Question 1

An isocost line represents:

Accepted Answer

A) all the combinations of inputs to a production process that result in the same total costs of production. 
B) all the combinations of inputs that result in the same amount of output. 
C) all of the combinations of two inputs for which the amount of money spent on each of the inputs is equal. 
D) all of the levels of output that result in the same total cost. 
A) all the combinations of inputs to a production process that result in the same total costs of production. 
B) all the combinations of inputs that result in the same amount of output. 
C) all of the combinations of two inputs for which the amount of money spent on each of the inputs is equal. 
D) all of the levels of output that result in the same total cost. A

Question 2

Which of the following is least likely to limit the ability of a firm to minimize production costs?

Accepted Answer

A) Resistance by labor. 
B) The fact that the firm is a nonprofit organization. 
C) An increase in the amount of competition faced by the firm. 
D) Legislated input combinations for firms in particular industries, e.g, health care. 
A) Resistance by labor. 
B) The fact that the firm is a nonprofit organization. 
C) An increase in the amount of competition faced by the firm. 
D) Legislated input combinations for firms in particular industries, e.g, health care. C

Question 3

Explain how labor resistance and political and legislative influences reduce the ability of firms to minimize their costs of production.What do the two have in common in this regard?

Accepted Answer

Both labor resistance and political and legislative influences constrain the set of choices firm managers have when it comes to the production process.Labor resistance is often focused on protecting existing jobs.Thus,it becomes more difficult for the manager to substitute capital for labor or combine two or more tasks in an effort to reduce production costs.Legislative influences often come in the form of mandated combinations of capital and labor or restrictions on the minimum number of workers that can be assigned to a particular task.Once again,this has the effect of limiting the manager's choices and may preclude certain input combinations that would result in reduced production costs.

Question 4

The list of the major factors that create economies of scale includes all of the following except:

Accepted Answer

A) specialization and division of labor. 
B) quantity discounts. 
C) an increase in demand for the firm's output. 
D) the use of automation devices. 
A) specialization and division of labor. 
B) quantity discounts. 
C) an increase in demand for the firm's output. 
D) the use of automation devices.

Question 5

Graphically,all else constant,a decrease in the price of labor would be illustrated by:

Accepted Answer

A) a parallel shift of the isocost line in toward the origin. 
B) rotating the isocost line away from the origin along the labor axis. 
C) a parallel shift of the isocost line away from the origin. 
D) rotating the isocost line in toward the origin along the capital axis. 
A) a parallel shift of the isocost line in toward the origin. 
B) rotating the isocost line away from the origin along the labor axis. 
C) a parallel shift of the isocost line away from the origin. 
D) rotating the isocost line in toward the origin along the capital axis.

Question 6

Which of the following is not cited as one of the factors that accounts for the large-scale production that exists in many sectors of the economy?

Accepted Answer

A) Economies of scale. 
B) Advertising and image differentiation. 
C) The minimum efficient scale of operation in many industries is quite high relative to market demand. 
D) Risk spreading. 
A) Economies of scale. 
B) Advertising and image differentiation. 
C) The minimum efficient scale of operation in many industries is quite high relative to market demand. 
D) Risk spreading.

Question 7

The text considers three methods that can be used to obtain empirical estimates of long-run costs in different industries.Of those three,surveys of expert opinion are considered to be most reliable because they are less subject to bias than the other two methods.

Accepted Answer

A) True 
 B)False

Question 8

An increase in the amount of competition with other firms that employ "best practices" would be likely to cause a particular firm's labor productivity to:

Accepted Answer

A) increase 
B) stay the same. 
C) decrease. 
D) cannot be determined without additional information. 
A) increase 
B) stay the same. 
C) decrease. 
D) cannot be determined without additional information.

Question 9

A production method that relies on large quantities of machines and equipment and smaller quantities of labor is referred to as a:

Accepted Answer

A) variable-input-intensive method of production. 
B) labor-intensive method of production. 
C) technology-intensive method of production 
D) capital-intensive method of production. 
A) variable-input-intensive method of production. 
B) labor-intensive method of production. 
C) technology-intensive method of production 
D) capital-intensive method of production.

Question 10

In which of the following market structures would X-inefficiency be most likely to exist?

Accepted Answer

A) Perfect competition. 
B) Monopolistic competition. 
C) Oligopoly. 
D) Monopoly. 
A) Perfect competition. 
B) Monopolistic competition. 
C) Oligopoly. 
D) Monopoly.

Question 11

Long-run average cost is defined as:

Accepted Answer

A) the minimum average cost of producing any level of output when all inputs are variable. 
B) the minimum average cost of producing any level of output when the amount of capital is varied and all other inputs are held constant. 
C) the average of the short-run costs associated with each amount of capital employed by the firm. 
D) the minimum average cost of producing any level of output when all inputs are fixed. 
A) the minimum average cost of producing any level of output when all inputs are variable. 
B) the minimum average cost of producing any level of output when the amount of capital is varied and all other inputs are held constant. 
C) the average of the short-run costs associated with each amount of capital employed by the firm. 
D) the minimum average cost of producing any level of output when all inputs are fixed.

Question 12

The "minimum efficient scale" of operation in an industry is defined as:

Accepted Answer

A) the smallest plant size that can be operated by firms in the industry. 
B) the scale of operation at which economies of scale are exhausted. 
C) the smallest number of firms that could effectively meet demand for an industry's output. 
D) the scale of operation by firms in an industry that is least efficient. 
A) the smallest plant size that can be operated by firms in the industry. 
B) the scale of operation at which economies of scale are exhausted. 
C) the smallest number of firms that could effectively meet demand for an industry's output. 
D) the scale of operation by firms in an industry that is least efficient.

Question 13

In the long-run production function,all of the inputs to the production process are allowed to vary.

Accepted Answer

A) True 
 B)False

Question 14

Over the past several decades,technological change has led to a significant amount of consolidation in the U.S.brewing industry.

Accepted Answer

A) True 
 B)False

Question 15

Assume a firm produces 500 units of a good by using two inputs,capital and labor,whose per unit prices are $10 and $4.Assume also that the marginal physical product of the last unit of capital is 30 and the marginal physical product of the last unit of labor is 10.To minimize costs this firm should employ:

Accepted Answer

A) the existing combination of resources. 
B) more labor and less capital. 
C) more capital and less labor. 
D) both more labor and more capital. 
A) the existing combination of resources. 
B) more labor and less capital. 
C) more capital and less labor. 
D) both more labor and more capital.

Question 16

"Learning by doing" has the effect of causing:

Accepted Answer

A) a movement down the LRAC curve. 
B) a movement up the LRAC curve. 
C) the LRAC curve to shift up. 
D) the LRAC curve to shift down. 
A) a movement down the LRAC curve. 
B) a movement up the LRAC curve. 
C) the LRAC curve to shift up. 
D) the LRAC curve to shift down.

Question 17

Regarding the production of health care,more recent studies suggest that economies of scale exist up to a hospital size of approximately 200 beds.

Accepted Answer

A) True 
 B)False

Question 18

What are the two primary factors that influence a firm manager's choice between a labor-intensive and a capital-intensive method of production? How does each factor influence the manager's choice.

Accepted Answer

The two primary factors are the technolo

Question 19

Most of the empirical research on long-run costs suggests that the long-run average cost curve for most firms has a very pronounced U-shape.

Accepted Answer

A) True 
 B)False

Question 20

As the price of labor increases relative to the price of capital,the firm will move to a more labor-intensive production method to minimize costs.

Accepted Answer

A) True 
 B)False

An isocost line represents:

Which of the following is least likely to limit the ability of a firm to minimize production costs?

Explain how labor resistance and political and legislative influences reduce the ability of firms to minimize their costs of production.What do the two have in common in this regard?

The list of the major factors that create economies of scale includes all of the following except:

Graphically,all else constant,a decrease in the price of labor would be illustrated by:

Which of the following is not cited as one of the factors that accounts for the large-scale production that exists in many sectors of the economy?

The text considers three methods that can be used to obtain empirical estimates of long-run costs in different industries.Of those three,surveys of expert opinion are considered to be most reliable because they are less subject to bias than the other two methods.

An increase in the amount of competition with other firms that employ "best practices" would be likely to cause a particular firm's labor productivity to:

A production method that relies on large quantities of machines and equipment and smaller quantities of labor is referred to as a:

In which of the following market structures would X-inefficiency be most likely to exist?

Long-run average cost is defined as:

The "minimum efficient scale" of operation in an industry is defined as:

In the long-run production function,all of the inputs to the production process are allowed to vary.

Over the past several decades,technological change has led to a significant amount of consolidation in the U.S.brewing industry.

"Learning by doing" has the effect of causing:

Regarding the production of health care,more recent studies suggest that economies of scale exist up to a hospital size of approximately 200 beds.

What are the two primary factors that influence a firm manager's choice between a labor-intensive and a capital-intensive method of production? How does each factor influence the manager's choice.

Most of the empirical research on long-run costs suggests that the long-run average cost curve for most firms has a very pronounced U-shape.

As the price of labor increases relative to the price of capital,the firm will move to a more labor-intensive production method to minimize costs.

Managers and Economics

Demand, supply, and Equilibrium Prices

Demand Elasticities

Techniques for Understanding Consumer Demand and Behavior

Production and Cost Analysis in the Short Run

Market Structure: Perfect Competition

Market Structure: Monopoly and Monopolistic Competition

Market Structure: Oligopoly

Pricing Strategies for the Firm

Measuring Macroeconomic Activity

Spending by Individuals, firms, and Governments on Real Goods and Services

The Role of Money in the Macro Economy

The Aggregate Model of the Macro Economy

International and Balance of Payments Issues in the Macro Economy

Combining Micro and Macro Analysis for Managerial Decision Making

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Exam 6: Production and Cost Analysis in the Long Run

An isocost line represents:

Which of the following is least likely to limit the ability of a firm to minimize production costs?

Explain how labor resistance and political and legislative influences reduce the ability of firms to minimize their costs of production.What do the two have in common in this regard?

The list of the major factors that create economies of scale includes all of the following except:

Graphically,all else constant,a decrease in the price of labor would be illustrated by:

Which of the following is not cited as one of the factors that accounts for the large-scale production that exists in many sectors of the economy?

The text considers three methods that can be used to obtain empirical estimates of long-run costs in different industries.Of those three,surveys of expert opinion are considered to be most reliable because they are less subject to bias than the other two methods.

An increase in the amount of competition with other firms that employ "best practices" would be likely to cause a particular firm's labor productivity to:

A production method that relies on large quantities of machines and equipment and smaller quantities of labor is referred to as a:

In which of the following market structures would X-inefficiency be most likely to exist?

Long-run average cost is defined as:

The "minimum efficient scale" of operation in an industry is defined as:

In the long-run production function,all of the inputs to the production process are allowed to vary.

Over the past several decades,technological change has led to a significant amount of consolidation in the U.S.brewing industry.

"Learning by doing" has the effect of causing:

Regarding the production of health care,more recent studies suggest that economies of scale exist up to a hospital size of approximately 200 beds.

What are the two primary factors that influence a firm manager's choice between a labor-intensive and a capital-intensive method of production? How does each factor influence the manager's choice.

Most of the empirical research on long-run costs suggests that the long-run average cost curve for most firms has a very pronounced U-shape.

As the price of labor increases relative to the price of capital,the firm will move to a more labor-intensive production method to minimize costs.

Managers and Economics

Demand, supply, and Equilibrium Prices

Demand Elasticities

Techniques for Understanding Consumer Demand and Behavior

Production and Cost Analysis in the Short Run

Market Structure: Perfect Competition

Market Structure: Monopoly and Monopolistic Competition

Market Structure: Oligopoly

Pricing Strategies for the Firm

Measuring Macroeconomic Activity

Spending by Individuals, firms, and Governments on Real Goods and Services

The Role of Money in the Macro Economy

The Aggregate Model of the Macro Economy

International and Balance of Payments Issues in the Macro Economy

Combining Micro and Macro Analysis for Managerial Decision Making

Filters