Econ 528 Final Study Guide Fall ULL || WITH A+
GRADED SOLUTIONS!!
Economies of scale exist as a firm increases its size in the long run because of all the
following except: correct answers As a firm expands its production, its
profit margin per-unit of output increases
Over the past twenty years, the number of small family farms has fallen significantly and in
their place there are fewer, but larger, farms owned by corporations. Which of the following
best explains this trend? correct answers Economies of scale in farming
The president of Toyota's Georgetown plant was quoted as saying, "Demand for high
volumes saps your energy. Over a period of time, it eroded our focus [and] thinned out the
expertise and knowledge we painstakingly built up over the years." This quote suggests that:
correct answers As Toyota expanded its capacity, it experienced diseconomies of scale.
The marginal revenue product of labor for a firm:
A. will decrease if the firm hires more labor
b. Will increase if the price of the firms's output increases
c. is the firms demand curve for labor
d. all of the above are correct correct answers d. all of the above are correct
Evaluate the Statement; Cost approach is the easier approach to achieve optimal production
when the firm is at the start of their production correct answers FALSE
Evaluate the Statement; Resource approach is the easier approach to achieve optimal
production after the firm has already established a production plan and requires only
incremental changes in their plan to achieve the maximum possible profit. correct answers
FALSE
The demand for labor is described as a derived demand because: correct answers It is derived
from the demand of
products that use labor in the production process.
Figure 17-1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of
linen doilies.
If the wage rate is $40, how many workers should Dale hire? correct answers 3 Units
(Workers)
Which type of workers is most likely to enjoy substantial economic rent? correct answers
Those with high wages which result
from them possessing the innate ability to develop some skill to a very high level
Which of the following is a reason why a firm would experience diseconomies of scale?
correct answers As the size of the firm increases it
becomes more difficult to coordinate the operations of its manufacturing plants
The minimum efficient scale is: correct answers Level of operation where long-run
, average costs are lowest.
Which of the following is not a reason why firms experience economies of scale? correct
answers As output increases, the managers can
begin to have difficultly coordinating the operations of their firms.
Economies of scope exist between book publishing and magazine publishing if: correct
answers The cost of publishing a magazines
lower for book publishers than for other firms
Learning curves represent the relationship between correct answers Average variable cost and
the cumulative number of units produced.
Answer whether the following statement is true or false: If the marginal revenue product of
an input is less than the price of that input, the input is too expensive and the firm should stop
using that input and try to find some alternate inputs. correct answers FALSE
Answer whether the following statement is true or false: Economic rent for an input is higher
if the input is abundant is supply? correct answers FALSE
A firm's demand curve for labor slopes downwards because: correct answers Of the law of
diminishing marginal returns
An increase in input costs in the production of electric automobiles caused the price of
electric automobiles to rise. Holding everything else constant, how would this affect the
market for gasoline-powered automobiles (a substitute for electric automobiles)? correct
answers The demand for gasoline-powered automobiles would increase and the equilibrium
price of gasoline-powered automobiles would increase.
A perfectly competitive firm produces 3,000 units of a food at a total cost of $36,000. The
fixed cost of production is $20,000. The price of each good is $10. Should the firm continue
to produce in the short run? correct answers Yes, it should continue to produce because it is
minimizing its loss.
Max Shreck, an accountant, quit his $80,000- a-year job and bought an existing tattoo parlor
from its previous owner, Sylvia Sidney. The lease has five years remaining and requires a
monthly payment of $4,000. Max's explicit cost amounts to $3,000 per month more than his
revenue. Should Max continue operating his business? correct answers Max should continue
running the tattoo parlor until his lease runs out.
A perfectly competitive firm's short-run supply curve is: correct answers Upward sloping and
is the portion of the marginal cost curve that lies above the average variable cost curve
If a typical firm in a perfectly competitive industry is earning profits, then correct answers
New firms will enter in the long run causing market supply to increase, market price to fall
and profits to decrease
A perfectly competitive wheat farmer in a constant-cost industry produces 3,000 bushels of
wheat at a total cost of $36,000. The prevailing market price is $15. What will happen to the
market price of wheat in the long run? correct answers The price falls to $12.
GRADED SOLUTIONS!!
Economies of scale exist as a firm increases its size in the long run because of all the
following except: correct answers As a firm expands its production, its
profit margin per-unit of output increases
Over the past twenty years, the number of small family farms has fallen significantly and in
their place there are fewer, but larger, farms owned by corporations. Which of the following
best explains this trend? correct answers Economies of scale in farming
The president of Toyota's Georgetown plant was quoted as saying, "Demand for high
volumes saps your energy. Over a period of time, it eroded our focus [and] thinned out the
expertise and knowledge we painstakingly built up over the years." This quote suggests that:
correct answers As Toyota expanded its capacity, it experienced diseconomies of scale.
The marginal revenue product of labor for a firm:
A. will decrease if the firm hires more labor
b. Will increase if the price of the firms's output increases
c. is the firms demand curve for labor
d. all of the above are correct correct answers d. all of the above are correct
Evaluate the Statement; Cost approach is the easier approach to achieve optimal production
when the firm is at the start of their production correct answers FALSE
Evaluate the Statement; Resource approach is the easier approach to achieve optimal
production after the firm has already established a production plan and requires only
incremental changes in their plan to achieve the maximum possible profit. correct answers
FALSE
The demand for labor is described as a derived demand because: correct answers It is derived
from the demand of
products that use labor in the production process.
Figure 17-1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of
linen doilies.
If the wage rate is $40, how many workers should Dale hire? correct answers 3 Units
(Workers)
Which type of workers is most likely to enjoy substantial economic rent? correct answers
Those with high wages which result
from them possessing the innate ability to develop some skill to a very high level
Which of the following is a reason why a firm would experience diseconomies of scale?
correct answers As the size of the firm increases it
becomes more difficult to coordinate the operations of its manufacturing plants
The minimum efficient scale is: correct answers Level of operation where long-run
, average costs are lowest.
Which of the following is not a reason why firms experience economies of scale? correct
answers As output increases, the managers can
begin to have difficultly coordinating the operations of their firms.
Economies of scope exist between book publishing and magazine publishing if: correct
answers The cost of publishing a magazines
lower for book publishers than for other firms
Learning curves represent the relationship between correct answers Average variable cost and
the cumulative number of units produced.
Answer whether the following statement is true or false: If the marginal revenue product of
an input is less than the price of that input, the input is too expensive and the firm should stop
using that input and try to find some alternate inputs. correct answers FALSE
Answer whether the following statement is true or false: Economic rent for an input is higher
if the input is abundant is supply? correct answers FALSE
A firm's demand curve for labor slopes downwards because: correct answers Of the law of
diminishing marginal returns
An increase in input costs in the production of electric automobiles caused the price of
electric automobiles to rise. Holding everything else constant, how would this affect the
market for gasoline-powered automobiles (a substitute for electric automobiles)? correct
answers The demand for gasoline-powered automobiles would increase and the equilibrium
price of gasoline-powered automobiles would increase.
A perfectly competitive firm produces 3,000 units of a food at a total cost of $36,000. The
fixed cost of production is $20,000. The price of each good is $10. Should the firm continue
to produce in the short run? correct answers Yes, it should continue to produce because it is
minimizing its loss.
Max Shreck, an accountant, quit his $80,000- a-year job and bought an existing tattoo parlor
from its previous owner, Sylvia Sidney. The lease has five years remaining and requires a
monthly payment of $4,000. Max's explicit cost amounts to $3,000 per month more than his
revenue. Should Max continue operating his business? correct answers Max should continue
running the tattoo parlor until his lease runs out.
A perfectly competitive firm's short-run supply curve is: correct answers Upward sloping and
is the portion of the marginal cost curve that lies above the average variable cost curve
If a typical firm in a perfectly competitive industry is earning profits, then correct answers
New firms will enter in the long run causing market supply to increase, market price to fall
and profits to decrease
A perfectly competitive wheat farmer in a constant-cost industry produces 3,000 bushels of
wheat at a total cost of $36,000. The prevailing market price is $15. What will happen to the
market price of wheat in the long run? correct answers The price falls to $12.
