Question 1

In the long run a company that produces and sells covers for cell phones incurs total costs of $2,500 when output is 1,250 covers and $4,000 when output is 1,500 covers. For this range of output, the cell phone cover company exhibits
A)economies of scale.
B)constant returns to scale.
C)diseconomies of scale.
D)efficient scale.

Accepted Answer

The company is experiencing an increase in total costs as output increases, indicating that they are experiencing diseconomies of scale. This means that as they produce more, their costs are increasing at a faster rate than their output, leading to a decrease in efficiency and profitability.

Question 2

Suppose that a firm's long-run average total costs of producing small commuter jet airplanes increases as it produces between 2,000 and 4,000 airplanes. For this range of output, the firm is experiencing
A)economies of scale.
B)constant returns to scale.
C)diseconomies of scale.
D)specialization.

Accepted Answer

The firm is experiencing diseconomies of scale if its long-run average total cost increases as it produces more output. This is happening in the given range of output (2,000-4,000 airplanes), indicating that the firm is facing increased costs due to factors such as increased coordination and communication costs, manager's span of control limitations, etc. Thus, option C is the correct answer.

Question 3

Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles. 
-Refer to Figure 13-9. At levels of output less than M, the firm experiences
A)economies of scale.
B)diseconomies of scale.
C)constant returns to scale.
D)both diminishing marginal productivity and coordination problems.

Accepted Answer

The answer of Figure 13-9
The figure below depicts average total...

Question 4

When a firm experiences diseconomies of scale,
A)short-run average total cost is minimized.
B)long-run average total cost is minimized.
C)long-run average total cost increases as output increases.
D)long-run average total cost decreases as output increases.

Accepted Answer

Diseconomies of scale refer to the situation where as output increases, per unit costs increase as well. This is typically seen in the long run, as firms have enough time to make adjustments to their production processes to try to reduce costs. Therefore, option C is the correct answer as it states that long-run average total cost increases as output increases.

Question 5

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. Which curve represents the long-run average total cost? A)ATC_A B)ATC_B C)ATC_C D)ATC_D

Accepted Answer

The answer of Figure 13-9
The figure below depicts average total...

Question 6

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. Which of the curves is most likely to characterize the short-run average total cost curve of the smallest factory? A)ATC_A B)ATC_B C)ATC_C D)ATC_D

Accepted Answer

The ATC curve with a lower level of output (ATCS1U1B1) is most likely to characterize the short-run average total cost curve of the smallest factory. This is because as output increases, the ATC curve shifts upward due to diminishing returns to scale, meaning it becomes more expensive to produce each additional unit. Therefore, the ATC curve for a smaller factory with less output is likely to have a lower average cost per unit than a larger factory with more output.

Question 7

In the long run a company that produces and sells kayaks incurs total costs of $15,000 when output is 30 kayaks and $20,000 when output is 40 kayaks. The kayak company exhibits
A)diseconomies of scale because total cost is rising as output rises.
B)constant returns to scale because average total cost is constant as output rises.
C)diseconomies of scale because average total cost is rising as output rises.
D)economies of scale because average total cost is falling as output rises.

Accepted Answer

The answer of In the long run a company that...

Question 8

Suppose that a firm's long-run average total costs of producing hand-crafted chairs is $300 when it produces 10,000 chairs and $325 when it produces 11,000 chairs. For this range of output, the firm is likely experiencing
A)economies of scale.
B)constant returns to scale.
C)specialization.
D)coordination problems.

Accepted Answer

The answer of Suppose that a firm's long-run average total...

Question 9

Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles. 
-Refer to Figure 13-9. The firm experiences constant returns to scale at which output levels?
A)output levels less than M
B)output levels between M and N
C)output levels greater than N
D)All of the above are correct as long as the firm is operating in the long run.

Accepted Answer

Constant returns to scale means that increasing all inputs by the same proportion will result in the same proportionate increase in output. In the figure, the slope of the ATC curve is constant between output levels M and N, indicating that increasing output in this range results in a proportional increase in costs, and thus constant returns to scale. Therefore, the correct answer is B, output levels between M and N.

Question 10

In the long run, when marginal cost is above average total cost, the average total cost curve exhibits
A)economies of scale.
B)diseconomies of scale.
C)constant returns to scale.
D)efficient scale.

Accepted Answer

When the marginal cost is above the average total cost, it increases the average total cost, which indicates an increase in per-unit production costs. This is known as diseconomies of scale. It happens when a firm tries to produce more output by expanding its production operation, which results in increased costs per unit of production, reduced efficiency, and higher average total cost.

Question 11

In the long run a company that produces and sells dog beds incurs total costs of $1,200 when output is 30 beds and $1,600 when output is 40 beds. Firm A exhibits
A)diseconomies of scale because total cost is rising as output rises.
B)constant returns to scale because average total cost is constant as output rises.
C)diseconomies of scale because average total cost is rising as output rises.
D)economies of scale because average total cost is falling as output rises.

Accepted Answer

The answer of In the long run a company that...

Question 12

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. In the long run, the firm can operate on which of the following average total cost curves? A)ATC_A B)ATC_B C)ATC_C D)All of the above are correct.

Accepted Answer

The answer of Figure 13-9
The figure below depicts average total...

Question 13

Diseconomies of scale occur when a firm's
A)marginal costs are constant as output increases.
B)long-run average total costs are decreasing as output increases.
C)long-run average total costs are increasing as output increases.
D)marginal costs are equal to average total costs for all levels of output.

Accepted Answer

Diseconomies of scale occur when a firm's long-run average total costs are increasing as output increases. This is due to factors such as managerial inefficiencies, communication problems, and coordination difficulties that arise as a firm grows larger. As a result, the cost per unit of output increases and the firm becomes less efficient as it grows.

Question 14

Firms may experience diseconomies of scale when
A)they are too small to take advantage of specialization.
B)large management structures are bureaucratic and inefficient.
C)there are too few employees, and managers do not have enough to do.
D)average fixed costs begin to rise again.

Accepted Answer

Diseconomies of scale occur when a firm grows so large that its costs per unit increase. This often happens due to bureaucratic inefficiencies in large management structures, where decision-making becomes slower and more complex.

Question 15

When a firm is experiencing diseconomies of scale, long-run
A)average total cost is minimized.
B)average total cost is greater than long-run marginal cost.
C)average total cost is less than long-run marginal cost.
D)marginal cost is minimized.

Accepted Answer

The answer of When a firm is experiencing diseconomies of...

Question 16

Suppose that a firm's long-run average total costs of producing custom wooden picnic tables is $300 when it produces 10,000 tables and $325 when it produces 11,000 tables. For this range of output, the firm is experiencing
A)economies of scale.
B)constant returns to scale.
C)diseconomies of scale.
D)specialization.

Accepted Answer

The long-run average total cost is increasing as the output increases, indicating that the firm is experiencing diseconomies of scale. This could be due to various factors such as increased complexity in production, difficulties in coordinating production processes, and diminishing returns to scale.

Question 17

Suppose that a firm's long-run average total costs of producing an individual income tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200 returns. For this range of output, the firm is experiencing
A)economies of scale.
B)constant returns to scale.
C)diseconomies of scale.
D)specialization.

Accepted Answer

When the long-run average total cost remains constant over a range of output, it is said to experience constant returns to scale. This means that the firm is neither experiencing economies of scale (where the per-unit cost decreases as the output increases), nor is it experiencing diseconomies of scale (where the per-unit cost increases as the output increases).

Question 18

Diseconomies of scale occur when
A)average fixed costs are falling.
B)average fixed costs are constant.
C)long-run average total costs rise as output increases.
D)long-run average total costs fall as output increases.

Accepted Answer

Diseconomies of scale occur when long-run average total costs rise as output increases. This usually happens due to organizational inefficiencies, communication gaps, and increased management difficulties. As a result, the cost per unit of production rises, leading to diminishing returns to scale.

Question 19

In the long run a company that produces and sells organic tofu incurs total costs of $1,200 when output is 1,200 units and $1,650 when output is 1,400 units. The tofu company exhibits
A)diseconomies of scale because total cost is rising as output rises.
B)diseconomies of scale because average total cost is rising as output rises.
C)economies of scale because total cost is rising as output rises.
D)economies of scale because average total cost is falling as output rises.

Accepted Answer

The company is experiencing diseconomies of scale because the total cost is increasing as output increases, and the average total cost is also increasing. When output increases from 1,200 units to 1,400 units, total cost increases by $450 ($1,650 - $1,200) but output only increases by 200 units. This means that as the company increases output, it is becoming less efficient and experiencing higher costs per unit, leading to higher average total cost.

Question 20

Figure 13-9
The figure below depicts average total cost functions for a firm that produces automobiles. 
-Refer to Figure 13-9. The firm experiences economies of scale at which output levels?
A)output levels less than M
B)output levels between M and N
C)output levels greater than N
D)All of the above are correct as long as the firm is operating in the long run.

Accepted Answer

The answer of Figure 13-9
The figure below depicts average total...

Quiz 13: The Costs of Production

In the long run a company that produces and sells covers for cell phones incurs total costs of $2,500 when output is 1,250 covers and $4,000 when output is 1,500 covers. For this range of output, the cell phone cover company exhibits

Suppose that a firm's long-run average total costs of producing small commuter jet airplanes increases as it produces between 2,000 and 4,000 airplanes. For this range of output, the firm is experiencing

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. At levels of output less than M, the firm experiences

When a firm experiences diseconomies of scale,

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. Which curve represents the long-run average total cost?

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. Which of the curves is most likely to characterize the short-run average total cost curve of the smallest factory?

In the long run a company that produces and sells kayaks incurs total costs of $15,000 when output is 30 kayaks and $20,000 when output is 40 kayaks. The kayak company exhibits

Suppose that a firm's long-run average total costs of producing hand-crafted chairs is $300 when it produces 10,000 chairs and $325 when it produces 11,000 chairs. For this range of output, the firm is likely experiencing

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. The firm experiences constant returns to scale at which output levels?

In the long run, when marginal cost is above average total cost, the average total cost curve exhibits

In the long run a company that produces and sells dog beds incurs total costs of $1,200 when output is 30 beds and $1,600 when output is 40 beds. Firm A exhibits

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. In the long run, the firm can operate on which of the following average total cost curves?

Diseconomies of scale occur when a firm's

Firms may experience diseconomies of scale when

When a firm is experiencing diseconomies of scale, long-run

Suppose that a firm's long-run average total costs of producing custom wooden picnic tables is $300 when it produces 10,000 tables and $325 when it produces 11,000 tables. For this range of output, the firm is experiencing

Suppose that a firm's long-run average total costs of producing an individual income tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200 returns. For this range of output, the firm is experiencing

Diseconomies of scale occur when

In the long run a company that produces and sells organic tofu incurs total costs of $1,200 when output is 1,200 units and $1,650 when output is 1,400 units. The tofu company exhibits

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. -Refer to Figure 13-9. The firm experiences economies of scale at which output levels?