown. The most economically efficient way to produce 1,000 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.

Exam 12: Production and Cost Analysis II

A firm finds that producing 30,000 vases costs $180,000 and producing 40,000 vases costs $200,000. This pattern might be explained by:

Refer to the graph shown. The marginal rate of substitution at point B is:

Refer to the graph shown. The output range in region a is associated with:

The production techniques available to real-world firms are constantly changing because of learning by doing and technological change.

Refer to the graph shown. A firm planning to produce 1,500 units of output would choose the scale of operation represented by:

Refer to the graph shown. A firm that shifts from SATC1 to SATC2 is most likely to do so because planned output increases:

Refer to the graph shown. If the firm's total cost is $375, labor must cost:

The relationship between long-run and short-run average total costs is known as the:

Which of the following provides the best explanation for constant returns to scale?

If the average total cost of supplying a good exceeds the price at which the good can be sold, then entrepreneurs have:

Economies of scale are associated with:

Economies of scale account for what part of a long-run average total cost curve?

Economies of scope cannot exist in:

Which of the following is most likely an example of constant returns to scale?

Refer to the graph shown. If the firm wishes to double output from 500 to 1,000:

Positive expected profits:

Some children in Siliguri, India, work as low-wage professional rock breakers. The rocks they break with a hammer are used in buildings and roads. In terms of the idea of efficiency, having children break rocks with hammers:

Since capital is relatively scarce in India, the economically efficient method of producing food would probably:

An entrepreneur would be least likely to develop a product if expected average total cost is:

Refer to the graph shown. The most economically efficient way to produce 1,000 units of output is to use:

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. A firm that shifts from SATC₁ to SATC₂ is most likely to do so because planned output increases: