Question 1

Under what circumstances does an increase in inputs by x percent result in an increase in output of less than x percent?

Accepted Answer

A) Diseconomies of scale. 
B) Constant returns to scale. 
C) Economies of scale. 
D) Minimum efficient scale. 
A) Diseconomies of scale. 
B) Constant returns to scale. 
C) Economies of scale. 
D) Minimum efficient scale.

Question 2

If economies of scale are present,then:

Accepted Answer

A) Average variable costs are falling but average fixed costs are constant. 
B) Average costs are constant. 
C) Average costs are decreasing. 
D) Average costs are increasing. 
A) Average variable costs are falling but average fixed costs are constant. 
B) Average costs are constant. 
C) Average costs are decreasing. 
D) Average costs are increasing.

Question 3

What is true if decreasing returns to scale are present?

Accepted Answer

A) Average fixed cost will rise. 
B) Total variable cost will fall. 
C) Economies of scale are also present. 
D) Diseconomies of scale are present. 
A) Average fixed cost will rise. 
B) Total variable cost will fall. 
C) Economies of scale are also present. 
D) Diseconomies of scale are present.

Question 4

Table 7.3 contains long-run cost data for two different firms.Determine the level of output where each of firms achieves minimum efficient scale?
Table 7.3

Accepted Answer

Plant 1:30

Question 5

All of the following except one are examples of pecuniary economies of scale.Which is the exception?

Accepted Answer

A) Bulk buying and selling. 
B) Management and machine specialization. 
C) Lower costs of borrowing. 
D) Lower costs of advertising. 
A) Bulk buying and selling. 
B) Management and machine specialization. 
C) Lower costs of borrowing. 
D) Lower costs of advertising.

Question 6

What are diseconomies of scale?

Accepted Answer

A) The situation where a firm's output decreases in proportion to the decrease in its inputs. 
B) The situation where a firm is able to obtain lower prices for the inputs it buys because of bulk buying. 
C) Bureaucratic inefficiencies in management that result in decreasing returns to scale. 
D) The smallest level of output at which a firm is able to minimize long-run average cost. 
A) The situation where a firm's output decreases in proportion to the decrease in its inputs. 
B) The situation where a firm is able to obtain lower prices for the inputs it buys because of bulk buying. 
C) Bureaucratic inefficiencies in management that result in decreasing returns to scale. 
D) The smallest level of output at which a firm is able to minimize long-run average cost.

Question 7

What does the term minimum efficient scale mean?

Accepted Answer

A) The largest-size plant capable of achieving minimum long-run average cost. 
B) The lowest average cost of production for a particular size of plant. 
C) The smallest size of plant capable of producing a particular output. 
D) The lowest level of efficiency which a firm is capable of producing. 
E) The smallest-size plant capable of achieving minimum long-run average cost. 
A) The largest-size plant capable of achieving minimum long-run average cost. 
B) The lowest average cost of production for a particular size of plant. 
C) The smallest size of plant capable of producing a particular output. 
D) The lowest level of efficiency which a firm is capable of producing. 
E) The smallest-size plant capable of achieving minimum long-run average cost.

Question 8

Which of the following is true regarding economies of scale?

Accepted Answer

A) It is another term for constant returns to scale. 
B) They are present only in pecuniary forms. 
C) They exist in both the short run and the long run. 
D) They are cost advantages that are achieved as a result of large-scale operations. 
A) It is another term for constant returns to scale. 
B) They are present only in pecuniary forms. 
C) They exist in both the short run and the long run. 
D) They are cost advantages that are achieved as a result of large-scale operations.

Question 9

Differentiate between a short-run average cost curve and a long-run average cost curve.

Accepted Answer

Firms operate in the short-run where at

Question 10

-Refer to Table 7.2 to answer this question.Assume that technology and the price of inputs remain unchanged.If the firm builds a bigger plant and all of its inputs exactly double,what will be its output at economic capacity in the new plant under conditions of constant returns to scale?

Accepted Answer

A) Exactly 800. 
B) Exactly 1,000. 
C) More than 500 but less than 1,000. 
D) More than 1,000. 
A) Exactly 800. 
B) Exactly 1,000. 
C) More than 500 but less than 1,000. 
D) More than 1,000.

Question 11

Technical economies of scale are closely related to which of the following?

Accepted Answer

A) The law of diminishing returns. 
B) Decreasing returns to scale. 
C) Rising short-run average total cost. 
D) Falling short-run marginal cost. 
E) Increasing returns to scale. 
A) The law of diminishing returns. 
B) Decreasing returns to scale. 
C) Rising short-run average total cost. 
D) Falling short-run marginal cost. 
E) Increasing returns to scale.

Question 12

State whether each of the following scenarios shows economies of scale or diseconomies of scale.
a)Increase firm size leads to greater problems in communication between the firms major stakeholders.
b)Increase firm size creates coordination problems among departments.
c)Increase firm size leads to greater specialization of management.
d)Increase firm size enables greater division of labour.

Accepted Answer

a)Diseconomies of sc

Under what circumstances does an increase in inputs by x percent result in an increase in output of less than x percent?

If economies of scale are present,then:

What is true if decreasing returns to scale are present?

Table 7.3 contains long-run cost data for two different firms.Determine the level of output where each of firms achieves minimum efficient scale? Table 7.3

All of the following except one are examples of pecuniary economies of scale.Which is the exception?

What are diseconomies of scale?

What does the term minimum efficient scale mean?

Which of the following is true regarding economies of scale?

Differentiate between a short-run average cost curve and a long-run average cost curve.

-Refer to Table 7.2 to answer this question.Assume that technology and the price of inputs remain unchanged.If the firm builds a bigger plant and all of its inputs exactly double,what will be its output at economic capacity in the new plant under conditions of constant returns to scale?

Technical economies of scale are closely related to which of the following?

The Economic Problem

Demand and Supply: An Introduction

Demand and Supply: An Elaboration

Elasticity

Consumer Choice

A Firms Production Decisions and Costs in the Short Run

Perfect Competition

An Evaluation of Competitive Markets

Monopoly

Imperfect Competition

The Factors of Production

International Trade

Filters

Exam 7: Costs in the Long Run

Under what circumstances does an increase in inputs by x percent result in an increase in output of less than x percent?

If economies of scale are present,then:

What is true if decreasing returns to scale are present?

Table 7.3 contains long-run cost data for two different firms.Determine the level of output where each of firms achieves minimum efficient scale? Table 7.3

All of the following except one are examples of pecuniary economies of scale.Which is the exception?

What are diseconomies of scale?

What does the term minimum efficient scale mean?

Which of the following is true regarding economies of scale?

Differentiate between a short-run average cost curve and a long-run average cost curve.

-Refer to Table 7.2 to answer this question.Assume that technology and the price of inputs remain unchanged.If the firm builds a bigger plant and all of its inputs exactly double,what will be its output at economic capacity in the new plant under conditions of constant returns to scale?

Technical economies of scale are closely related to which of the following?

The Economic Problem

Demand and Supply: An Introduction

Demand and Supply: An Elaboration

Elasticity

Consumer Choice

A Firms Production Decisions and Costs in the Short Run

Perfect Competition

An Evaluation of Competitive Markets

Monopoly

Imperfect Competition

The Factors of Production

International Trade

Filters