ULL ECON 528 - FINAL | 162 QUESTIONS AND
ANSWERS | WITH COMPLETE SOLUTION!!
If, when a firm doubles all its inputs, its average cost of production decreases,
then production displays
A) diminishing returns.
B) economies of scale.
C) diseconomies of scale.
D) declining fixed costs. Answer - B) economies of scale.
The long-run average cost curve shows
A) the lowest average cost of producing every level of output in the long run.
B) where the most profitable level of output occurs.
C) the average cost of producing where diminishing returns are not present.
D) the plant size or scale that the firm should build. Answer - A) the lowest
average cost of producing every level of output in the long run.
All of the following statements are true of the minimum efficient scale except
one. Which one?
A) All possible economies of scale have been exhausted.
B) The short-run average total cost curve's minimum point is equal to the long
run average cost curve's minimum point.
C) Any increase in the scale of operation will encounter diseconomies of scale.
,D) An increase in the output level will increase profit. Answer - D) An increase
in the output level will increase profit.
At the minimum efficient scale
A) all possible economies of scale have not been exhausted.
B) the firm has achieved the lowest possible average cost of production.
C) any increases in the scale of operation will encounter further economies of
scale.
D) marginal cost is at its minimum. Answer - B) the firm has achieved the
lowest possible average cost of production.
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." Based on this quote, what must be true of the plant's average cost
of production curve?
A) It is upward-sloping.
B) It is downward-sloping.
C) It is a ray from the origin.
D) It is U-shaped. Answer - A) It is upward-sloping.
Economies of scope refers to the decrease in average total cost that can occur
when a firm
A) produces more than one product.
B) has monopoly power in world markets.
C) controls the raw materials used as inputs.
D) narrows the scope of its regional markets. Answer - A) produces more than
one product.
,Producing 200 units of good Y and 100 units of good X in the same factory costs
the firm $50,000. In contrast, producing 200 units of good Y in one factory and
100 units of good X in another factory costs the firm $75,000. So if the firm
produces the two goods together, it achieves:
A) quadratic returns to scale.
B) diseconomies of scope.
C) economies of scope.
D) diseconomies of scale and diseconomies of scope. Answer - C) economies of
scope.
The marginal revenue product of labor for a firm
A) will increase if the price of the firm's output increases.
B) is the firm's demand curve for labor.
C) will decrease if the firm hires more labor.
D) All of the above are correct. Answer - D) All of the above are correct.
Answer whether the following statements are true or false:
A) Over time, more experienced workers will demand higher wages and
therefore, will lead to an increased in the cost of production for the producers.
B) When you produce more, the average cost of production increases. Answer
- A) False & B) False
A reason why a perfectly competitive firm's demand for labor curve slopes
downward is that
A) each additional unit of labor hired is less efficient than previously hired
units.
B) in the short run, as more labor is hired, labor's marginal product falls
because of the law of diminishing returns.
, C) the extra cost of hiring additional units of labor increases as a firm hires
more units of labor.
D) the firm's demand curve for the product that uses labor is downward
sloping. Answer - B) in the short run, as more labor is hired, labor's marginal
product falls because of the law of diminishing returns.
The term "derived demand" refers to
A) the demand for financial products called derivatives.
B) the demand for a factor of production that is derived from the demand for
the good the factor produces.
C) a firm's estimated demand curve derived from sales data.
D) a demand curve that derives from the availability of resources. Answer - B)
the demand for a factor of production that is derived from the demand for the
good the factor produces.
12) The price of a factor of production that is in fixed supply is called
A) economic rent.
B) economic profit.
C) a compensating differential.
D) opportunity cost. Answer - A) economic rent.
Economies of scale exist as a firm increases its size in the long run because of
all of the following except
a. as a firm expands its production, its profit margin per-unit of output
increases.
b. the firm can afford more sophisticated technology in production.
c. as a larger input buyer, the firm can purchase inputs at a lower per unit cost.
d. labor and management can specialize even further in their tasks. Answer - a.
as a firm expands its production, its profit margin per-unit of output increases.
ANSWERS | WITH COMPLETE SOLUTION!!
If, when a firm doubles all its inputs, its average cost of production decreases,
then production displays
A) diminishing returns.
B) economies of scale.
C) diseconomies of scale.
D) declining fixed costs. Answer - B) economies of scale.
The long-run average cost curve shows
A) the lowest average cost of producing every level of output in the long run.
B) where the most profitable level of output occurs.
C) the average cost of producing where diminishing returns are not present.
D) the plant size or scale that the firm should build. Answer - A) the lowest
average cost of producing every level of output in the long run.
All of the following statements are true of the minimum efficient scale except
one. Which one?
A) All possible economies of scale have been exhausted.
B) The short-run average total cost curve's minimum point is equal to the long
run average cost curve's minimum point.
C) Any increase in the scale of operation will encounter diseconomies of scale.
,D) An increase in the output level will increase profit. Answer - D) An increase
in the output level will increase profit.
At the minimum efficient scale
A) all possible economies of scale have not been exhausted.
B) the firm has achieved the lowest possible average cost of production.
C) any increases in the scale of operation will encounter further economies of
scale.
D) marginal cost is at its minimum. Answer - B) the firm has achieved the
lowest possible average cost of production.
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." Based on this quote, what must be true of the plant's average cost
of production curve?
A) It is upward-sloping.
B) It is downward-sloping.
C) It is a ray from the origin.
D) It is U-shaped. Answer - A) It is upward-sloping.
Economies of scope refers to the decrease in average total cost that can occur
when a firm
A) produces more than one product.
B) has monopoly power in world markets.
C) controls the raw materials used as inputs.
D) narrows the scope of its regional markets. Answer - A) produces more than
one product.
,Producing 200 units of good Y and 100 units of good X in the same factory costs
the firm $50,000. In contrast, producing 200 units of good Y in one factory and
100 units of good X in another factory costs the firm $75,000. So if the firm
produces the two goods together, it achieves:
A) quadratic returns to scale.
B) diseconomies of scope.
C) economies of scope.
D) diseconomies of scale and diseconomies of scope. Answer - C) economies of
scope.
The marginal revenue product of labor for a firm
A) will increase if the price of the firm's output increases.
B) is the firm's demand curve for labor.
C) will decrease if the firm hires more labor.
D) All of the above are correct. Answer - D) All of the above are correct.
Answer whether the following statements are true or false:
A) Over time, more experienced workers will demand higher wages and
therefore, will lead to an increased in the cost of production for the producers.
B) When you produce more, the average cost of production increases. Answer
- A) False & B) False
A reason why a perfectly competitive firm's demand for labor curve slopes
downward is that
A) each additional unit of labor hired is less efficient than previously hired
units.
B) in the short run, as more labor is hired, labor's marginal product falls
because of the law of diminishing returns.
, C) the extra cost of hiring additional units of labor increases as a firm hires
more units of labor.
D) the firm's demand curve for the product that uses labor is downward
sloping. Answer - B) in the short run, as more labor is hired, labor's marginal
product falls because of the law of diminishing returns.
The term "derived demand" refers to
A) the demand for financial products called derivatives.
B) the demand for a factor of production that is derived from the demand for
the good the factor produces.
C) a firm's estimated demand curve derived from sales data.
D) a demand curve that derives from the availability of resources. Answer - B)
the demand for a factor of production that is derived from the demand for the
good the factor produces.
12) The price of a factor of production that is in fixed supply is called
A) economic rent.
B) economic profit.
C) a compensating differential.
D) opportunity cost. Answer - A) economic rent.
Economies of scale exist as a firm increases its size in the long run because of
all of the following except
a. as a firm expands its production, its profit margin per-unit of output
increases.
b. the firm can afford more sophisticated technology in production.
c. as a larger input buyer, the firm can purchase inputs at a lower per unit cost.
d. labor and management can specialize even further in their tasks. Answer - a.
as a firm expands its production, its profit margin per-unit of output increases.
