Question 1

Due to extremely large fixed costs, an electricity generating plant probably experiences which of the following returns to size?

Accepted Answer

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

Question 2

Economies to scale are illustrated by

Accepted Answer

A) a downward sloping long-run average cost curve. 
B) a horizontal long-run average cost curve. 
C) an upward sloping long-run average cost curve. 
D) a long-run average cost curve that is shaped like an upside down U. 
A) a downward sloping long-run average cost curve. 
B) a horizontal long-run average cost curve. 
C) an upward sloping long-run average cost curve. 
D) a long-run average cost curve that is shaped like an upside down U.

Question 3

With a given plant size, an increase in output will NOT result in an increase in

Accepted Answer

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

Question 4

-The marginal productivity of labor will eventually decrease as more workers are employed because

Accepted Answer

A) average product is increasing. 
B) total product is decreasing. 
C) the amount of capital will also be increasing. 
D) on the average each worker will have fewer inputs to work with. 
A) average product is increasing. 
B) total product is decreasing. 
C) the amount of capital will also be increasing. 
D) on the average each worker will have fewer inputs to work with.

Question 5

Economists generally define the short run as being

Accepted Answer

A) that period of time in which at least one of the firm's inputs, usually plant size, is fixed. 
B) that period of time in which all inputs are variable. 
C) any period of time less than one year. 
D) any period of time less than six months. 
A) that period of time in which at least one of the firm's inputs, usually plant size, is fixed. 
B) that period of time in which all inputs are variable. 
C) any period of time less than one year. 
D) any period of time less than six months.

Question 6

Explain how you can calculate average physical product and marginal physical product from information on total physical product and variable input.

Accepted Answer

Given the information on total physical

Question 7

The typical cost curves are U-shaped due to the

Accepted Answer

A) law of diminishing marginal utility. 
B) law of supply. 
C) law of demand. 
D) law of diminishing marginal product. 
A) law of diminishing marginal utility. 
B) law of supply. 
C) law of demand. 
D) law of diminishing marginal product.

Question 8

The amount of calendar time associated with the long run

Accepted Answer

A) is less than five years. 
B) is greater than one year. 
C) is between one and five years. 
D) varies by industry. 
A) is less than five years. 
B) is greater than one year. 
C) is between one and five years. 
D) varies by industry.

Question 9

Which of the following statements about a firm's short-run variable costs is correct?

Accepted Answer

A) They increase as the level of output decreases. 
B) They typically include the cost of workers' wages. 
C) They include the costs of plant and equipment. 
D) They are always a greater expense than are fixed costs. 
A) They increase as the level of output decreases. 
B) They typically include the cost of workers' wages. 
C) They include the costs of plant and equipment. 
D) They are always a greater expense than are fixed costs.

Question 10

When El Torito Restaurant is deciding how many waiters to hire for a holiday weekend, it is making a ________ decision.

Accepted Answer

A) plant-size 
B) long-run 
C) short-run 
D) fixed-input 
A) plant-size 
B) long-run 
C) short-run 
D) fixed-input

Question 11

-Use the above figure. The AVC at output 5 is

Accepted Answer

A) $35.00. 
B) $2.00. 
C) $3.00. 
D) $5.00. 
A) $35.00. 
B) $2.00. 
C) $3.00. 
D) $5.00.

Question 12

The relationship between inputs and outputs is known as

Accepted Answer

A) business. 
B) manufacturing. 
C) a production function. 
D) marginal product. 
A) business. 
B) manufacturing. 
C) a production function. 
D) marginal product.

Question 13

-Refer to the above table. When the quantity of labor equals 2, what does the average product equal?

Accepted Answer

A) 46 
B) 23 
C) 26 
D) 92 
A) 46 
B) 23 
C) 26 
D) 92

Question 14

Which of the following would be an example of a fixed cost?

Accepted Answer

A) the electric and gas bills 
B) wages paid to temporary workers 
C) property insurance premiums 
D) expenditures on imported raw materials 
A) the electric and gas bills 
B) wages paid to temporary workers 
C) property insurance premiums 
D) expenditures on imported raw materials

Question 15

What is the difference between average variable costs and average total costs?

Accepted Answer

Average total costs equal average variab

Question 16

Minimum efficient scale

Accepted Answer

A) is the point at which economies of scale begin for a particular firm. 
B) is the lowest rate of output per unit of time at which long-run average costs reach a minimum for a particular firm. 
C) applies only to firms with U-shaped long-run average cost curves. 
D) is the point at which diseconomies of scale begin for a particular firm. 
A) is the point at which economies of scale begin for a particular firm. 
B) is the lowest rate of output per unit of time at which long-run average costs reach a minimum for a particular firm. 
C) applies only to firms with U-shaped long-run average cost curves. 
D) is the point at which diseconomies of scale begin for a particular firm.

Question 17

In economics, how long is the long run?

Accepted Answer

A) More than 12 months 
B) 24 months or longer 
C) 5 years or more 
D) Whatever time it takes a firm to vary all inputs 
A) More than 12 months 
B) 24 months or longer 
C) 5 years or more 
D) Whatever time it takes a firm to vary all inputs

Question 18

Marginal costs will begin to rise at the point where

Accepted Answer

A) fixed costs increase. 
B) variable costs increase. 
C) average variable costs increase. 
D) diminishing marginal product begins. 
A) fixed costs increase. 
B) variable costs increase. 
C) average variable costs increase. 
D) diminishing marginal product begins.

Question 19

-If marginal product is zero, we know that

Accepted Answer

A) total product is also zero. 
B) average product is also zero. 
C) total output is maximized. 
D) average product is constant. 
A) total product is also zero. 
B) average product is also zero. 
C) total output is maximized. 
D) average product is constant.

Question 20

The short run is

Accepted Answer

A) a period of time during which at least one input cannot be changed. 
B) a period of time during which no inputs can be changed. 
C) a period of time during which all inputs can be changed. 
D) a period of time shorter than one year. 
A) a period of time during which at least one input cannot be changed. 
B) a period of time during which no inputs can be changed. 
C) a period of time during which all inputs can be changed. 
D) a period of time shorter than one year.

Exam 22: The Firm: Cost and Output Determination

Due to extremely large fixed costs, an electricity generating plant probably experiences which of the following returns to size?

Economies to scale are illustrated by

With a given plant size, an increase in output will NOT result in an increase in

-The marginal productivity of labor will eventually decrease as more workers are employed because

Economists generally define the short run as being

Explain how you can calculate average physical product and marginal physical product from information on total physical product and variable input.

The typical cost curves are U-shaped due to the

The amount of calendar time associated with the long run

Which of the following statements about a firm's short-run variable costs is correct?

When El Torito Restaurant is deciding how many waiters to hire for a holiday weekend, it is making a ________ decision.

-Use the above figure. The AVC at output 5 is

The relationship between inputs and outputs is known as

-Refer to the above table. When the quantity of labor equals 2, what does the average product equal?

Which of the following would be an example of a fixed cost?

What is the difference between average variable costs and average total costs?

Minimum efficient scale

In economics, how long is the long run?

Marginal costs will begin to rise at the point where

-If marginal product is zero, we know that

The short run is

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

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