Deck 10: Costs: Short Run and Long Run

Question 1

Internal economies of scale occur when:

A) Costs fall over time.
B) Revenue falls over time.
C) Unit costs fall as the firm's scale increases.
D) The price falls with more output.

Answer 1

C

Question 2

The Law of Diminishing Returns occurs:

A) In the long run.
B) When the price is lowered to sell more.
C) When more units of a variable factor of production are added to a fixed factor.
D) When the total output falls as more units of a variable factor of production are added.

Answer 2

C

Question 3

Marginal costs:

A) Equal fixed costs plus variable costs.
B) Equal average costs.
C) Equal total cost per unit.
D) Equal the extra cost of producing a unit.

Answer 3

D

Question 4

Fixed costs:

A) Never change.
B) Do not change with output.
C) Do not change over time.
D) Are equal to variable costs.

Question 5

The short run:

A) Is 1 week.
B) Is when a firm has at least one fixed factor of production.
C) Is when all the factors of production are variable.
D) Is when losses are made.

Question 6

Diseconomies of scale occur when:

A) Marginal costs increase as output increases in the long run.
B) Total costs increase as output increases in the long run.
C) Fixed costs increase as output increases in the long run.
D) Unit costs increase as output increases in the long run.

Question 7

When marginal product is positive but falling, total output (total product) is falling.

Question 8

Short run marginal costs are determined mainly by the law of diminishing marginal utility.

Question 9

The increase or decrease in total cost when another unit is produced is called the ________ cost.

Question 10

The marginal cost curve:

A) Is inversely related to the average cost curve.
B) Crosses the marginal product at its minimum.
C) Crosses the total cost curve at its maximum point.
D) Crosses the average costs curve at its minimum point.

Question 11

The marginal product curve:

A) Is inversely related to the average fixed cost curve.
B) Crosses the average product curve at its minimum point.
C) Crosses the average product curve at its maximum point.
D) Crosses the average costs curve at its minimum point.

Question 12

If the total product is 300 units when 10 employees are employed and 440 when 11 are employed:

A) The marginal product is 30 units with 10 employees.
B) The average product is 140 units.
C) The average product increases from 30 units to 40 units.
D) The marginal product is 10 units.

Question 13

The first level of output at which average costs are minimized is called:

A) The Minimum Average Scale
B) The Maximum Unit Scale
C) The Mean Extra Scale
D) The Minimum Efficient Scale