Question 1

Costs that change as output changes are called incremental costs.

Accepted Answer

A) True 
 B)False

Question 2

As output increases,average fixed cost gets smaller and smaller.

Accepted Answer

A) True 
 B)False

Question 3

As a firm hires more labor in the short run,the

Accepted Answer

A)  level of total product stays constant.
B)  output per worker rises.
C)  extra output of another worker may rise at first, but eventually must fall.
D)  costs of production are increasing at a fixed rate per unit of output.

Question 4

In the long run,all of a firm's inputs are variable.

Accepted Answer

A) True 
 B)False

Question 5

Stan owns a software design business.He does not have time to expand his office space or redesign the layout of his office.He can increase the amount of work he does by working more hours,asking his current employees to work more hours,or hiring more employees.The relationship between Stan's inputs and the maximum output his firm can produce is called his

Accepted Answer

A)  long-run production function.
B)  production possibilities frontier.
C)  short-run production function.
D)  cost function.

Question 6

Diminishing marginal product of labor occurs when adding another unit of labor

Accepted Answer

A)  decreases output.
B)  changes output by an amount smaller than the output added by the previous unit of labor.
C)  increases output by an amount larger than the output added by the previous unit of labor.
D)  decreases output by an amount smaller than the output added by the previous unit of labor.

Question 7

The short run is the time period during which a firm has at least one input constraint.

Accepted Answer

A) True 
 B)False

Question 8

The minimum efficient scale is

Accepted Answer

A)  the level of output where diminishing returns have not set in yet.
B)  the plant size that yields the most profit.
C)  level of operation where long-run average costs are lowest.
D)  the smallest output level where the firm finally reaches productive efficiency.

Question 9

Table 8-8
   Quantity  (sets)   Long Run  Average Cost 100$4020035300304003050035\begin{array} { | c | c | } \hline \begin{array} { c } 	ext { Quantity } \	ext { (sets)  }\end{array} & \begin{array} { c } 	ext { Long Run } \	ext { Average Cost }\end{array} \\hline 100 & \$ 40 \\hline 200 & 35 \\hline 300 & 30 \\hline 400 & 30 \\hline 500 & 35 \\hline\end{array} Quantity  (sets)  ​100200300400500​ Long Run  Average Cost ​$4035303035​​  
Elegant Settings manufactures stainless steel cutlery.Table 8-8 shows the company's cost data.
-Refer to Table 8-8.What is the minimum efficient scale of production?

Accepted Answer

A)  100 units
B)  200 units
C)  300 units
D)  400 units

Question 10

If production displays economies of scale,the long-run average cost curve is

Accepted Answer

A)  above the short-run average total cost curve.
B)  downward-sloping.
C)  upward sloping.
D)  below the long-run marginal cost curve.

Question 11

The difference between technology and technological change is that

Accepted Answer

A)  technology refers to the processes used by a firm to transform inputs into output while technological change is a change in a firm's ability to produce a given level of output with a given quantity of inputs.
B)  technology is carried out by firms producing physical goods but technological change is an intellectual exercise into seeking ways to improve production.
C)  technology is product-centered, that is, developing new products with our limited resources while technological change is process-centered in that it focuses on developing new production techniques.
D)  technology involves the use of capital equipment while technological change requires the use of brain power.

Question 12

If production displays increasing marginal returns,then

Accepted Answer

A)  total product rises by a constant amount throughout.
B)  each new worker hired adds more to output than previous hires.
C)  the firm must be adding new capital to keep boosting productivity.
D)  total product reaches a maximum sooner than if production displayed decreasing returns.

Question 13

Table 8-8
   Quantity  (sets)   Long Run  Average Cost 100$4020035300304003050035\begin{array} { | c | c | } \hline \begin{array} { c } 	ext { Quantity } \	ext { (sets)  }\end{array} & \begin{array} { c } 	ext { Long Run } \	ext { Average Cost }\end{array} \\hline 100 & \$ 40 \\hline 200 & 35 \\hline 300 & 30 \\hline 400 & 30 \\hline 500 & 35 \\hline\end{array} Quantity  (sets)  ​100200300400500​ Long Run  Average Cost ​$4035303035​​  
Elegant Settings manufactures stainless steel cutlery.Table 8-8 shows the company's cost data.
-Refer to Table 8-8.Elegant Settings experiences

Accepted Answer

A)  economies of scale up to an output level of 400.
B)  diminishing returns up to an output level of 400.
C)  increasing returns beyond an output level of 400.
D)  economies of scale at an output of 300 or less and diseconomies of scale at an output level above 400.

Question 14

The level of output at which all economies of scale have been exhausted is known as

Accepted Answer

A)  constant returns to scale.
B)  minimum efficient scale.
C)  the economically efficient output level.
D)  optimal economic size.

Question 15

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,it was previously operating at

Accepted Answer

A)  minimum efficient scale.
B)  more than minimum efficient scale.
C)  less than minimum efficient scale.
D)  minimum capacity.

Question 16

Figure 8-10
 
-Refer to Figure 8-10.Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC₄.Now,following a permanent change in demand,it plans to cut production to Qc units.What will happen to its average cost of production?

Accepted Answer

A)  In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37.
B)  In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41.
C)  In the short run, its average cost falls from $47 to $37, and in the long run, average cost rises to $41.
D)  In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37.

Question 17

A "stockout" occurs when

Accepted Answer

A)  brokers run out of shares of stock to sell of a particular company.
B)  a disruption due to a power outage, etc., causes a temporary production shutdown.
C)  a company holds too many goods in inventories.
D)  a firm loses sales because goods consumers want are not available.

Question 18

The River Rouge plant was built by the Ford Motor Company in the 1920s to produce the company's Model A car.Which of the following is evidence that the River Rouge plant suffered from diseconomies of scale?

Accepted Answer

A)  Despite an expensive advertising campaign the Model A did not earn the company a profit.
B)  Model A cars made at the River Rouge plant failed to earn Ford a profit.Ford eventually constructed smaller plants to make the Model A at a lower average cost.
C)  Model A cars made at the River Rouge plant failed to earn a profit.Ford reduced the average cost of the Model A by cutting its employees' wages.
D)  Model A cars made at the River Rouge plant failed to earn a profit because the price of steel used to manufacture the Model A rose when workers in the steel industry went on strike.

Question 19

A characteristic of the long run is

Accepted Answer

A)  there are fixed inputs.
B)  all inputs can be varied.
C)  plant capacity cannot be increased or decreased.
D)  there are both fixed and variable inputs.

Question 20

The additional output a firm produces by hiring one more worker is called the marginal product of labor.

Accepted Answer

A) True 
 B)False

Exam 8: Technology, production, and Costs

The minimum efficient scale is

Correct Answer
verified

In the long run,all of a firm's inputs are variable.

Correct Answer
verified

Correct Answer
verified

Figure 8-10 -Refer to Figure 8-10.Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC₄.Now,following a permanent change in demand,it plans to cut production to Qc units.What will happen to its average cost of production?

Correct Answer
verified

Diminishing marginal product of labor occurs when adding another unit of labor

Correct Answer
verified

Correct Answer
verified

A "stockout" occurs when

Correct Answer
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A characteristic of the long run is

Correct Answer
verified

The River Rouge plant was built by the Ford Motor Company in the 1920s to produce the company's Model A car.Which of the following is evidence that the River Rouge plant suffered from diseconomies of scale?

Correct Answer
verified

The additional output a firm produces by hiring one more worker is called the marginal product of labor.

Correct Answer
verified

If production displays increasing marginal returns,then

Correct Answer
verified

If production displays economies of scale,the long-run average cost curve is

Correct Answer
verified

The level of output at which all economies of scale have been exhausted is known as

Correct Answer
verified

As output increases,average fixed cost gets smaller and smaller.

Correct Answer
verified

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,it was previously operating at

Correct Answer
verified

Costs that change as output changes are called incremental costs.

Correct Answer
verified

The short run is the time period during which a firm has at least one input constraint.

Correct Answer
verified

The difference between technology and technological change is that

Correct Answer
verified

As a firm hires more labor in the short run,the

Correct Answer
verified

Correct Answer
verified

Exam 8: Technology, production, and Costs

The minimum efficient scale is

Correct AnswerverifiedShow Answer

In the long run,all of a firm's inputs are variable.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 8-10 -Refer to Figure 8-10.Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC₄.Now,following a permanent change in demand,it plans to cut production to Qc units.What will happen to its average cost of production?

Correct AnswerverifiedShow Answer

Diminishing marginal product of labor occurs when adding another unit of labor

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A "stockout" occurs when

Correct AnswerverifiedShow Answer

A characteristic of the long run is

Correct AnswerverifiedShow Answer

The River Rouge plant was built by the Ford Motor Company in the 1920s to produce the company's Model A car.Which of the following is evidence that the River Rouge plant suffered from diseconomies of scale?

Correct AnswerverifiedShow Answer

The additional output a firm produces by hiring one more worker is called the marginal product of labor.

Correct AnswerverifiedShow Answer

If production displays increasing marginal returns,then

Correct AnswerverifiedShow Answer

If production displays economies of scale,the long-run average cost curve is

Correct AnswerverifiedShow Answer

The level of output at which all economies of scale have been exhausted is known as

Correct AnswerverifiedShow Answer

As output increases,average fixed cost gets smaller and smaller.

Correct AnswerverifiedShow Answer

If an airport decides to expand by building an additional passenger terminal,and in doing so it lowers its average cost per airplane landing,it was previously operating at

Correct AnswerverifiedShow Answer

Costs that change as output changes are called incremental costs.

Correct AnswerverifiedShow Answer

The short run is the time period during which a firm has at least one input constraint.

Correct AnswerverifiedShow Answer

The difference between technology and technological change is that

Correct AnswerverifiedShow Answer

As a firm hires more labor in the short run,the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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