Question 1

If a firm has increasing returns to scale at all levels of output, the

Accepted Answer

A) slope of its long-run total cost curve is always negative. 
B) slopes of its short-run average cost curves are always negative. 
C) slope of its long-run average cost curve is always negative. 
D) slope of its production function is always negative. 
A) slope of its long-run total cost curve is always negative. 
B) slopes of its short-run average cost curves are always negative. 
C) slope of its long-run average cost curve is always negative. 
D) slope of its production function is always negative.

Question 2

A total product curve shows the

Accepted Answer

A) aggregate output of many firms in an industry. 
B) amount of product consumers will take off the market. 
C) maximum amount of product that it is technically possible to produce. 
D) relationship between units of inputs and total output. 
A) aggregate output of many firms in an industry. 
B) amount of product consumers will take off the market. 
C) maximum amount of product that it is technically possible to produce. 
D) relationship between units of inputs and total output.

Question 3

Are returns to a single input and returns to scale one and the same?
 Explain.

Accepted Answer

No.Returns to a single input refers to c

Question 4

Figure 7-4
  
-Following a rash of airplane bombs, the airlines have been forced to increase security at a cost of $30 million per year.The number of inspectors and machines does not vary with the number of passengers-the airlines must have sufficient staff available to handle the full-capacity load.Which graph in Figure 7-4 best illustrates the impact of the security expenditures?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 5

In the long run, more costs become fixed.

Accepted Answer

A) True 
 B)False

Question 6

Total fixed cost

Accepted Answer

A) increases as output increases. 
B) declines as output increases. 
C) is always zero. 
D) remains constant even if the firm shuts down. 
A) increases as output increases. 
B) declines as output increases. 
C) is always zero. 
D) remains constant even if the firm shuts down.

Question 7

The long run is a period long enough so that one of the firm's commitments ends.

Accepted Answer

A) True 
 B)False

Question 8

John Amaker owns orange groves and hires pickers for a two-week period as shown in Table 7-3.Table 7-3
  
-In Table 7-3, negative returns set in with picker

Accepted Answer

A) 6. 
B) 7. 
C) 8. 
D) 9. 
E) There are no negative returns in this table. 
A) 6. 
B) 7. 
C) 8. 
D) 9. 
E) There are no negative returns in this table.

Question 9

Figure 7-15
  
-In Figure 7-15, we would expect a move of the budget line from A to B if

Accepted Answer

A) the price of machines falls. 
B) the price of labor falls. 
C) output falls. 
D) the product price rises. 
A) the price of machines falls. 
B) the price of labor falls. 
C) output falls. 
D) the product price rises.

Question 10

Input proportions are usually fixed by technological conditions alone.

Accepted Answer

A) True 
 B)False

Question 11

When the marginal revenue product of an input is less than its price, the

Accepted Answer

A) producer should expand the use of that input. 
B) price of the input will automatically rise in a free market. 
C) producer should reduce the use of that input. 
D) marginal physical product of that input must be below its average physical product. 
A) producer should expand the use of that input. 
B) price of the input will automatically rise in a free market. 
C) producer should reduce the use of that input. 
D) marginal physical product of that input must be below its average physical product.

Question 12

The short run is that period during which there are no fixed commitments.

Accepted Answer

A) True 
 B)False

Question 13

Draw a long-run average cost curve that first exhibits increasing returns to scale (economies of scale), then constant returns to scale, and finally decreasing returns to scale (diseconomies of scale).Label each region.

Accepted Answer

Initially, LRAC declines as ou

Question 14

Complete the table below by computing the missing numbers from those that are given.

Accepted Answer

The answer of Complete the table below by computing the...

Question 15

Figure 7-8
  
-"Overfishing" impairs the ability of fish stock to replenish itself, so the stock of fish declines.Fishermen then attempt to increase output by adding more boats and fishing longer.Which average cost curve in Figure 7-8 depicts the "overfishing" situation?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 16

The behavior of historical cost curves says nothing about the cost advantages or disadvantages of a single large firm.

Accepted Answer

A) True 
 B)False

Question 17

A firm practices input substitution when it

Accepted Answer

A) retrains Joe the welder as a painter and Pat the painter as a welder. 
B) buys extra machines for its workers to use. 
C) allows fixed cost to become variable. 
D) replaces unskilled labor with automated machinery. 
A) retrains Joe the welder as a painter and Pat the painter as a welder. 
B) buys extra machines for its workers to use. 
C) allows fixed cost to become variable. 
D) replaces unskilled labor with automated machinery.

Question 18

Figure 7-8
  
-Of the graphs in Figure 7-8, which represents total cost?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 19

With regard to the characteristics of production indifference curves, which of the following statements is/are NOT true?

Accepted Answer

A) ​Higher curves correspond to larger outputs. 
B) ​An indifference curve will generally have a negative slope. 
C) ​An indifference curve is typically assumed to curve inward toward the origin near its middle. 
D) ​All of the above are true for production indifference curves, but not for isoquants. 
E) ​b and c 
A) ​Higher curves correspond to larger outputs. 
B) ​An indifference curve will generally have a negative slope. 
C) ​An indifference curve is typically assumed to curve inward toward the origin near its middle. 
D) ​All of the above are true for production indifference curves, but not for isoquants. 
E) ​b and c

Question 20

Marginal cost is the

Accepted Answer

A) change in total cost resulting from the purchase of one more unit of the variable input. 
B) change in total cost resulting from the production of one more unit of output. 
C) difference between total fixed cost and total variable cost. 
D) difference between total cost and total expenditure. 
A) change in total cost resulting from the purchase of one more unit of the variable input. 
B) change in total cost resulting from the production of one more unit of output. 
C) difference between total fixed cost and total variable cost. 
D) difference between total cost and total expenditure.

Exam 7: Production, Inputs, and Cost: Building Blocks for Supply Analysis

If a firm has increasing returns to scale at all levels of output, the

A total product curve shows the

Are returns to a single input and returns to scale one and the same? Explain.

In the long run, more costs become fixed.

Total fixed cost

The long run is a period long enough so that one of the firm's commitments ends.

John Amaker owns orange groves and hires pickers for a two-week period as shown in Table 7-3.Table 7-3 -In Table 7-3, negative returns set in with picker

Figure 7-15 -In Figure 7-15, we would expect a move of the budget line from A to B if

Input proportions are usually fixed by technological conditions alone.

When the marginal revenue product of an input is less than its price, the

The short run is that period during which there are no fixed commitments.

Draw a long-run average cost curve that first exhibits increasing returns to scale (economies of scale), then constant returns to scale, and finally decreasing returns to scale (diseconomies of scale).Label each region.

Complete the table below by computing the missing numbers from those that are given.

Figure 7-8 -"Overfishing" impairs the ability of fish stock to replenish itself, so the stock of fish declines.Fishermen then attempt to increase output by adding more boats and fishing longer.Which average cost curve in Figure 7-8 depicts the "overfishing" situation?

The behavior of historical cost curves says nothing about the cost advantages or disadvantages of a single large firm.

A firm practices input substitution when it

Figure 7-8 -Of the graphs in Figure 7-8, which represents total cost?

With regard to the characteristics of production indifference curves, which of the following statements is/are NOT true?

Marginal cost is the

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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