Question 1

What is the difference between "diminishing marginal returns" and "diseconomies of scale"?

Accepted Answer

A) Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
B) Both concepts explain why average total cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
C) Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why average cost increases. 
D) Diminishing marginal returns, which applies only in the long run when all factors are variable, explains why average variable cost increases, while diseconomies of scale, which applies in the short run when at least one factor is fixed, explains why average total cost increases. 
A) Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
B) Both concepts explain why average total cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable. 
C) Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why average cost increases. 
D) Diminishing marginal returns, which applies only in the long run when all factors are variable, explains why average variable cost increases, while diseconomies of scale, which applies in the short run when at least one factor is fixed, explains why average total cost increases. C

Question 2

In economics, what is the difference between the short run and the long run?

Accepted Answer

In economics, the short run refers to the period of time during which at least one of a firm's inputs is fixed.The long run refers to the period of time in which a firm can vary all its inputs, adopt new technology, and increase or decrease the size of its physical plant.

Question 3

The law of diminishing marginal returns states

Accepted Answer

A) that at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline. 
B) that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline. 
C) that in the presence of a fixed factor, at some point average product of labor starts to fall as more and more variable inputs are added. 
D) average total costs of production initially fall and after some point starts to rise at a decreasing rate as output increases. 
A) that at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline. 
B) that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline. 
C) that in the presence of a fixed factor, at some point average product of labor starts to fall as more and more variable inputs are added. 
D) average total costs of production initially fall and after some point starts to rise at a decreasing rate as output increases. B

Question 4

Figure 11-15
  
-Refer to Figure 11-15.Suppose Hilda produces 100 gooseberry pies.What is the marginal rate of technical substitution of labor for capital when labor is increased from 10 to 20 hours?

Accepted Answer

A) 1 unit of capital 
B) 10 units of capital 
C) 14 units of capital 
D) 24 units of capital 
A) 1 unit of capital 
B) 10 units of capital 
C) 14 units of capital 
D) 24 units of capital

Question 5

Which of the following are examples of a firm experiencing a positive technological change?
a.A firm is able to reduce its inputs by 15 percent and still produce the same level of output.
b.A seminar attended by the firm's workers makes them more productive.
c.A firm adds 5 percent to its workforce and is able to maintain its initial level of output.
d.A firm restructures its distribution system and is able to save on its shipping times.
e.A firm rearranges its warehouse and finds that it can use fewer workers to maintain its productivity level.

Accepted Answer

Examples a, b, d, and e are examples of

Question 6

Figure 11-11
   
Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATCₐ, ATCb and ATCc.
-Refer to Figure 11-11.Constant returns to scale

Accepted Answer

A) occur for output rates greater than 5,000 picture frames. 
B) occur between 5,000 and 20,000 picture frames per month. 
C) occur between 10,000 and 20,000 pictures frames per month. 
D) will shift the long-run average cost curve downward. 
A) occur for output rates greater than 5,000 picture frames. 
B) occur between 5,000 and 20,000 picture frames per month. 
C) occur between 10,000 and 20,000 pictures frames per month. 
D) will shift the long-run average cost curve downward.

Question 7

The River Rouge plant was built by the Ford Motor Company in the 1920s to produce the company's Model A car.Which of the following is evidence that the River Rouge plant suffered from diseconomies of scale?

Accepted Answer

A) Despite an expensive advertising campaign the Model A did not earn the company a profit. 
B) Model A cars made at the River Rouge plant failed to earn Ford a profit. Ford eventually constructed smaller plants to make the Model A at a lower average cost. 
C) Model A cars made at the River Rouge plant failed to earn a profit. Ford reduced the average cost of the Model A by cutting its employees' wages. 
D) Model A cars made at the River Rouge plant failed to earn a profit because the price of steel used to manufacture the Model A rose when workers in the steel industry went on strike. 
A) Despite an expensive advertising campaign the Model A did not earn the company a profit. 
B) Model A cars made at the River Rouge plant failed to earn Ford a profit. Ford eventually constructed smaller plants to make the Model A at a lower average cost. 
C) Model A cars made at the River Rouge plant failed to earn a profit. Ford reduced the average cost of the Model A by cutting its employees' wages. 
D) Model A cars made at the River Rouge plant failed to earn a profit because the price of steel used to manufacture the Model A rose when workers in the steel industry went on strike.

Question 8

The law of diminishing marginal returns

Accepted Answer

A) explains why the average total cost and marginal cost curves are U-shaped in the short run. 
B) explains why the average total cost, average fixed cost, and the marginal cost curves are U-shaped in the short run. 
C) causes average total cost to rise at a decreasing rate as output increases. 
D) causes the difference between average total cost and average variable cost to get smaller as output increases. 
A) explains why the average total cost and marginal cost curves are U-shaped in the short run. 
B) explains why the average total cost, average fixed cost, and the marginal cost curves are U-shaped in the short run. 
C) causes average total cost to rise at a decreasing rate as output increases. 
D) causes the difference between average total cost and average variable cost to get smaller as output increases.

Question 9

Use the general relationship between marginal and average values to explain why a marginal cost curve must intersect an average total cost curve and an average variable cost curve at their minimum points.

Accepted Answer

The relationship between marginal and av

Question 10

Which of the following statements correctly describes the distinction between technology and technological change?

Accepted Answer

A) Technology refers to the processes used by a firm to transform inputs into output of goods and services while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs. 
B) Technology refers to the ability of a firm to increase its maximum output from a given quantity of inputs and technological change is the process by which the firm achieves this productivity gain. 
C) Technology is product-centered; its refers to developing new products with limited resources while technological change is process-centered in that it focuses on developing new production techniques. 
D) Technology involves research and development while technological change involves the use of more efficient machinery. 
A) Technology refers to the processes used by a firm to transform inputs into output of goods and services while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs. 
B) Technology refers to the ability of a firm to increase its maximum output from a given quantity of inputs and technological change is the process by which the firm achieves this productivity gain. 
C) Technology is product-centered; its refers to developing new products with limited resources while technological change is process-centered in that it focuses on developing new production techniques. 
D) Technology involves research and development while technological change involves the use of more efficient machinery.

Question 11

Figure 11-1
  
-Refer to Figure 11-1.In a diagram that shows the marginal product of labor on the vertical axis and labor on the horizontal axis, the marginal product curve

Accepted Answer

A) never intersects the horizontal axis. 
B) intersects the horizontal axis at a point corresponding to the 5th worker. 
C) intersects the horizontal axis at a point corresponding to the 6th worker. 
D) intersects the horizontal axis at a point corresponding to the 8th worker. 
A) never intersects the horizontal axis. 
B) intersects the horizontal axis at a point corresponding to the 5th worker. 
C) intersects the horizontal axis at a point corresponding to the 6th worker. 
D) intersects the horizontal axis at a point corresponding to the 8th worker.

Question 12

Figure 11-1
  
-Refer to Figure 11-1.The marginal product of the 7th worker is

Accepted Answer

A) 66. 
B) 9.43. 
C) 2. 
D) -2. 
A) 66. 
B) 9.43. 
C) 2. 
D) -2.

Question 13

Gertrude Stork's Chocolate Shoppe normally employs 4 workers.When the Chocolate Shoppe hired a 5th worker the Shoppe's total output decreased.Therefore,

Accepted Answer

A) the marginal product of the 5th worker is negative. 
B) the total output of Gertrude Stork's Chocolate Shoppe is negative. 
C) the average product of the 5th worker is negative. 
D) the 5th worker should be hired only if he is willing to accept a wage lower than the wage paid to the other 4 workers. 
A) the marginal product of the 5th worker is negative. 
B) the total output of Gertrude Stork's Chocolate Shoppe is negative. 
C) the average product of the 5th worker is negative. 
D) the 5th worker should be hired only if he is willing to accept a wage lower than the wage paid to the other 4 workers.

Question 14

The minimum efficient scale is

Accepted Answer

A) the level of output where diminishing returns have not set in yet. 
B) the plant size that yields the most profit. 
C) the level of operation where long-run average costs are lowest. 
D) the smallest output level where the firm finally reaches productive efficiency. 
A) the level of output where diminishing returns have not set in yet. 
B) the plant size that yields the most profit. 
C) the level of operation where long-run average costs are lowest. 
D) the smallest output level where the firm finally reaches productive efficiency.

Question 15

Vipsana's Gyros House sells gyros.The cost of ingredients (pita, meat, spices, etc.)to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?

Accepted Answer

A) $2.00 
B) $2.40 
C) $4.40 
D) $6.80 
A) $2.00 
B) $2.40 
C) $4.40 
D) $6.80

Question 16

Figure 11-5
  
-Refer to Figure 11-5.The vertical difference between curves F and G measures

Accepted Answer

A) average fixed costs. 
B) marginal costs. 
C) fixed costs. 
D) sunk costs. 
A) average fixed costs. 
B) marginal costs. 
C) fixed costs. 
D) sunk costs.

Question 17

In the short run, if average product is at its maximum, then average variable cost is at its minimum.

Accepted Answer

A) True 
 B)False

Question 18

If a firm is experiencing diseconomies of scale, its long-run average cost curve is increasing.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following equations is incorrect?

Accepted Answer

A) ATC - AFC = AVC 
B) AVC + AFC = ATC 
C) AFC = ATC - AVC 
D) ATC = AVC - AFC 
A) ATC - AFC = AVC 
B) AVC + AFC = ATC 
C) AFC = ATC - AVC 
D) ATC = AVC - AFC

Question 20

A firm's cost of production is determined by all of the following except

Accepted Answer

A) the technology used to produce its output. 
B) the productivity of its workers. 
C) the cost of raw material used in production. 
D) the amount of corporate taxes it must pay on its profit. 
A) the technology used to produce its output. 
B) the productivity of its workers. 
C) the cost of raw material used in production. 
D) the amount of corporate taxes it must pay on its profit.

What is the difference between "diminishing marginal returns" and "diseconomies of scale"?

In economics, what is the difference between the short run and the long run?

The law of diminishing marginal returns states

Figure 11-15 -Refer to Figure 11-15.Suppose Hilda produces 100 gooseberry pies.What is the marginal rate of technical substitution of labor for capital when labor is increased from 10 to 20 hours?

Figure 11-11 Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATCₐ, ATCb and ATCc. -Refer to Figure 11-11.Constant returns to scale

The River Rouge plant was built by the Ford Motor Company in the 1920s to produce the company's Model A car.Which of the following is evidence that the River Rouge plant suffered from diseconomies of scale?

The law of diminishing marginal returns

Use the general relationship between marginal and average values to explain why a marginal cost curve must intersect an average total cost curve and an average variable cost curve at their minimum points.

Which of the following statements correctly describes the distinction between technology and technological change?

Figure 11-1 -Refer to Figure 11-1.In a diagram that shows the marginal product of labor on the vertical axis and labor on the horizontal axis, the marginal product curve

Figure 11-1 -Refer to Figure 11-1.The marginal product of the 7th worker is

Gertrude Stork's Chocolate Shoppe normally employs 4 workers.When the Chocolate Shoppe hired a 5th worker the Shoppe's total output decreased.Therefore,

The minimum efficient scale is

Vipsana's Gyros House sells gyros.The cost of ingredients (pita, meat, spices, etc.)to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?

Figure 11-5 -Refer to Figure 11-5.The vertical difference between curves F and G measures

In the short run, if average product is at its maximum, then average variable cost is at its minimum.

If a firm is experiencing diseconomies of scale, its long-run average cost curve is increasing.

Which of the following equations is incorrect?

A firm's cost of production is determined by all of the following except

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

Exam 11: Technology, Production, and Costs

What is the difference between "diminishing marginal returns" and "diseconomies of scale"?

In economics, what is the difference between the short run and the long run?

The law of diminishing marginal returns states

Figure 11-15 -Refer to Figure 11-15.Suppose Hilda produces 100 gooseberry pies.What is the marginal rate of technical substitution of labor for capital when labor is increased from 10 to 20 hours?

Figure 11-11 Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATCₐ, ATCb and ATCc. -Refer to Figure 11-11.Constant returns to scale

The River Rouge plant was built by the Ford Motor Company in the 1920s to produce the company's Model A car.Which of the following is evidence that the River Rouge plant suffered from diseconomies of scale?

The law of diminishing marginal returns

Use the general relationship between marginal and average values to explain why a marginal cost curve must intersect an average total cost curve and an average variable cost curve at their minimum points.

Which of the following statements correctly describes the distinction between technology and technological change?

Figure 11-1 -Refer to Figure 11-1.In a diagram that shows the marginal product of labor on the vertical axis and labor on the horizontal axis, the marginal product curve

Figure 11-1 -Refer to Figure 11-1.The marginal product of the 7th worker is

Gertrude Stork's Chocolate Shoppe normally employs 4 workers.When the Chocolate Shoppe hired a 5th worker the Shoppe's total output decreased.Therefore,

The minimum efficient scale is

Vipsana's Gyros House sells gyros.The cost of ingredients (pita, meat, spices, etc.)to make a gyro is $2.00.Vipsana pays her employees $60 per day.She also incurs a fixed cost of $120 per day.Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers?

Figure 11-5 -Refer to Figure 11-5.The vertical difference between curves F and G measures

In the short run, if average product is at its maximum, then average variable cost is at its minimum.

If a firm is experiencing diseconomies of scale, its long-run average cost curve is increasing.

Which of the following equations is incorrect?

A firm's cost of production is determined by all of the following except

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters