ULL ECON 528 – FINAL EXAM QUESTIONS
WITH CORRECT ANSWERS
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. |- |CORRECT |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. |- |CORRECT |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. |- |CORRECT |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. |- |CORRECT |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. |- |CORRECT |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. |- |CORRECT |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. |- |CORRECT |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. |- |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. |- |CORRECT |
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. |- |CORRECT |
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. |- |CORRECT |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. |- |CORRECT |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. |- |CORRECT |ANSWER✔✔-
a. |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?
a. |economies |of |scale |in |farming
b. |diminishing |returns |to |labor |in |farming
c. |diseconomies |of |scale |in |farming |- |CORRECT |ANSWER✔✔-a. |economies |of |scale |in |farming
WITH CORRECT ANSWERS
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. |- |CORRECT |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. |- |CORRECT |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. |- |CORRECT |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. |- |CORRECT |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. |- |CORRECT |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. |- |CORRECT |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. |- |CORRECT |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. |- |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. |- |CORRECT |
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. |- |CORRECT |
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. |- |CORRECT |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. |- |CORRECT |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. |- |CORRECT |ANSWER✔✔-
a. |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?
a. |economies |of |scale |in |farming
b. |diminishing |returns |to |labor |in |farming
c. |diseconomies |of |scale |in |farming |- |CORRECT |ANSWER✔✔-a. |economies |of |scale |in |farming
