Question 1

When diseconomies of scale occur,

Accepted Answer

A)  the long-run average total cost curve falls.
B)  marginal cost intersects average total cost.
C)  the long-run average total cost curve rises.
D)  average fixed costs will rise.E) All of the above
F) A) and D)

Question 2

In the long run,

Accepted Answer

A)  all costs are variable costs.
B)  all costs are fixed costs.
C)  variable costs equal fixed costs.
D)  fixed costs are greater than variable costs.E) All of the above
F) A) and B)

Question 3

The ability of Intel to spread product development and other "start-up" costs over a larger number of units of output results in

Accepted Answer

A)  economies of scale.
B)  diseconomies of scale.
C)  minimum efficient scale.
D)  constant returns to scale.E) A) and D)
F) A) and C)

Question 4

The law of diminishing returns explains why short-run marginal cost curves are upsloping.Topic: Short-Run Production Costs
Topic: Short-Run Production Relationships

Accepted Answer

A) True 
 B)False

Question 5

Which of the following definitions is correct?

Accepted Answer

A)  Accounting profit + economic profit = normal profit.
B)  Economic profit − accounting profit = explicit costs.
C)  Economic profit = accounting profit − implicit costs.
D)  Economic profit − implicit costs = accounting profits.E) C) and D)
F) A) and B)

Question 6

If you operated a small bakery, which of the following would be a variable cost in the short run?

Accepted Answer

A)  baking ovens
B)  interest on business loans
C)  annual lease payment for use of the building
D)  baking supplies (flour, salt, etc.) E) A) and D)
F) B) and D)

Question 7

The short run is characterized by

Accepted Answer

A)  plenty of time for firms to either enter or leave the industry.
B)  increasing but not diminishing returns.
C)  fixed plant capacity.
D)  zero fixed costs.E) B) and C)
F) A) and C)

Question 8

If a variable input is added to some fixed input, beyond some point the resulting extra output will decline.This statement describes

Accepted Answer

A)  economies and diseconomies of scale.
B)  X-inefficiency.
C)  the law of diminishing returns.
D)  the law of diminishing marginal utility.E) A) and B)
F) B) and D)

Question 9

(Consider This)  If the law of diminishing returns applies to study time,

Accepted Answer

A)  the tenth hour of study will likely be less productive than the third.
B)  this implies that longer lectures are less productive than shorter ones.
C)  there is no benefit to studying a subject more than five hours in any given day.
D)  people with less intelligence necessarily experience diminishing returns sooner than those with greater intelligence.E) B) and C)
F) All of the above

Question 10

Harvey quit his job at State University, where he earned $45,000 a year.He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year.To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming.In the first year, the firm sold 11,000 units of software at $75 for each unit.Of the $75 per unit,
$55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.The economic profits of Harvey's firm in the first year were

Accepted Answer

A)  $70,000.
B)  $160,000.
C)  $220,000.
D)  $280,000.E) None of the above
F) B) and C)

Question 11

Suppose a firm is in a range of production where it is experiencing economies of scale.Knowing this, we can predict that

Accepted Answer

A)  the long-run average total cost curve is upsloping.
B)  a 10 percent increase in all inputs will increase output by less than 10 percent.
C)  a 10 percent increase in all inputs will increase output by more than 10 percent.
D)  the firm is encountering problems of managerial bureaucracy because of its size.E) B) and C)
F) A) and D)

Question 12

The law of diminishing returns describes the

Accepted Answer

A)  relationship between total costs and total revenues.
B)  profit-maximizing position of a firm.
C)  relationship between resource inputs and product outputs in the short run.
D)  relationship between resource inputs and product outputs in the long run.E) B) and C)
F) C) and D)

Question 13

Other things equal, if the prices of a firm's variable inputs were to fall,

Accepted Answer

A)  one could not predict how unit costs of production would be affected.
B)  marginal cost, average variable cost, and average fixed cost would all fall.
C)  marginal cost, average variable cost, and average total cost would all fall.
D)  average variable cost would fall, but marginal cost would be unchanged.E) None of the above
F) A) and B)

Question 14

Which of the following would contribute most to a firm experiencing "economies of scale"?

Accepted Answer

A)  rising long-run average costs
B)  the law of diminishing marginal returns
C)  specialization of labor and management within the firm
D)  deterioration of information and control within the firmE) None of the above
F) A) and B)

Question 15

Diseconomies of scale occur mainly because

Accepted Answer

A)  of the law of diminishing returns.
B)  firms in an industry must be relatively large in order to use the most efficient production techniques.
C)  of the inherent difficulties involved in managing and coordinating a large business enterprise.
D)  the short-run average total cost curve rises when marginal product is greater than average total cost.E) B) and C)
F) All of the above

Question 16

Because of higher gasoline prices, firms using gasoline intensively in the production or distribution of their goods have experienced

Accepted Answer

A)  an upward shift in their MC, AVC, and ATC curves.
B)  an upward shift in their AFC, AVC, and ATC curves.
C)  a downward shift in their MC, AFC, and AVC curves.
D)  greater economies of scale.E) C) and D)
F) B) and C)

Question 17

Daily newspapers have been rising in price in recent years because

Accepted Answer

A)  wages in the newspaper industry have risen dramatically.
B)  the overhead costs have recently been spread over a shrinking number of buyers.
C)  capital has replaced virtually all labor used to produce a newspaper.
D)  long-standing government subsidies have been removed in most major cities.E) A) and D)
F) None of the above

Question 18

Suppose a firm sells its product at a price lower than the per-unit implicit costs of producing it.Which of the following statements is definitely true?

Accepted Answer

A)  The firm will earn positive accounting and economic profits.
B)  The firm will face accounting and economic losses.
C)  The firm will face an accounting loss but earn positive economic profits.
D)  The firm may earn positive accounting profits but will face economic losses.E) C) and D)
F) A) and C)

Question 19

Normal profits are

Accepted Answer

A)  the profits reported by accountants on a firm's annual financial statement.
B)  identical to economic profits.
C)  determined by subtracting total costs from total revenues.
D)  considered an implicit cost by economists.E) B) and D)
F) B) and C)

Question 20

The long run is a period of time, or a time frame, in which

Accepted Answer

A)  all resources are fixed in quantity.
B)  the level of output is variable.
C)  the amount of all resources can be varied.
D)  the capacity of the production plant is fixed.E) A) and D)
F) A) and C)

Exam 9: Businesses and the Costs of Production

The long run is a period of time, or a time frame, in which

Correct Answer
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Which of the following would contribute most to a firm experiencing "economies of scale"?

Correct Answer
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Which of the following definitions is correct?

Correct Answer
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Correct Answer
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The ability of Intel to spread product development and other "start-up" costs over a larger number of units of output results in

Correct Answer
verified

The law of diminishing returns describes the

Correct Answer
verified

If you operated a small bakery, which of the following would be a variable cost in the short run?

Correct Answer
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The law of diminishing returns explains why short-run marginal cost curves are upsloping.Topic: Short-Run Production Costs Topic: Short-Run Production Relationships

Correct Answer
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In the long run,

Correct Answer
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Other things equal, if the prices of a firm's variable inputs were to fall,

Correct Answer
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Normal profits are

Correct Answer
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Daily newspapers have been rising in price in recent years because

Correct Answer
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Because of higher gasoline prices, firms using gasoline intensively in the production or distribution of their goods have experienced

Correct Answer
verified

When diseconomies of scale occur,

Correct Answer
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The short run is characterized by

Correct Answer
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Suppose a firm is in a range of production where it is experiencing economies of scale.Knowing this, we can predict that

Correct Answer
verified

(Consider This) If the law of diminishing returns applies to study time,

Correct Answer
verified

Suppose a firm sells its product at a price lower than the per-unit implicit costs of producing it.Which of the following statements is definitely true?

Correct Answer
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Diseconomies of scale occur mainly because

Correct Answer
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If a variable input is added to some fixed input, beyond some point the resulting extra output will decline.This statement describes

Correct Answer
verified

Exam 9: Businesses and the Costs of Production

The long run is a period of time, or a time frame, in which

Correct AnswerverifiedShow Answer

Which of the following would contribute most to a firm experiencing "economies of scale"?

Correct AnswerverifiedShow Answer

Which of the following definitions is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The ability of Intel to spread product development and other "start-up" costs over a larger number of units of output results in

Correct AnswerverifiedShow Answer

The law of diminishing returns describes the

Correct AnswerverifiedShow Answer

If you operated a small bakery, which of the following would be a variable cost in the short run?

Correct AnswerverifiedShow Answer

The law of diminishing returns explains why short-run marginal cost curves are upsloping.Topic: Short-Run Production Costs Topic: Short-Run Production Relationships

Correct AnswerverifiedShow Answer

In the long run,

Correct AnswerverifiedShow Answer

Other things equal, if the prices of a firm's variable inputs were to fall,

Correct AnswerverifiedShow Answer

Normal profits are

Correct AnswerverifiedShow Answer

Daily newspapers have been rising in price in recent years because

Correct AnswerverifiedShow Answer

Because of higher gasoline prices, firms using gasoline intensively in the production or distribution of their goods have experienced

Correct AnswerverifiedShow Answer

When diseconomies of scale occur,

Correct AnswerverifiedShow Answer

The short run is characterized by

Correct AnswerverifiedShow Answer

Suppose a firm is in a range of production where it is experiencing economies of scale.Knowing this, we can predict that

Correct AnswerverifiedShow Answer

(Consider This) If the law of diminishing returns applies to study time,

Correct AnswerverifiedShow Answer

Suppose a firm sells its product at a price lower than the per-unit implicit costs of producing it.Which of the following statements is definitely true?

Correct AnswerverifiedShow Answer

Diseconomies of scale occur mainly because

Correct AnswerverifiedShow Answer

If a variable input is added to some fixed input, beyond some point the resulting extra output will decline.This statement describes

Correct AnswerverifiedShow Answer

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