Question 1

Constant returns to scale indicate that a firm is experiencing:

Accepted Answer

A)   per unit costs of production that are decreasing as the scale of output expands.
B)   per unit costs of production that remain stable as the scale of output expands.
C)   per unit costs of production that are increasing as the scale of output expands.
D)   an increasing marginal product.E) All of the above
F) C) and D)

Question 2

The production function describes:

Accepted Answer

A)   the relationship between the quantity of inputs utilized and the quantity of output produced.
B)   how inputs are most profitably used in production.
C)   the most cost-effective method of combining various inputs in the production process.
D)   the relationship between a firm's revenue and its level of production.E) C) and D)
F) B) and C)

Question 3

Economists normally assume that the goal of a firm is to:

Accepted Answer

A)   sell as many units of output as possible.
B)   maximize profits.
C)   sell products at the highest prices possible.
D)   maximize sales revenue.E) None of the above
F) B) and D)

Question 4

A firm has $300 million in revenues and explicit costs of $100 million.If its owners have invested $150 million in the company at an opportunity cost of 10 percent a year,the firm's accounting profit is:

Accepted Answer

A)   $50 million.
B)   $150 million.
C)   $185 million.
D)   $200 million.E) A) and D)
F) A) and C)

Question 5

If the cost of variable inputs used in a firm's production process rose,which of the following would not occur?

Accepted Answer

A)   Its AVC curve would shift up.
B)   Its ATC curve would shift up.
C)   Its MC curve would shift up.
D)   Its AFC curve would shift up.E) C) and D)
F) A) and B)

Question 6

The short run is not the same length of time for all firms and industries because:

Accepted Answer

A)   entrepreneurs have different tastes and preferences.
B)   the average product of labor varies across industries.
C)   the life span of capital and the extent of capital specialization will vary across firms and industries.
D)   The marginal product of capital begins to diminish at different levels of capital utilization across firms.E) B) and C)
F) A) and D)

Question 7

A firm's average fixed cost when producing 2,000 units of output equals $10.When only 1,000 units of output are produced:

Accepted Answer

A)   AFC must still equal $10.
B)   AFC must equal $20.
C)   AFC must equal $5.
D)   marginal cost must equal $20.E) All of the above
F) C) and D)

Question 8

Average fixed cost is:

Accepted Answer

A)   total cost divided by the number of units produced over a given period.
B)   total fixed cost divided by the number of units produced over a given period.
C)   the price of a fixed factor of production.
D)   fixed cost divided by the number of units of a fixed input employed over a given period.E) A) and C)
F) B) and C)

Question 9

Given the following information about the cost function for Bob's Beautiful Bowling Balls: th unit is lower than for any other unit. D)  AVC falls through the first five units of output." class="answers-bank-image d-inline" rel="preload" > Which of the following is true?

Accepted Answer

A)   The average fixed cost of producing 3 units is $200.
B)   The total cost of producing 5 units is $230.
C)   The marginal cost of the 4th unit is lower than for any other unit.
D)   AVC falls through the first five units of output.E) All of the above
F) B) and C)

Question 10

If average total costs are $40 and average variable cost are $20 at 10 units of output and the marginal cost of the 11th unit is $30,what is the average total cost of 11 units?

Accepted Answer

A)   $23.00
B)   $20.09
C)   $30.00
D)   $39.09E) C) and D)
F) A) and D)

Question 11

Which of the following is a short run adjustment?

Accepted Answer

A)   A bakery hiring two additional bakers.
B)   Two new firms enter the textile industry.
C)   Three firms leave the bicycle industry.
D)   A computer hardware company builds a new factory.E) All of the above
F) C) and D)

Question 12

Exhibit 11-8 The table below shows how total cost varies with output in a factory producing watches:
 Refer to Exhibit 11-8.The marginal cost of producing a third watch equals:

Accepted Answer

A)   $50.
B)   $69.
C)   $5.
D)   $4.E) C) and D)
F) B) and D)

Question 13

If the total cost of producing 10 units equals $90,and the average total cost of producing 11 units equals $8.75,then the marginal cost of the eleventh unit produced:

Accepted Answer

A)   is definitely greater than the marginal cost of producing the tenth unit.
B)   is definitely less than the marginal cost of producing the tenth unit.
C)   is less than the average total cost of producing ten units.
D)   is greater than the average total cost of producing ten units.E) B) and C)
F) A) and C)

Question 14

The region of economies of scale is that in which:

Accepted Answer

A)   short-run marginal cost is falling as output expands.
B)   short-run average total cost is falling as output expands.
C)   long-run marginal cost is falling as output expands.
D)   long-run average total cost is falling as output expands.E) B) and C)
F) None of the above

Question 15

Economies of scale:

Accepted Answer

A)   are the result of a diminishing marginal product.
B)   pertain to the long run only.
C)   refer to the increase in output that results from the increased utilization of a single input.
D)   imply that the average total cost curve will fall continuously as output increases in the short run.E) B) and C)
F) A) and D)

Question 16

If a technological change reduced the amount of the variable input needed by a firm to produce a unit of output:

Accepted Answer

A)   its AVC curve would shift down.
B)   its ATC curve would shift down.
C)   its MC curve would shift down.
D)   All of the above would occur.E) A) and B)
F) A) and C)

Question 17

Exhibit 11-6  Refer to Exhibit 11-6.The average fixed cost curve is the curve labeled:

Accepted Answer

A)  A.
B)  B.
C)  C.
D)  D.E) A) and C)
F) A) and B)

Question 18

An increase in the price of raw materials will shift both the MC and the ATC curves upward.

Accepted Answer

A) True 
 B)False

Question 19

In the short run,if a firm's total product is increasing:

Accepted Answer

A)   its marginal product must be increasing.
B)   its marginal product must be positive.
C)   its marginal product could be increasing or decreasing.
D)   both b. and c. are true.E) B) and C)
F) A) and D)

Question 20

Exhibit 11-10  Refer to Exhibit 11-10.Which of the following curves represent the LRATC?

Accepted Answer

A)   1
B)   2
C)   3
D)   4E) A) and D)
F) A) and C)

Exam 11: The Firm: Production and Costs

Exhibit 11-8 The table below shows how total cost varies with output in a factory producing watches: Refer to Exhibit 11-8.The marginal cost of producing a third watch equals:

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Constant returns to scale indicate that a firm is experiencing:

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In the short run,if a firm's total product is increasing:

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Which of the following is a short run adjustment?

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Economists normally assume that the goal of a firm is to:

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The production function describes:

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An increase in the price of raw materials will shift both the MC and the ATC curves upward.

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A firm's average fixed cost when producing 2,000 units of output equals $10.When only 1,000 units of output are produced:

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If average total costs are $40 and average variable cost are $20 at 10 units of output and the marginal cost of the 11th unit is $30,what is the average total cost of 11 units?

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Economies of scale:

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A firm has $300 million in revenues and explicit costs of $100 million.If its owners have invested $150 million in the company at an opportunity cost of 10 percent a year,the firm's accounting profit is:

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If a technological change reduced the amount of the variable input needed by a firm to produce a unit of output:

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If the total cost of producing 10 units equals $90,and the average total cost of producing 11 units equals $8.75,then the marginal cost of the eleventh unit produced:

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If the cost of variable inputs used in a firm's production process rose,which of the following would not occur?

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Exhibit 11-10 Refer to Exhibit 11-10.Which of the following curves represent the LRATC?

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Given the following information about the cost function for Bob's Beautiful Bowling Balls: Which of the following is true?

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Average fixed cost is:

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Exhibit 11-6 Refer to Exhibit 11-6.The average fixed cost curve is the curve labeled:

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The short run is not the same length of time for all firms and industries because:

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The region of economies of scale is that in which:

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If average total costs are $40 and average variable cost are $20 at 10 units of output and the marginal cost of the 11^th unit is $30,what is the average total cost of 11 units?

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