question
Economists generally define the short run as being
a. any period of time less than one year.
b. that period of time in which all inputs are variable.
c. any period of time less than six months.
d. that period of time in which at least one of the firm's inputs, usually plant size, is fixed
a. any period of time less than one year.
b. that period of time in which all inputs are variable.
c. any period of time less than six months.
d. that period of time in which at least one of the firm's inputs, usually plant size, is fixed
answer
d. that period of time in which at least one of the firm's inputs, usually plant size, is fixed
question
Which of the following is NOT a short-run decision for a manufacturing firm?
a. Hiring workers
b. Investing in a new addition to the manufactA basic distinction between the long run and the short run is that
if a firm produces no output in the long run, it still incurs a cost.
Correct! in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted.
in the long run, some inputs are fixed, while in the short run, all inputs are variable.
the opportunity costs of production are lower in the short run than in the long runuring plant
c. Downsizing the firm's manufacturing plant
d. Firing workers
a. Hiring workers
b. Investing in a new addition to the manufactA basic distinction between the long run and the short run is that
if a firm produces no output in the long run, it still incurs a cost.
Correct! in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted.
in the long run, some inputs are fixed, while in the short run, all inputs are variable.
the opportunity costs of production are lower in the short run than in the long runuring plant
c. Downsizing the firm's manufacturing plant
d. Firing workers
answer
b. Investing in a new addition to the manufacturing plant
question
A basic distinction between the long run and the short run is that
a. if a firm produces no output in the long run, it still incurs a cost.
b. in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted.
c. in the long run, some inputs are fixed, while in the short run, all inputs are variable.
d. the opportunity costs of production are lower in the short run than in the long run
a. if a firm produces no output in the long run, it still incurs a cost.
b. in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted.
c. in the long run, some inputs are fixed, while in the short run, all inputs are variable.
d. the opportunity costs of production are lower in the short run than in the long run
answer
b. in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted.
question
Mr. James' company produces candy bars. Which is NOT a variable input for this firm?
a. Packaging materials
b. Assembly line personnel
c. The big chocolate-stirring machines
s. Sugar
a. Packaging materials
b. Assembly line personnel
c. The big chocolate-stirring machines
s. Sugar
answer
c. The big chocolate-stirring machines
question
Production functions indicate the relationship between
a. factor costs and output prices.
b. the value of inputs and average costs.
c. factor inputs and the quantity of output.
d. factor inputs and factor prices.
a. factor costs and output prices.
b. the value of inputs and average costs.
c. factor inputs and the quantity of output.
d. factor inputs and factor prices.
answer
c. factor inputs and the quantity of output.
question
Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 65 cookies together. What is the marginal product of the 2nd worker?
a. 35 cookies
b. 20 cookies
c. 15 cookies
d. 30 cookies
a. 35 cookies
b. 20 cookies
c. 15 cookies
d. 30 cookies
answer
b. 20 cookies
question
Which of the following WILL change a firm's production function?
a. Adopting new technology
b. Hiring additional workers
c. Acquiring additional physical capital
d. Adding a second production facility exactly like its first production site
a. Adopting new technology
b. Hiring additional workers
c. Acquiring additional physical capital
d. Adding a second production facility exactly like its first production site
answer
a. Adopting new technology
question
The law of diminishing marginal product states that
a. output will continue to increase indefinitely if more variable factors of production are added to an existing stock of fixed factors.
b. successive equal-sized increases in labor, when added to fixed factors of production, will result in smaller increases of output.
c. a doubling all inputs will double output.
d. variable costs tend to decrease with output.
a. output will continue to increase indefinitely if more variable factors of production are added to an existing stock of fixed factors.
b. successive equal-sized increases in labor, when added to fixed factors of production, will result in smaller increases of output.
c. a doubling all inputs will double output.
d. variable costs tend to decrease with output.
answer
b. successive equal-sized increases in labor, when added to fixed factors of production, will result in smaller increases of output.
question
The firm's short-run costs contain
a. only fixed costs.
b. only variable costs.
c. both variable and fixed costs.
d. only opportunity costs.
a. only fixed costs.
b. only variable costs.
c. both variable and fixed costs.
d. only opportunity costs.
answer
c. both variable and fixed costs.
question
Which of the following is correct?
a. TC = FC * VC
b. TC = FC - VC
c. TC = FC / VC
d. TC = FC + VC
a. TC = FC * VC
b. TC = FC - VC
c. TC = FC / VC
d. TC = FC + VC
answer
d. TC = FC + VC
question
Which of the following would be an example of a fixed cost?
a. The cost of electricity
b. The cost of raw materials
c. Labor costs of hourly workers
d. Rent on machinery
a. The cost of electricity
b. The cost of raw materials
c. Labor costs of hourly workers
d. Rent on machinery
answer
d. Rent on machinery
question
Suppose that a firm is currently producing 500 units of output. At this level of output, VC = $1,000 and FC = $2,500. What is the firms ATC?
a. $2
b. $5
c. $10
d. $7
a. $2
b. $5
c. $10
d. $7
answer
d. $7
question
Suppose that when the level of output for the firm increases from 100 to 110 units, its variable costs increase from $500 to $700. What is the firm's marginal cost?
a. $20
b. $5
c. $7
d. $200
a. $20
b. $5
c. $7
d. $200
answer
a. $20
question
Assume it takes 10 units of labor to produce 4 units of output. When the price of labor is $6 per unit and fixed costs equal $60, what is the total cost of those 4 units of output?
a. $70
b. $150
c. $120
d. $60
a. $70
b. $150
c. $120
d. $60
answer
c. $120
question
Short-run total cost is defined as
a. fixed cost plus variable cost.
b. capital cost only.
c. the sum of marginal cost and variable cost.
d. price of labor per unit multiplied by the number of labor units.
a. fixed cost plus variable cost.
b. capital cost only.
c. the sum of marginal cost and variable cost.
d. price of labor per unit multiplied by the number of labor units.
answer
a. fixed cost plus variable cost.
question
image
*y= Long-run ave. cots (A,B,C,D)
x= output per time period (Q1, Q2, Q3, Q4)
A>B=C<D, A=D*
In the above figure, for any output level less than Q2, this firm experiences
a. decreasing long run average costs.
b. economies of scale.
c. diseconomies of scale.
d. constant economies of scale
*y= Long-run ave. cots (A,B,C,D)
x= output per time period (Q1, Q2, Q3, Q4)
A>B=C<D, A=D*
In the above figure, for any output level less than Q2, this firm experiences
a. decreasing long run average costs.
b. economies of scale.
c. diseconomies of scale.
d. constant economies of scale
answer
b. economies of scale.
question
image
*y= Long-run ave. cots (A,B,C,D)
x= output per time period (Q1, Q2, Q3, Q4)
A>B=C<D, A=D*
In the above figure, the firm experiences constant returns to scale between output levels of
a. Q3 and Q4.
b. any level greater than Q4.
c. zero and Q1.
d. Q2 and Q3.
*y= Long-run ave. cots (A,B,C,D)
x= output per time period (Q1, Q2, Q3, Q4)
A>B=C<D, A=D*
In the above figure, the firm experiences constant returns to scale between output levels of
a. Q3 and Q4.
b. any level greater than Q4.
c. zero and Q1.
d. Q2 and Q3.
answer
d. Q2 and Q3.
question
Economies of scale exist where the long-run average cost curve is
a. downward sloping.
b. horizontal.
c. upward sloping.
d. tangent to the marginal cost curve.
a. downward sloping.
b. horizontal.
c. upward sloping.
d. tangent to the marginal cost curve.
answer
a. downward sloping.
question
Diseconomies of scale occur
a. none of the above.
b. only in the short run.
c. because of fixed costs.
d. only in the long run.
a. none of the above.
b. only in the short run.
c. because of fixed costs.
d. only in the long run.
answer
d. only in the long run
question
If a firm is experiencing diseconomies of scale, then
a. proportional increases in all inputs result in proportional increases in output.
b. the long-run average cost curve is decreasing as output expands.
c. the firm should expand the size of its operation.
d. the long-run average cost curve is rising as output expands.
a. proportional increases in all inputs result in proportional increases in output.
b. the long-run average cost curve is decreasing as output expands.
c. the firm should expand the size of its operation.
d. the long-run average cost curve is rising as output expands.
answer
d. the long-run average cost curve is rising as output expands.
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