Quiz 8: Production Technology and Cost

A firm's objective is to maximize its economic profit,which is: A)total revenue minus economic cost. B)total profit minus total cost. C)economic cost minus profit. D)economic cost minus total revenue.

Sarah has a savings account with a $1000 balance that earns 3% APY.She decides to withdraw the entire balance to buy a laptop computer,what will be her opportunity if her buying the laptop? A)the cost of the laptop B)the forgone interest C)the forgone interest and the cost of the laptop D)the cost of the laptop minus the forgone interest

You own a building that has four possible uses: an Internet cafe,a coffee store,an ice cream store,and a bookstore.The value of the building in each use is $2,000;$3,000;$4,000;and $5,000,respectively.You decide to open an ice cream store.The opportunity cost of using this building for an ice cream store is: A)$2,000,the value if the building is used as an Internet cafe. B)$3,000,the value if the building is used as a coffee store. C)$3,333,the average of the values if the building is used for either an Internet cafe,a coffee store,or a bookstore. D)$5,000,the value if the building is used for a bookstore.

You are the owner and only employee of a company that repairs computers.Last year,you earned total revenues of $75,000.Your costs for equipment,rent,and supplies were $10,000.To start this business you quit a job at another computer software firm that paid $40,000 a year.During the year,your economic costs were: A)$10,000. B)$40,000. C)$50,000. D)$75,000.

You are the owner and only employee of a company that repairs computers.Last year,you earned total revenues of $75,000.Your costs for equipment,rent,and supplies were $10,000.To start this business you quit a job at another computer software firm that paid $40,000 a year.Last year,your economic profits were: A)$100,000. B)$75,000. C)$50,000. D)$25,000.

Dan is an entrepreneur who invests in commercial and residential real estate.He has a savings account with $100,000 that earns 1% APY.Dan wants to buy a house that will give him a monthly cash inflow of $200.What will opportunity cost of investing in the house be? A)1000 B)1200 C)800 D)200

Scenario 8.1: Ana used to work for a Advertising agency where she earned a yearly salary of $60,000.She got tired of working for another company so she opened his own Advertising company.Ana now pays her designer $40,000 per year and spends $25,000 for rent and utilities.She earns $120,000 in annual revenue. -Refer to Scenario 8.1.What is Ana's explicit cost? A)$65,000 B)$55,000 C)$45,000 D)$35,000

Scenario 8.1: Ana used to work for a Advertising agency where she earned a yearly salary of $60,000.She got tired of working for another company so she opened his own Advertising company.Ana now pays her designer $40,000 per year and spends $25,000 for rent and utilities.She earns $120,000 in annual revenue. -Refer to Scenario 8.1.Ana's opportunity cost of running her own business is: A)$30,000. B)$60,000. C)$65,000. D)$120,000.

Scenario 8.1: Ana used to work for a Advertising agency where she earned a yearly salary of $60,000.She got tired of working for another company so she opened his own Advertising company.Ana now pays her designer $40,000 per year and spends $25,000 for rent and utilities.She earns $120,000 in annual revenue. -Refer to Scenario 8.1.Ana's accounting profit is: A)$65,000. B)$55,000. C)$5,000. D)$120,000.

Scenario 8.1: Ana used to work for a Advertising agency where she earned a yearly salary of $60,000.She got tired of working for another company so she opened his own Advertising company.Ana now pays her designer $40,000 per year and spends $25,000 for rent and utilities.She earns $120,000 in annual revenue. -Refer to Scenario 8.1.Ana's economic profit is: A)-$55,000. B)-$15,000. C)-$5,000. D)-$120,000.

Mario has a company that produces plastic freezer bags.His company objective is to maximize: A)his company's revenues. B)his company's total out-of-pocket costs. C)his company's opportunity costs of each factor of production. D)his company's economic profits,the difference between total revenue and total cost.

Total economic costs include: A)a normal rate of return. B)out-of-pocket costs. C)opportunity costs of all inputs. D)all of the above

Table 8.1 -Refer to Table 8.1.Suppose Mr.B withdrew $50,000 from his account that earned 10% to invest into this business.He quit his full-time job that paid $40,000 to manage this business.Mr.B's economic profit equals: A)$100,000. B)$45,000. C)$0. D)-$45,000.

Table 8.1 -Refer to Table 8.1.Suppose Mr.B withdrew $50,000 from his account that earned 10% to invest into this business.He quit his full-time job that paid $40,000 to manage this business.Mr.B's implicit cost equals: A)$100,000. B)$90,000. C)$50,000. D)45,000.

Table 8.1 -Refer to Table 8.1.Suppose Mr.B withdrew $50,000 from his account that earned 10% to invest into this business.He quit his full-time job that paid $40,000 to manage this business.If Mr.B is excited about his $45,000 profit,an economist would: A)celebrate with him. B)mention the $90,000 he has given up. C)tell him his economic profit is indeed positive but not as big as $45,000. D)tell him he made zero economic profit.

Table 8.1 -Which of the following situations describes a short-run adjustment of a firm to changing business conditions? A)A doctor increases the size of his waiting room. B)A manager calls in two part-time workers to prepare for the holiday rush. C)A rancher sells some of his land. D)A manufacturing firm expands its production facility.

Additional Application Do implicit costs affect decision-making in the real world? For the first time nationwide the number of golf courses closing in a year will exceed the number that is opening.This can be explained by a number of reasons.One is the cost of insuring golf courses,which has increased in many areas.Also the number of rounds played has decreased 4% in the last six years.But another explanation is the opportunity cost of owning a golf course.As property prices have increased,the land that golf courses are on is worth a great deal more as housing developments.The owners must continually decide whether the return from operating a golf course is greater than,or at least equal to,the return the owners could get if the land was developed for another use.Furthermore,one explanation for the decline in rounds being played is attributed to the time it takes to play golf.As the opportunity cost of a golfer's time increases,the fewer hours he/she is willing to spend on the golf course.Implicit costs are real and play a role in decision-making of both supply and demand. "Blues on the Green: Why Golf is in Decline," The Economist,October 14,2006,p.70. -Which of the following would be an implicit cost of operating a golf course? A)the cost of fertilizers and water B)the cost of groundskeepers C)the cost of property insurance D)the cost of not developing houses on the property

Additional Application Do implicit costs affect decision-making in the real world? For the first time nationwide the number of golf courses closing in a year will exceed the number that is opening.This can be explained by a number of reasons.One is the cost of insuring golf courses,which has increased in many areas.Also the number of rounds played has decreased 4% in the last six years.But another explanation is the opportunity cost of owning a golf course.As property prices have increased,the land that golf courses are on is worth a great deal more as housing developments.The owners must continually decide whether the return from operating a golf course is greater than,or at least equal to,the return the owners could get if the land was developed for another use.Furthermore,one explanation for the decline in rounds being played is attributed to the time it takes to play golf.As the opportunity cost of a golfer's time increases,the fewer hours he/she is willing to spend on the golf course.Implicit costs are real and play a role in decision-making of both supply and demand. "Blues on the Green: Why Golf is in Decline," The Economist,October 14,2006,p.70. -If the owners of a golf course only include their explicit costs when they calculate their annual profit: A)their economic profit will be greater than their accounting profit. B)their economic profit will be equal to their accounting profit. C)their economic profit will be less than their accounting profit. D)none of the above will be true.

Additional Application Do implicit costs affect decision-making in the real world? For the first time nationwide the number of golf courses closing in a year will exceed the number that is opening.This can be explained by a number of reasons.One is the cost of insuring golf courses,which has increased in many areas.Also the number of rounds played has decreased 4% in the last six years.But another explanation is the opportunity cost of owning a golf course.As property prices have increased,the land that golf courses are on is worth a great deal more as housing developments.The owners must continually decide whether the return from operating a golf course is greater than,or at least equal to,the return the owners could get if the land was developed for another use.Furthermore,one explanation for the decline in rounds being played is attributed to the time it takes to play golf.As the opportunity cost of a golfer's time increases,the fewer hours he/she is willing to spend on the golf course.Implicit costs are real and play a role in decision-making of both supply and demand. "Blues on the Green: Why Golf is in Decline," The Economist,October 14,2006,p.70. -Which of the following would be an implicit cost of playing a round of golf? A)the value of meeting new friends or improving business relationships B)the value of another activity the golfer could be doing C)the cost of property insurance;the value of fresh air and exercise for five hours D)the value of competition and improving your skill level

Economic costs are measured by all monetary payments.

Accounting costs include all monetary payments and all the opportunity cost of inputs that do not require an explicit monetary payment.

Accounting costs include explicit and implicit costs.

Economic costs include only the implicit costs to a firm.

A firm's accounting cost is always higher than its economic cost.

Economic profits are determined by subtracting total revenue and implicit costs.

The opportunity cost of an entrepreneur's time is an explicit cost.

Your friend Harry has quit his $20,000-a-year job to start a business that rents fishing boats.He asks you to lend him $50,000 and agrees to pay you a 10% return on your $50,000 if he earns a profit.During the first year Harry's total revenue is $120,000 and his total cost for equipment and supplies are $100,000.Harry tells you that he cannot pay you any interest this year because he did not earn a profit.Is your friend Harry trying to cheat you?

Jimmy was working for an accounting firm earning $30,000 per year.He has $100,000 in an investment account earning 10% per year.If he decided to invest the $100,000 in a new business and quit his job to work full-time at this new business,what is his implicit cost of this new business?

Explain the difference between accounting costs and economic costs.

Table 8.2 -Mitzi's Pet Salon hires you to determine the company's status.The data in Table 8.2 provides information on the company's annual costs and revenues.Mitzi spends at least 40 hours a week at her place of business.If she closed the salon,she could work for her competitor and earn $15,000 per year.She also owns the building that houses the salon and could rent it out for $18,000 per year if she closes her business.Calculate the economic cost and economic profit for Mitzi's Pet Salon.Would an accountant come to the same conclusion about the profitability of this firm? Explain.

The period of time when a firm is unable to change all of inputs,or factors of production,is called the: A)economic term. B)short run. C)accounting term. D)long run.

The short run can be defined as any period of time: A)less than one year. B)in which some inputs are fixed. C)in which all inputs are variable. D)in which price is fixed.

-Refer to Figure 8.1.The marginal product of the second worker is ________ lawns moved. A)4 B)5 C)5.5 D)11

-Refer to Figure 8.1.The lawn mower company's total-product curve shows the following: A)the effects of labor specialization. B)the effects of diminishing returns. C)the effects of labor specialization and diminishing returns. D)none of the above.

When El Guapo's Mexican Restaurant hires one waiter,5 tables can be served in an hour.When El Guapo's Mexican Restaurant hires two waiters,12 tables can be served in an hour.The marginal product of labor of the second waiter is ________ tables served per hour. A)5 B)7 C)12 D)17

At Carolina's Bakery,the marginal products of the first,second,third,and fourth workers are 15,11,8,and 6 cakes produced respectively.The total product of the first three workers is: A)8. B)15. C)34. D)42.

-Refer to Figure 8.2.Diminishing marginal returns set in after the ________ worker is hired. A)first B)second C)third D)fifth

-Refer to Figure 8.2.The marginal product of the third worker is ________. A)forty-two B)thirty-two C)twelve D)ten

-Refer to Figure 8.2.The marginal product of the fifth worker is ________. A)one B)five C)eight D)ten

-Refer to Figure 8.2.The marginal product of the sixth worker is ________. A)0 B)5 C)-5 D)50

Which of the following is a reason why the marginal product increases as output increases: A)decreasing repetition. B)increasing continuity. C)both A and B D)neither A nor B

Suppose that at Pollo Loco's Restaurant 5 cooks can make 70 meals.Assuming that there are diminishing returns to labor,it will require ________ to make 70 more meals. A)an additional 5 cooks B)more than an additional 5 cooks C)less than an additional 5 cooks D)a total of 10 cooks

If marginal product is negative,then: A)total product will decrease if more of the input is hired. B)total product is equal to zero. C)marginal product will increase if more of the input is hired. D)average product will increase if more of the input is hired.

Table 8.3 -Refer to Table 8.3.If the firm hires seven workers,then: A)marginal product is negative. B)marginal product is less than one. C)total product is negative. D)marginal product is equal to three.

Table 8.3 -Refer to Table 8.3.If four workers are hired,then: A)diminishing marginal returns have started. B)marginal product equals five. C)total product is maximized on the table. D)all of the above

Table 8.3 -Refer to Table 8.3.The firm will experience diminishing marginal returns to labor as long it hires more than: A)0 units of labor. B)1 unit of labor. C)2 units of labor. D)3 units of labor.

Which of the following statements about fixed costs is correct? A)Fixed costs are not opportunity costs. B)Fixed costs must be paid even if the firm's output is zero. C)Fixed costs are always the largest portion of total costs. D)none of the above

Dan owns a factory that manufactures smartphones.He has a lot of costs every month to keep his factory running.Which of the following is one of Dan's fixed costs? A)plastic used to make the smartphones B)his electricity bill for the factory C)his mortgage on the factory D)memory devices used to store music and video on the smartphones

A fixed cost can be thought of as: A)a cost that changes as output increases. B)a cost that must be paid even if output equals zero. C)a cost that is paid only when output equals zero. D)total costs ignoring opportunity costs.

Total variable cost: A)increases as output increases. B)is constant as output increases. C)decreases as output increases. D)is lowest for labor-intensive technologies.

Which type of cost always increases immediately when output increases? A)fixed costs B)overhead costs C)total variable costs D)sunk costs

If the price of a fixed factor of production increases,then: A)total costs are unchanged. B)marginal costs will increase. C)variable costs are unchanged. D)variable costs will increase.

A firm's short-run total cost (TC)is equal to: A)fixed costs plus variable costs. B)variable cost minus total cost. C)total cost divided by variable cost. D)fixed cost minus variable cost.

A residential cleaning company has total costs of $45,000 and total variable costs of $25,000.The cleaning company has total fixed costs that equal to: A)$45,000. B)$20,000. C)$70,000. D)indeterminate because the firm's output level is not known.

Short-run costs that depend on the level of output are: A)total fixed cost only. B)total variable costs only. C)total costs only. D)both total variable costs and total costs.

Raphael's Salon has $5,000 in fixed cost and $15,000 in variable costs monthly.Raphael's Salon gives 1500 hair cuts a month.What is the average total cost for Raphael's Salon? A)8 B)7 C)0.075 D)13.33

Which of the following is most likely to be a variable cost for a firm? A)the interest payments made on equipment loans B)an annual payment for insurance on the firm's plant C)the monthly rent on office space that it leased for 5 years D)the payments made to match workers' 401K contributions

-Refer to Figure 8.3.Micro Oven's total fixed costs are: A)$0. B)$200. C)$500. D)indeterminate from this information.

-Refer to Figure 8.3.If two microwave ovens are produced,Micro Oven's total variable costs are: A)$350. B)$425. C)$500. D)indeterminate from this information.

-Refer to Figure 8.3.The vertical distance AB represents: A)total fixed costs. B)marginal costs. C)average fixed costs. D)average total costs.

For small quantities of output,average variable cost decreases as output increases due to: A)a reduction in the number of workers. B)diminishing return. C)labor specialization increases worker productivity. D)More information is needed to determine.

Marginal cost: A)is the increase in total cost resulting from producing one more unit of output. B)is the average cost of production divided by output. C)equals the increase in average variable cost resulting from producing one more unit of output. D)always equals average cost.

A firm will begin to experience diminishing returns at the point where: A)marginal cost increases. B)marginal cost decreases. C)marginal product increases. D)both B and C

Marginal cost is equal to: A)variable cost divided by output. B)output divided by variable cost. C)the change in output divided by the change in variable cost. D)the change in variable cost divided by the change in output.

-Refer to Figure 8.4.The marginal cost of the 10th basketball is: A)$2. B)$30. C)$28. D)$1.

Tom's landscaping service has only one variable input which is labor.Tom's landscaping service labor costs are $300 a day and Tom's landscaping service does 9 yards per day.To do 10 yards per day,Tom's landscaping service labor costs increase to $325 a day.The marginal cost of doing that 10th yard is: A)$25. B)$32.5. C)$45. D)indeterminate from the information given.

If Mayo Lawyer Firm's total costs are $7000 when 20 clients' cases are worked and $7600 when 21 clients' cases are worked,the marginal cost of the 21st client's case is: A)$300. B)$400. C)$500. D)$600.

-Refer to Figure 8.5.The marginal cost of the third oven is: A)$100. B)$150. C)$50. D)indeterminate from this information.

The law of diminishing returns applies in the: A)short run and the long run. B)long run but not the short run. C)short run only. D)long run only.

Marginal costs typically: A)increase as output increases. B)decrease as output increases. C)first increase then decrease as output increases. D)first decrease then increase as output increases.

As output increases,total cost also increases.Therefore: A)marginal cost is increasing. B)marginal cost is positive. C)average fixed costs are increasing. D)all of the above

As output increases,it is always true that: A)average total cost decreases. B)average variable cost is above marginal cost. C)average fixed costs decrease. D)total fixed costs increase.

At Fresh Hot Bakery,the average cost of making 20 baguettes is $1.00.The average cost of making 21 baguettes is $1.10.The marginal cost of the 21st baguettes is: A)$0.10. B)$2.10. C)$3.00. D)$3.10.

-Refer to Figure 8.6.The total fixed costs for Cyndy's Floral Arrangements are $1,000.If Cyndy's Floral Arrangements produces 200 silk flower arrangements,the average fixed costs are: A)$.20. B)$5. C)$20. D)$200.

-As output increases,average fixed costs: A)decrease. B)initially decrease and then increase. C)remain constant. D)increase.

Table 8.4 -Refer to Table 8.4.There are diminishing returns to labor for: A)all workers. B)workers 1 and 2 only. C)workers 4 through 5 only. D)worker 1 only.

Table 8.4 -Refer to Table 8.4.Three workers can produce ________ cakes per day at a total cost of ________. A)90;350 B)90;$50 C)90;$550 D)90;$750

Table 8.4 -Refer to Table 8.4.When the second worker is hired,the marginal cost is equal to: A)$2. B)$3. C)$6. D)$50.

Table 8.4 -Refer to Table 8.4.When the fifth worker is employed,the marginal cost is: A)$150. B)$100. C)$15. D)$10.

Table 8.5 -Refer to Table 8.5.If Sherry produces zero earrings,her total fixed costs are: A)$0. B)$50. C)$100. D)indeterminate from this information.

Table 8.5 -Refer to Table 8.5.If Sherry produces one pair of earrings,her total variable costs are: A)$50. B)$100. C)$150. D)indeterminate from this information.

Table 8.5 -Refer to Table 8.5.If Sherry produces two pair of earrings,her marginal cost is: A)$40. B)$45. C)$72.50. D)$122.50.

Table 8.5 -Refer to Table 8.5.If Sherry produces three pair of earrings,her total variable costs are: A)$26.67. B)$140. C)$175. D)$225.

Table 8.5 -Refer to Table 8.5.If Sherry produces five pair of earrings,her total costs are: A)$320. B)$360. C)$370. D)$400.

Table 8.5 -Refer to Table 8.5.If Sherry produces four pair of earrings,her average fixed costs are: A)$4. B)$20. C)$25. D)$100.

-Refer to Figure 8.7.If six microwave ovens are produced,Micro Oven's average total costs are: A)$116.67. B)$700. C)$1200. D)$200.00.

Average total cost is equal to: A)total cost divided by quantity. B)variable cost divided by quantity. C)average fixed cost minus average variable cost. D)the extra cost of producing one more unit of output.

O'Connor Lamp Factory has total fixed costs of $4500.O'Connor Lamp Factory's average variable cost per lamp is $30 and its average total cost is $45.O'Connor Lamp Factory sells each lamp for $100 each.How many lamps is O'Connor Lamp Factory currently manufacturing: A)200 lamps. B)250 lamps. C)300 lamps. D)a number of lamps that is indeterminate from this information.

Suppose that a donut bakery has $1,500 of variable costs and $2,500 of fixed costs when it produces 1000 donuts and sells them for $1 per donut.Average total cost is equal to: A)$4. B)$25. C)$2. D)$1.5.

If a firm spends $200 to produce 20 units of output and spends $440 to produce 40 units of output,then the marginal cost of increasing output is: A)$22. B)$12. C)$20. D)$10.

Average variable cost and average total costs get closer together as output increases because: A)diminishing returns set in. B)average fixed costs decrease as output increases. C)marginal costs decrease as output increases. D)economies of scale become apparent.

-Refer to Figure 8.8.Curve 1 is Outdoor Equipment's: A)marginal cost curve. B)average variable cost curve. C)average total cost curve. D)average fixed cost curve.

-Refer to Figure 8.8.Curve 2 is Outdoor Equipment's: A)marginal cost curve. B)average variable cost curve. C)average total cost curve. D)average fixed cost curve.

-Refer to Figure 8.8.Curve 3 is Outdoor Equipment's: A)marginal cost curve. B)average variable cost curve. C)average total cost curve. D)average fixed cost curve.

-Refer to Figure 8.8.The vertical distance AB is Outdoor Equipment's: A)marginal cost. B)average fixed cost. C)total fixed cost. D)total cost.

If marginal cost is above average variable cost,then: A)average variable cost is increasing. B)marginal cost must be decreasing. C)average variable cost is constant. D)average variable cost is decreasing.

Marginal cost equals average total cost: A)when average total cost is at its minimum point. B)when marginal cost is at its minimum point. C)when average variable cost is at its minimum point. D)when there are no fixed costs.

If average variable cost decreases as output increases,then: A)marginal cost is negative. B)marginal cost is decreasing. C)marginal cost is less than average variable cost. D)marginal cost is greater than average variable cost.

Suppose that at Jones & Smith Shoe Factory,the marginal cost of making a pair of shoes is $15 and average variable cost is $15.For the next pair of shoes produced marginal cost will be ________ $15 and average variable cost will be ________ $15. A)greater than;less than B)less than;greater than C)less than;less than D)greater than;greater than

Suppose marginal cost is $5.Average variable costs are $10.For the next unit of output produced,average variable costs will be: A)less than $10. B)more than $10. C)equal to $10. D)It is impossible to say.

World's Best Chair Co.has produced 30 chairs at a total cost of $300.The next chair produced will add $10 to the company's total cost.Which of the following is definitely TRUE if the 31st chair is produced? A)Short-run average total cost will decrease. B)Marginal cost will decrease. C)Average fixed cost will decrease. D)A and C are true.

Which of the following is true for all units of output produced? A)Marginal cost is less than average total cost. B)Marginal cost is greater than average total cost. C)Average variable cost is less than average total cost. D)Average fixed cost is less than average variable cost.

Recall the application about idle capital and short-run marginal cost with a firm that simply digs holes and has a fixed amount of capital (10 standard shovels)and can vary the number of workers,Why is the marginal cost constant for the first 10 units of output? A)The average total cost is falling. B)The firm does not experience diminishing returns. C)The average total cost is raising. D)none of the above

The law of diminishing returns applies only in the long run when the fixed cost can be flexible.

Average fixed costs rise continuously as the quantity of output rises.

The increase in total cost that results from producing one more unit of output is the fixed cost.

The gap between average total cost and the average variable cost is always the average fixed cost.

Whenever the marginal cost is less than the average cost,the average cost is falling.

The long run is when at least one cost is fixed.

Decreasing marginal product implies decreasing marginal costs.

Comment on the following statement: "In the short run,a firm's total costs will be zero if the firm chooses to produce nothing."

What is the relationship between marginal cost and fixed cost?

Table 8.6 -Refer to Table 8.6.For each level of output,compute average variable cost,marginal cost,average fixed cost,and average total cost.

Table 8.7 -Complete Table 8.7.

Explain why the firm's short-run marginal cost curve initially decreases and then increases in most cases.

Describe the relationship between marginal cost and average cost.

When XYZ Corporation produces 35 units of output,its average variable cost is $5.The marginal cost of the 36th unit of output is $7.If the firm choose to produce the 36th unit of output,what will happen to average variable cost? Explain.

Why does the vertical distance between the ATC curve and the AVC curve decrease as output increases?

The period of time when a firm is able to change all of inputs,or factors of production,is called the: A)economic term. B)short run. C)accounting term. D)long run.

One of the main differences between the long run and the short run is that: A)the firm can earn a profit. B)the firm can operate at a loss. C)there are no diminishing returns in the short run. D)there are no diminishing returns in the long run.

If a firm is operating in the long run the firm is flexible in the following: A)altering all inputs. B)building a new production facility. C)modifying an existing facility. D)all of the above

Which of the following describes a long-run adjustment of a firm to changing business conditions? A)A restaurant owner leases an empty store next door and expands. B)A dentist changes her hours to see more patients. C)A farmer hires more workers to help bring in the harvest. D)all of the above

If a firm's production process exhibits economies of scale for all levels of output,then the firm's long-run average cost curve will be: A)horizontal. B)positively sloped. C)negatively sloped. D)U-shaped.

If a firm's production process exhibits diseconomies of scale for all levels of output,then the firm's long-run average cost curve will be: A)horizontal. B)positively sloped. C)negatively sloped. D)U-shaped.

A firm's long run marginal cost is: A)the change in long run cost resulting from producing one more unit of output. B)the change in long run fixed cost resulting from producing one more unit of output. C)the change in long run variable cost resulting from producing one more unit of output. D)none of the above.

When an increase in a firm's scale of production leads to higher average costs it is referred to as: A)economies of scale. B)constant returns to scale. C)decreasing returns to scale. D)diseconomies of scale.

If the car manufacturer enjoys economies of scale,then an increase in the number of cars manufactured will lead to a(n): A)decrease in average cost. B)increase in average cost. C)constant average cost. D)decrease in total cost.

You are the manager and owner of E-bulbs Inc.and you know that your factory experiences economies of scale.You want to quantify the extent of scale economies in the production of E-bulbs Inc.so you need to find: A)diseconomies of scale. B)minimum efficient scale. C)diminishing marginal productivity. D)diminishing marginal returns.

The manager of HDG Computers reports that if output expands in the long run then average costs will rise.This is an example of: A)economies of scale. B)diseconomies of scale. C)minimum efficient scale D)constant returns to scale.

Diseconomies of scale can occur for: A)coordination problems. B)minimum efficient scale problems. C)increasing input costs. D)A and C are correct.

All of the following are possible reasons for diseconomies of scale EXCEPT: A)bureaucratic inefficiency. B)a top-heavy management structure. C)indivisible inputs. D)All of the above are possible reasons for diseconomies of scale.

-Which segment of the LAC in Figure 8.9 represents constant returns to scale? A)ab B)cd C)de D)all of the above

-Refer to Figure 8.9.Which point of the LAC represents minimum efficient scale? A)a B)b C)c D)e

-Refer to Figure 8.9.Which point of the LAC represents economies of scale? A)a B)b C)c D)e

-Refer to Figure 8.9.Which point of the LAC represents diseconomies of scale? A)a B)b C)c D)e

Which of the following industries is most likely to exhibit significant economies of scale? A)home building B)vegetable farming C)motorcycle production D)electric power generation

Suppose that an increase in the scale of production at CR Cabinets Inc.leads to no change in average costs,CR Cabinets Inc.experiences: A)minimum efficient scale. B)economies of scale. C)diseconomies of scale. D)constant returns to scale.

Which of the following is an example of economies of scale? A)As the computer industry has expanded,the number of professionally trained computer programmers has also increased,which has caused the salaries of computer programmers to increase. B)To attract firms to locate in its state,the state government reduced the tax rate that businesses must pay on its profits,thus lowering the costs to firms who locate in the state. C)A firm increases in size and is therefore able to lower its health insurance costs because as the size of the group insured increases,the premium per person decreases substantially. D)As the demand for calculators increased,the price of calculators actually fell.

Recall the application about invisible inputs and the cost of fake killer whales,Sea lions off the Washington coast eat steelhead and other fish,depleting some species threatened with extinction and decreasing the harvest of the commercial fishing industry.Rick Funk is a plastics manufacturer who has offered to build a life-sized fiberglass killer whale,mount it on a rail like a roller coaster,and send the whale diving through the water to scare off the sea lions,whales' natural prey.According to Funk,it would cost about $16,000 to make the first whale,including $11,000 for the mold and $5,000 for labor and materials.Once the mold is made,each additional whale would cost an additional $5,000.Why is the mold an invisible input? A)because it cannot be scaled down and still produced the whales B)because the cost of producing the mold is not visible in the total cost C)because it can be scaled down and still produce the whales D)both B and C

Suppose Greg's Carpet factory experiences economies of scale up to a certain point and constant returns of scale beyond that point.Its long-run average cost curve is most likely to be: A)upward sloping to the right. B)downward sloping to the right. C)horizontal. D)L-shaped.

If the fixed cost of producing a good is very high,but the marginal cost is low and constant,then the average total cost will: A)increase as more units are produced. B)decrease as more units are produced. C)first decrease and then increase as more units are produced. D)not change as more units are produced.

When an increase of a firm's scale of production leads to lower average costs per unit produced,economies of scale are present.

When indivisible inputs are being used,the average cost of production increases as output decreases.

If a firm's long-run average cost curve is horizontal the firm is experiencing economies of scale

When the long-run cost curve is negatively sloped the firm is experiencing diseconomies of scale.

When the long-run cost curve is negatively sloped the firm is experiencing economies of scale.

Most firms seem to exhibit constant returns to scale after some level of output.

The difference between the short run and long run is a firm's flexibility in choosing inputs.

Long-run cost curves are generally steeper than short-run cost curves.

The long-run average cost curve for the XYZ Co.is U-shaped.What does this imply about the firm's returns to scale?

What are economies of scale? What are diseconomies of scale? What are constant returns to scale?

How is a long-run average cost curve different from a short-run average cost curve? How are they related?

How do economies of scale affect the shape of the long-run average cost curve?

Comment on the following statement: "The shape of the long-run average cost curve is determined by diminishing returns."

The textbook identifies two sources of economies of scale.What are these sources?

The firm's short-run cost curves shows how ________ vary with the quantity produced when at least one input is fixed. A)technology B)production costs C)economy of scales D)none of the above

A large or a small wind turbine have similar installation,operating and maintenance costs,however,a large turbine has four times the generating capacity but costs less than three times as much as a small turbine,the average cost of generating electricity with wind is: A)constant at each output. B)increasing as output increases. C)decreasing as output increases. D)at first increasing and then decreasing as output rises.

When detailing the cost of producing electricity with turbines of different sizes.The concept of scale economies is realized when: A)the average cost tend to decrease as the size of the turbine decreases. B)the average cost tend to increase as the size of the turbine decreases. C)the average cost tend to decrease as the size of the turbine increases. D)the average cost tend to increase as the size of the turbine increases.

An informational good,such as a music video,has a ________ first-copy cost and a_______ marginal cost. A)large;large B)large;small C)small;large D)small;small

If the first copy cost of producing a R&B music video is $350,000 and the marginal cost is $0,how much total cost would the firm incur if it produces 5 million copies? A)zero B)$350,000 C)$5 million D)$5 million + $350,000

Recent innovations in photovoltaic technology have reduced the unit cost of solar power.

The long-run average-cost curve shows how the average cost of production varies when the firm is perfectly flexible in choosing its inputs.

Explain why the wind power have economies of scale.