Question 1

What are some factors that contribute to a firm achieving increasing returns to scale (or economies of scale) in the long run?

Accepted Answer

Larger firms have more opportunities to

Question 2

In the short run, the average total cost curve reaches its minimum point at a lower level of output than the short-run marginal cost curve reaches its minimum.

Accepted Answer

A) True 
 B)False

Question 3

Use the following to answer questions:  
-(Table: Production of Bagels) Look at the table Production of Bagels. Diminishing marginal returns begin with the addition of the _____ worker.

Accepted Answer

A)  third 
B)  fourth 
C)  fifth 
D)  sixth 
A)  third 
B)  fourth 
C)  fifth 
D)  sixth

Question 4

When marginal cost is rising:

Accepted Answer

A)  average variable cost must be rising. 
B)  average total cost must be rising. 
C)  average variable cost and average total cost must be falling. 
D)  both average variable cost and average total cost may be rising or falling. 
A)  average variable cost must be rising. 
B)  average total cost must be rising. 
C)  average variable cost and average total cost must be falling. 
D)  both average variable cost and average total cost may be rising or falling.

Question 5

Darren runs a barbershop with average fixed costs of $60 per day and a total output of 50 haircuts per day. Darren shuts down every year during the last week of July and the first week of August. What is his annual fixed cost if he is open six days per week?

Accepted Answer

A)  $18,000 
B)  $3,000 
C)  $60 
D)  The answer cannot be determined with the information available. 
A)  $18,000 
B)  $3,000 
C)  $60 
D)  The answer cannot be determined with the information available.

Question 6

The marginal product of labor is the change in _____ divided by the change in _____.

Accepted Answer

A)  labor; total product 
B)  total output; the quantity of labor 
C)  average output; the quantity of labor 
D)  total costs; the quantity of labor 
A)  labor; total product 
B)  total output; the quantity of labor 
C)  average output; the quantity of labor 
D)  total costs; the quantity of labor

Question 7

A firm's marginal cost is:

Accepted Answer

A)  the ratio of the change in total cost to the change in the quantity of output. 
B)  the change in total cost divided by the change in labor input. 
C)  the slope of the average fixed cost curve. 
D)  total cost divided by output. 
A)  the ratio of the change in total cost to the change in the quantity of output. 
B)  the change in total cost divided by the change in labor input. 
C)  the slope of the average fixed cost curve. 
D)  total cost divided by output.

Question 8

When marginal cost is BELOW average variable cost, average variable cost must be:

Accepted Answer

A)  at its minimum. 
B)  at its maximum. 
C)  falling. 
D)  rising. 
A)  at its minimum. 
B)  at its maximum. 
C)  falling. 
D)  rising.

Question 9

If two firms are identical in all respects except that one has more of the fixed input capital than another, the marginal product curve for the firm with more capital:

Accepted Answer

A)  must equal the marginal product curve for the firm with less capital. 
B)  will lie above the marginal product curve for the firm with less capital. 
C)  will lie below the total marginal curve for the firm with less capital. 
D)  will show no diminishing marginal returns. 
A)  must equal the marginal product curve for the firm with less capital. 
B)  will lie above the marginal product curve for the firm with less capital. 
C)  will lie below the total marginal curve for the firm with less capital. 
D)  will show no diminishing marginal returns.

Question 10

A firm's total fixed cost:

Accepted Answer

A)  stays constant in the short run. 
B)  falls as the firm produces more output in the short run. 
C)  falls as the firm produces more output in the long run. 
D)  increases as the firm produces more output. 
A)  stays constant in the short run. 
B)  falls as the firm produces more output in the short run. 
C)  falls as the firm produces more output in the long run. 
D)  increases as the firm produces more output.

Question 11

Average total cost is:

Accepted Answer

A)  the change in cost divided by the change in output. 
B)  total cost divided by output. 
C)  the change in output divided by the change in costs. 
D)  total cost times output. 
A)  the change in cost divided by the change in output. 
B)  total cost divided by output. 
C)  the change in output divided by the change in costs. 
D)  total cost times output.

Question 12

Use the following to answer questions:
Figure: Short-Run Costs II  
-(Figure: Short-Run Costs II) Look at the figure Short-Run Costs II. Curve 3 is the _____ cost curve.

Accepted Answer

A)  average total 
B)  total 
C)  marginal 
D)  average variable 
A)  average total 
B)  total 
C)  marginal 
D)  average variable

Question 13

The fixed cost curve is:

Accepted Answer

A)  positively sloped. 
B)  negatively sloped. 
C)  vertical. 
D)  horizontal. 
A)  positively sloped. 
B)  negatively sloped. 
C)  vertical. 
D)  horizontal.

Question 14

Use the following to answer questions:
Figure: Long-Run and Short-Run Average Cost Curves  
-(Figure: Long-Run and Short-Run Average Cost Curves) Look at the figure Long-Run and Short-Run Average Cost Curves. If a firm faced the long-run average total cost curve shown in the figure and it expected to produce 100,000 units of the good in the long run, the firm should build the plant associated with:

Accepted Answer

A)  ATC1. 
B)  ATC2. 
C)  ATC3. 
D)  ATC1 or ATC2. 
A)  ATC1. 
B)  ATC2. 
C)  ATC3. 
D)  ATC1 or ATC2.

Question 15

When a firm produces a small amount of output, the spreading effect:

Accepted Answer

A)  is stronger than the diminishing returns effect. 
B)  is weaker than the diminishing returns effect. 
C)  and diminishing returns effect are equal. 
D)  is zero. 
A)  is stronger than the diminishing returns effect. 
B)  is weaker than the diminishing returns effect. 
C)  and diminishing returns effect are equal. 
D)  is zero.

Question 16

Variable cost divided by the quantity of output produced is _____ cost.

Accepted Answer

A)  marginal 
B)  average total 
C)  average fixed 
D)  average variable 
A)  marginal 
B)  average total 
C)  average fixed 
D)  average variable

Question 17

Use the following to answer questions:  
-(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases two mixers, her average total cost _____ in the range of output between 100 and 400 cakes.

Accepted Answer

A)  increases 
B)  decreases 
C)  remains the same 
D)  can't be calculated 
A)  increases 
B)  decreases 
C)  remains the same 
D)  can't be calculated

Question 18

When an additional unit of a variable input adds less to total product than the previous unit, the firm has:

Accepted Answer

A)  increasing returns. 
B)  diminishing marginal returns. 
C)  diminishing total returns. 
D)  diminishing marginal returns and diminishing total returns. 
A)  increasing returns. 
B)  diminishing marginal returns. 
C)  diminishing total returns. 
D)  diminishing marginal returns and diminishing total returns.

Question 19

The change in total output resulting from a one-unit increase in the quantity of an input used, holding the quantities of all other inputs constant, is:

Accepted Answer

A)  average cost. 
B)  average product. 
C)  marginal cost. 
D)  marginal product. 
A)  average cost. 
B)  average product. 
C)  marginal cost. 
D)  marginal product.

Question 20

Use the following to answer questions:  
-(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases three mixers and bakes 200 cakes per day, what is her average fixed cost?

Accepted Answer

A)  $0.05 
B)  $2.50 
C)  $5.00 
D)  $12.50 
A)  $0.05 
B)  $2.50 
C)  $5.00 
D)  $12.50

What are some factors that contribute to a firm achieving increasing returns to scale (or economies of scale) in the long run?

In the short run, the average total cost curve reaches its minimum point at a lower level of output than the short-run marginal cost curve reaches its minimum.

Use the following to answer questions: -(Table: Production of Bagels) Look at the table Production of Bagels. Diminishing marginal returns begin with the addition of the _____ worker.

When marginal cost is rising:

Darren runs a barbershop with average fixed costs of $60 per day and a total output of 50 haircuts per day. Darren shuts down every year during the last week of July and the first week of August. What is his annual fixed cost if he is open six days per week?

The marginal product of labor is the change in _ divided by the change in _.

A firm's marginal cost is:

When marginal cost is BELOW average variable cost, average variable cost must be:

If two firms are identical in all respects except that one has more of the fixed input capital than another, the marginal product curve for the firm with more capital:

A firm's total fixed cost:

Average total cost is:

Use the following to answer questions: Figure: Short-Run Costs II -(Figure: Short-Run Costs II) Look at the figure Short-Run Costs II. Curve 3 is the _____ cost curve.

The fixed cost curve is:

When a firm produces a small amount of output, the spreading effect:

Variable cost divided by the quantity of output produced is _____ cost.

When an additional unit of a variable input adds less to total product than the previous unit, the firm has:

The change in total output resulting from a one-unit increase in the quantity of an input used, holding the quantities of all other inputs constant, is:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 11: Behind the Supply Curve: Inputs and Costs

What are some factors that contribute to a firm achieving increasing returns to scale (or economies of scale) in the long run?

In the short run, the average total cost curve reaches its minimum point at a lower level of output than the short-run marginal cost curve reaches its minimum.

Use the following to answer questions: -(Table: Production of Bagels) Look at the table Production of Bagels. Diminishing marginal returns begin with the addition of the _____ worker.

When marginal cost is rising:

Darren runs a barbershop with average fixed costs of $60 per day and a total output of 50 haircuts per day. Darren shuts down every year during the last week of July and the first week of August. What is his annual fixed cost if he is open six days per week?

The marginal product of labor is the change in _____ divided by the change in _____.

A firm's marginal cost is:

When marginal cost is BELOW average variable cost, average variable cost must be:

If two firms are identical in all respects except that one has more of the fixed input capital than another, the marginal product curve for the firm with more capital:

A firm's total fixed cost:

Average total cost is:

Use the following to answer questions: Figure: Short-Run Costs II -(Figure: Short-Run Costs II) Look at the figure Short-Run Costs II. Curve 3 is the _____ cost curve.

The fixed cost curve is:

When a firm produces a small amount of output, the spreading effect:

Variable cost divided by the quantity of output produced is _____ cost.

When an additional unit of a variable input adds less to total product than the previous unit, the firm has:

The change in total output resulting from a one-unit increase in the quantity of an input used, holding the quantities of all other inputs constant, is:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

The marginal product of labor is the change in _ divided by the change in _.