Question 1

If a firm increases all of its inputs by 10 percent and its output increases by 10 percent,then:

Accepted Answer

A)   it is encountering diseconomies of scale.
B)   it is encountering economies of scale.
C)   it is encountering constant returns to scale.
D)   the marginal products of all inputs are falling.E) A) and B)
F) None of the above

Question 2

When total product is diminishing,marginal product is:

Accepted Answer

A)   positive and increasing.
B)   positive and decreasing.
C)   constant.
D)   negative.E) All of the above
F) B) and C)

Question 3

The first,second,and third workers employed by a firm add 24,18,and 9 units to total product respectively.Therefore,the:

Accepted Answer

A)   marginal product of the third worker is 9.
B)   total product of the three workers is 54.
C)   average product of the three workers is 18.
D)   marginal product of the first worker is 18.E) A) and C)
F) C) and D)

Question 4

Economies and diseconomies of scale explain:

Accepted Answer

A)   the profit-maximizing level of production.
B)   why the firm's long-run average total cost curve is U-shaped.
C)   why the firm's short-run marginal cost curve cuts the short-run average variable cost curve at its minimum point.
D)   the distinction between fixed and variable costs.E) C) and D)
F) B) and C)

Question 5

In the above diagram curves 1,2,and 3 represent the:

Accepted Answer

A)   average,marginal,and total product curves respectively.
B)   marginal,average,and total product curves respectively.
C)   total,average,and marginal product curves respectively.
D)   total,marginal,and average product curves respectively.E) All of the above
F) A) and B)

Question 6

One reason that diseconomies of scale arise is because:

Accepted Answer

A)   the short-run average total cost curve rises when marginal product is increasing.
B)   of the difficulties involved in managing and coordinating a large business enterprise.
C)   firms must be large both absolutely and relative to the market to employ the most efficient productive techniques available.
D)   beyond some point marginal product declines as additional units of a variable resource (labor) are added to a fixed resource (capital) .E) A) and B)
F) B) and C)

Question 7

The basic difference between the short run and the long run is that:

Accepted Answer

A)   all costs are fixed in the short run,but all costs are variable in the long run.
B)   the law of diminishing returns applies in the long run but not in the short run.
C)   at least one resource is fixed in the short run,while all resources are variable in the long run.
D)   economies of scale may be present in the short run but not in the long run.E) None of the above
F) C) and D)

Question 8

A factory,mine,store,or warehouse that performs one or more functions in making and distributing goods and services is:

Accepted Answer

A)   a firm.
B)   a plant.
C)   an industry.
D)   a corporation.E) A) and B)
F) None of the above

Question 9

A business organization that owns and operates one or more plants is:

Accepted Answer

A)   a firm.
B)   an industry.
C)   a partnership.
D)   an S corporation.E) None of the above
F) A) and D)

Question 10

A major advantage of the corporate form of business organization is the concept of limited liability.

Accepted Answer

A) True 
 B)False

Question 11

Refer to the above diagram.At output level Q total variable cost is:

Accepted Answer

A)   0BEQ.
B)   BCDE.
C)   0CDQ.
D)   0AFQ.E) C) and D)
F) B) and D)

Question 12

The long-run average total cost curve:

Accepted Answer

A)   will rise if diminishing returns are encountered.
B)   will fall if diminishing returns are encountered.
C)   will rise if economies of scale are incurred.
D)   is based on the assumption that all resources are variable.E) B) and C)
F) None of the above

Question 13

Refer to the above diagram.At output level Q:

Accepted Answer

A)   marginal product is falling.
B)   marginal product is rising.
C)   marginal product is negative.
D)   one cannot determine whether marginal product is falling or rising.E) A) and C)
F) C) and D)

Question 14

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) C) and D)
F) None of the above

Question 15

3. B)  0Q2. C)  Q1Q2. D)  Q1Q3." class="answers-bank-image d-inline" rel="preload" > In the above diagram the range of diminishing marginal returns is:

Accepted Answer

A)   0Q3.
B)   0Q2.
C)   Q1Q2.
D)   Q1Q3.E) A) and D)
F) B) and C)

Question 16

1/2. D)  cannot be calculated from the information given. The fourth worker increased total product from 25 to 30,so her marginal product is 5." class="answers-bank-image d-inline" rel="preload" > Refer to the above data.The marginal product of the fourth worker:

Accepted Answer

A)   is 5.
B)   is 7.
C)   is 71/2.
D)   cannot be calculated from the information given.The fourth worker increased total product from 25 to 30,so her marginal product is 5.E) None of the above
F) B) and C)

Question 17

Average fixed cost:

Accepted Answer

A)   equals marginal cost when average total cost is at its minimum.
B)   may be found for any output by adding average variable cost and average total cost.
C)   graphs as a U-shaped curve.
D)   declines continually as output increases.E) A) and C)
F) None of the above

Question 18

Limited liability means all members of a partnership are liable for the debts incurred by one another.

Accepted Answer

A) True 
 B)False

Question 19

At zero units of output a firm's variable costs are zero.

Accepted Answer

A) True 
 B)False

Question 20

For most producing firms:

Accepted Answer

A)   marginal cost rises as output is carried to a certain level,and then begins to decline.
B)   total costs rise as output is carried to a certain level,and then begin to decline.
C)   average total costs decline as output is carried to a certain level,and then begin to rise.
D)   average total costs rise as output is carried to a certain level,and then begin to decline.E) None of the above
F) B) and D)

Exam 6: Businesses and Their Costs

The basic difference between the short run and the long run is that:

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A factory,mine,store,or warehouse that performs one or more functions in making and distributing goods and services is:

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The long-run average total cost curve:

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A major advantage of the corporate form of business organization is the concept of limited liability.

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Refer to the above diagram.At output level Q:

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A business organization that owns and operates one or more plants is:

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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:

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In the above diagram the range of diminishing marginal returns is:

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In the above diagram curves 1,2,and 3 represent the:

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Refer to the above diagram.At output level Q total variable cost is:

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Economies and diseconomies of scale explain:

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For most producing firms:

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Limited liability means all members of a partnership are liable for the debts incurred by one another.

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If a firm increases all of its inputs by 10 percent and its output increases by 10 percent,then:

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When total product is diminishing,marginal product is:

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The first,second,and third workers employed by a firm add 24,18,and 9 units to total product respectively.Therefore,the:

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Refer to the above data.The marginal product of the fourth worker:

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Average fixed cost:

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At zero units of output a firm's variable costs are zero.

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One reason that diseconomies of scale arise is because:

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