Question 1

Diminishing marginal returns occur when:

Accepted Answer

A)  each additional unit of a variable factor adds more to total output than the previous unit. 
B)  each additional unit of a variable factor adds less to total output than the previous unit. 
C)  the marginal product of a variable factor is increasing at a decreasing rate. 
D)  total product decreases. 
A)  each additional unit of a variable factor adds more to total output than the previous unit. 
B)  each additional unit of a variable factor adds less to total output than the previous unit. 
C)  the marginal product of a variable factor is increasing at a decreasing rate. 
D)  total product decreases.

Question 2

Marginal cost _____ over the range of increasing marginal returns and _____ over the range of diminishing marginal returns.

Accepted Answer

A)  increases; decreases 
B)  decreases; increases 
C)  is constant; decreases 
D)  increases; is constant 
A)  increases; decreases 
B)  decreases; increases 
C)  is constant; decreases 
D)  increases; is constant

Question 3

A manufacturing company that benefits from lower costs per unit as it grows is an example of a firm exhibiting:

Accepted Answer

A)  increasing returns to scale. 
B)  decreasing returns to scale. 
C)  increasing opportunity costs. 
D)  scale reduction. 
A)  increasing returns to scale. 
B)  decreasing returns to scale. 
C)  increasing opportunity costs. 
D)  scale reduction.

Question 4

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 one mixer and bakes 400 cakes per day, what is her average fixed cost?

Accepted Answer

A)  $0.025 
B)  $2.50 
C)  $1,000 
D)  $400,000 
A)  $0.025 
B)  $2.50 
C)  $1,000 
D)  $400,000

Question 5

The total cost curve for a snowmobile dealership shows how _____ cost depends on the quantity of _____.

Accepted Answer

A)  total; fixed inputs 
B)  average; variable inputs 
C)  total; output 
D)  marginal; output 
A)  total; fixed inputs 
B)  average; variable inputs 
C)  total; output 
D)  marginal; output

Question 6

When the long-run average total cost curve is upward-sloping as output increases, the firm has diseconomies of scale.

Accepted Answer

A) True 
 B)False

Question 7

Use the following to answer questions:
Figure: Long-Run Average Cost  
-(Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has _____ in the output region from 0 to A.

Accepted Answer

A)  decreasing returns to scale 
B)  constant returns to scale 
C)  increasing returns to scale 
D)  negative costs of production 
A)  decreasing returns to scale 
B)  constant returns to scale 
C)  increasing returns to scale 
D)  negative costs of production

Question 8

Use the following to answer questions:  
-(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the average fixed cost of 5 cakes?

Accepted Answer

A)  $1 
B)  $2 
C)  $5 
D)  $10 
A)  $1 
B)  $2 
C)  $5 
D)  $10

Question 9

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

Accepted Answer

A)  above average total cost. 
B)  below average fixed cost. 
C)  falling. 
D)  rising. 
A)  above average total cost. 
B)  below average fixed cost. 
C)  falling. 
D)  rising.

Question 10

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 one mixer and bakes 400 cakes per day, what is her average total cost?

Accepted Answer

A)  $2.50 
B)  $10 
C)  $12.50 
D)  $1,010 
A)  $2.50 
B)  $10 
C)  $12.50 
D)  $1,010

Question 11

Use the following to answer questions:  
-(Figure and Table: Variable, Fixed, and Total Costs) Look at the figure and table Variable, Fixed, and Total Costs. When 51 bushels of wheat is produced, the average fixed cost is _____, average variable cost is _____, and average total cost is _____.

Accepted Answer

A)  $7.84; $11.76; $19.60 
B)  $133.33; $200.00; $333.33 
C)  $400.00; $600.00; $1,000.00 
D)  $5.33; $13.33; $18.67 
A)  $7.84; $11.76; $19.60 
B)  $133.33; $200.00; $333.33 
C)  $400.00; $600.00; $1,000.00 
D)  $5.33; $13.33; $18.67

Question 12

Ashley Bakery expects its marginal cost curve will eventually slope upward, because as with most production processes, baking has:

Accepted Answer

A)  constant opportunity costs. 
B)  a maximum efficient scale. 
C)  diminishing marginal returns. 
D)  decreasing opportunity costs. 
A)  constant opportunity costs. 
B)  a maximum efficient scale. 
C)  diminishing marginal returns. 
D)  decreasing opportunity costs.

Question 13

Use the following to answer questions:  
-(Table: Costs of Producing Bagels) Look at the table Cost of Producing Bagels. The total cost of producing 6 bagels is:

Accepted Answer

A)  $0.10. 
B)  $0.20. 
C)  $0.80. 
D)  $0.90. 
A)  $0.10. 
B)  $0.20. 
C)  $0.80. 
D)  $0.90.

Question 14

Use the following to answer questions:
Figure: Long-Run Average Cost  
-(Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has _____ in the output region from A to B.

Accepted Answer

A)  constant returns to scale 
B)  economies of scale 
C)  diseconomies of scale 
D)  constant total cost as output increases 
A)  constant returns to scale 
B)  economies of scale 
C)  diseconomies of scale 
D)  constant total cost as output increases

Question 15

At quantities greater than the long-run minimum cost per unit of output, the long-run average total cost curve is _____ of the corresponding short-run average total cost curve.

Accepted Answer

A)  tangent to the minimum 
B)  tangent to the maximum 
C)  to the right of the minimum 
D)  to the left of the minimum 
A)  tangent to the minimum 
B)  tangent to the maximum 
C)  to the right of the minimum 
D)  to the left of the minimum

Question 16

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. 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. Suppose that Pat used to produce 200 cakes, but she has a sudden increase in demand, so that she begins to produce 400 cakes. Explain how her average total cost will change in the short run and in the long run.

Accepted Answer

When Pat was producing 200 cakes, she bo

Question 17

The total product curve:

Accepted Answer

A)  shows the relation between output and the quantity of a variable input for varying levels of the fixed input. 
B)  will become flatter as output increases if there are diminishing returns to the variable input. 
C)  will be downward-sloping if there are diminishing returns to the variable input. 
D)  will become horizontal when the marginal product of the variable input is constant. 
A)  shows the relation between output and the quantity of a variable input for varying levels of the fixed input. 
B)  will become flatter as output increases if there are diminishing returns to the variable input. 
C)  will be downward-sloping if there are diminishing returns to the variable input. 
D)  will become horizontal when the marginal product of the variable input is constant.

Question 18

In the long run:

Accepted Answer

A)  the firm has time to change the level of all inputs. 
B)  inputs are neither variable nor fixed. 
C)  at least one input is free. 
D)  all inputs are more expensive. 
A)  the firm has time to change the level of all inputs. 
B)  inputs are neither variable nor fixed. 
C)  at least one input is free. 
D)  all inputs are more expensive.

Question 19

Use the following to answer questions:  
-(Figure and Table: Variable, Fixed, and Total Costs) Look at the figure and table Variable, Fixed, and Total Costs. The marginal cost of increasing production from 84 to 91 bushels of wheat is:

Accepted Answer

A)  $13.00. 
B)  $19.78. 
C)  $22.22. 
D)  $28.57. 
A)  $13.00. 
B)  $19.78. 
C)  $22.22. 
D)  $28.57.

Question 20

Use the following to answer questions:  
-(Table: Cost Data) Look at the table Cost Data. The average total cost of producing 5 purses is:

Accepted Answer

A)  $10. 
B)  $38. 
C)  $48. 
D)  $240. 
A)  $10. 
B)  $38. 
C)  $48. 
D)  $240.

Diminishing marginal returns occur when:

Marginal cost _ over the range of increasing marginal returns and _ over the range of diminishing marginal returns.

A manufacturing company that benefits from lower costs per unit as it grows is an example of a firm exhibiting:

The total cost curve for a snowmobile dealership shows how _ cost depends on the quantity of _.

When the long-run average total cost curve is upward-sloping as output increases, the firm has diseconomies of scale.

Use the following to answer questions: Figure: Long-Run Average Cost -(Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has _____ in the output region from 0 to A.

Use the following to answer questions: -(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the average fixed cost of 5 cakes?

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

Use the following to answer questions: -(Figure and Table: Variable, Fixed, and Total Costs) Look at the figure and table Variable, Fixed, and Total Costs. When 51 bushels of wheat is produced, the average fixed cost is ___, average variable cost is _, and average total cost is ___.

Ashley Bakery expects its marginal cost curve will eventually slope upward, because as with most production processes, baking has:

Use the following to answer questions: -(Table: Costs of Producing Bagels) Look at the table Cost of Producing Bagels. The total cost of producing 6 bagels is:

Use the following to answer questions: Figure: Long-Run Average Cost -(Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has _____ in the output region from A to B.

At quantities greater than the long-run minimum cost per unit of output, the long-run average total cost curve is _____ of the corresponding short-run average total cost curve.

The total product curve:

In the long run:

Use the following to answer questions: -(Figure and Table: Variable, Fixed, and Total Costs) Look at the figure and table Variable, Fixed, and Total Costs. The marginal cost of increasing production from 84 to 91 bushels of wheat is:

Use the following to answer questions: -(Table: Cost Data) Look at the table Cost Data. The average total cost of producing 5 purses 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

Diminishing marginal returns occur when:

Marginal cost _____ over the range of increasing marginal returns and _____ over the range of diminishing marginal returns.

A manufacturing company that benefits from lower costs per unit as it grows is an example of a firm exhibiting:

The total cost curve for a snowmobile dealership shows how _____ cost depends on the quantity of _____.

When the long-run average total cost curve is upward-sloping as output increases, the firm has diseconomies of scale.

Use the following to answer questions: Figure: Long-Run Average Cost -(Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has _____ in the output region from 0 to A.

Use the following to answer questions: -(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume that fixed costs are $10. What is the average fixed cost of 5 cakes?

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

Use the following to answer questions: -(Figure and Table: Variable, Fixed, and Total Costs) Look at the figure and table Variable, Fixed, and Total Costs. When 51 bushels of wheat is produced, the average fixed cost is _____, average variable cost is _____, and average total cost is _____.

Ashley Bakery expects its marginal cost curve will eventually slope upward, because as with most production processes, baking has:

Use the following to answer questions: -(Table: Costs of Producing Bagels) Look at the table Cost of Producing Bagels. The total cost of producing 6 bagels is:

Use the following to answer questions: Figure: Long-Run Average Cost -(Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has _____ in the output region from A to B.

At quantities greater than the long-run minimum cost per unit of output, the long-run average total cost curve is _____ of the corresponding short-run average total cost curve.

The total product curve:

In the long run:

Use the following to answer questions: -(Figure and Table: Variable, Fixed, and Total Costs) Look at the figure and table Variable, Fixed, and Total Costs. The marginal cost of increasing production from 84 to 91 bushels of wheat is:

Use the following to answer questions: -(Table: Cost Data) Look at the table Cost Data. The average total cost of producing 5 purses 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

Marginal cost _ over the range of increasing marginal returns and _ over the range of diminishing marginal returns.

The total cost curve for a snowmobile dealership shows how _ cost depends on the quantity of _.

Use the following to answer questions: -(Figure and Table: Variable, Fixed, and Total Costs) Look at the figure and table Variable, Fixed, and Total Costs. When 51 bushels of wheat is produced, the average fixed cost is ___, average variable cost is _, and average total cost is ___.