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Multiple Choice Questions Chapter 10 Output and Costs

Economic Principles- Microeconomics (University of Manchester)

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Multiple Choice Questions

Chapter 10: Output and Costs

1) The short run is a period of time in which 1) _______

A) resource prices are fixed.
B) output prices are fixed.
C) the quantity used of at least one resource is fixed.
D) the quantities used of all resource are fixed.

2) The short run is a time frame in which 2) _______

A) the quantities of all resources can be varied.
B) the quantities of some resources are fixed and the quantities of
other resources can be varied.
C) all costs are sunk costs.
D) the quantities of all resources are fixed.

3) An example of a variable resource in the short run is 3) _______

A) capital equipment. B) a building.
C) an employee. D) land.

4) A cost that has already been made and cannot be recovered is called a 4) _______
A) marginal cost. B) variable cost.
C) sunk cost. D) fixed cost.

5) The long run is a time frame in which 5) _______

A) the quantities of all resources are fixed.
B) the quantities of all resources can be varied.
C) all costs are sunk costs.
D) the quantities of some resources are fixed and the quantities of
other resources can be varied.

6) In the long run, a firm can vary 6) _______

A) both its labour and its capital.
B) neither its labour nor its capital.
C) its labour but not its capital.
D) its capital but not its labour.

7) The long run is distinguished from the short run in that, in the long run, 7) _______
A) the quantities of all resources can be varied.
B) the firm no longer maximizes its profit.
C) output prices can vary.
D) resource prices can vary.

8) The marginal product of labour is the increase in total product from a 8) _______
A) one percent increase in the wage rate, while also increasing the
price of capital by one percent.
B) one pound increase in the wage rate, while holding the price of
capital constant.
C) one unit increase in the quantity of labour, while holding the
quantity of capital constant.
D) one unit increase in the quantity of labour, while also increasing
the quantity of capital by one unit.

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9) The marginal product of labour is the change in total product from a 9) _______
one unit increase in
A) the quantity of labour employed, holding the quantity of capital
constant.
B) both the quantity of labour and the quantity of capital employed.
C) the quantity of capital employed, holding the quantity of labour
constant.
D) the wage rate.

10) The average product of labour is 10) ______

A) total product divided by the total quantity of labour employed.
B) the inverse of the average product of capital.
C) the slope of the curve showing the total product of labour.
D) the slope of the curve showing the marginal product of labour.

11) Average product is the 11) ______

A) change in total product due to a one unit change in input.
B) total product per unit of an input.
C) total product divided by the total cost.
D) maximum output attainable with fixed factors and one variable
factor.

Total Product, Marginal Product, Average Product

Labour
(workers per Total product Marginal Average
day) (units per day) product product
0 0 0 0
1 2 2 2
2 8
3 12
4 15
5 1
12) In the above table, the total product that is produced when the firm 12) ______
employs five workers is
A) 3.2. B) 16. C) 14. D) 3.

13) In the above table, the marginal product of the third worker is 13) ______
A) 1. B) 2. C) 4. D) 3.

14) In the above table, the marginal product of the fourth worker is 14) ______
A) 3. B) 6. C) 1. D) 4.

15) In the above table, the marginal product is greatest when the 15) ______
A) first worker is hired. B) fourth worker is hired.
C) third worker is hired. D) second worker is hired.

16) In the above table, the average product of three workers is 16) ______
A) 1. B) 4. C) 3. D) 2.

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17) In the above table, the average product is less than the marginal product 17) ______
A) when the third worker is hired.
B) when the first worker is hired.
C) when the second worker is hired.
D) for the entire range of output given.

18) Points below a firm's total product curve are 18) ______
A) neither attainable nor technologically efficient.
B) both attainable and technologically efficient.
C) attainable but not technologically efficient.
D) technologically efficient but not attainable.

19) Points on a firm's total product curve are 19) ______

A) attainable but not technologically efficient.
B) neither attainable nor technologically efficient.
C) technologically efficient but not attainable.
D) both attainable and technologically efficient.

20) When the total product curve is drawn in a figure that measures 20) ______
employment along the horizontal axis, it is a graph that shows the
A) maximum output attainable for each quantity of labour employed.
B) maximum profit attainable for each unit of output sold per unit of
labour employed.
C) minimum cost of producing a given amount of output using
different techniques.
D) minimum output attainable for each quantity of labour employed.

21) In the figure above, the marginal product of the second worker is 21) ______
A) 2 units. B) 5 units. C) 1 units. D) 10 units.

22) In the above figure, after the second worker is hired, the marginal 22) ______
product of labour is
A) constant. B) increasing.
C) diminishing. D) zero.

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23) At point d in the above figure, the average product of labour equals 23) ______
A) approximately 1. B) 4.
C) 3.75. D) 15.

24) In the above figure, the average product of labour at point c is 24) ______
A) 10.
B) 2.
C) 5.
D) None of the above answers is correct.

25) In the figure above, 25) ______

A) there are no efficient points. B) is an efficient point.
C) g is an efficient point. D) d is an efficient point.

26) In the above figure, an inefficient point is 26) ______

A) f. B) a. C) g. D) e.

27) In the above figure, an unattainable point is 27) ______

A) g. B) a. C) e. D) f.

28) In the above figure, the most efficient way to produce 10 units is to hire 28) ______
A) 3 workers. B) 5 workers.
C) 1 worker. D) 2 workers.

29) In the above figure, the most efficient way to produce 15 units is to hire 29) ______
A) 2 workers. B) 4 workers.
C) 5 workers. D) 3 workers.

30) In the above figure, the maximum number of units that 4 workers can 30) ______
produce is
A) more than 15 units. B) 15 units.
C) 10 units. D) 5 units.

31) In the above figure, the marginal product of labour is zero at point 31) ______
A) c. B) e. C) a. D) f.

32) At point e in the above figure, the marginal product of labour definitely 32) ______
A) equals the average product of labour.
B) is at its maximum.
C) is greater than the average product of labour.
D) is less than the average product of labour.

33) The steeper the slope of the total product curve, the 33) ______
A) higher is the total cost curve.
B) larger is the marginal product of labour.
C) more efficient is the technology employed.
D) smaller is the marginal product of labour.

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34) Increasing marginal returns to labour might occur at low levels of 34) ______
labour input because of
A) increasing average costs.
B) decreasing use of machinery and increasing use of technology.
C) increasing specialization of tasks.
D) differing factor proportions.

35) In general, increasing marginal returns occur 35) ______

A) as output expands at high levels of production.
B) through the entire range of production.
C) whenever the slope of the total product curve is positive.
D) as output expands at low levels of production.

36) "Diminishing marginal returns" refer to a situation in which the 36) ______
A) average product of the last worker hired is less than the average
product of the previous worker hired.
B) average cost of the last worker hired is less than the average cost of
the previous worker hired.
C) marginal cost of the last worker hired is less than the marginal cost
of the previous worker hired.
D) marginal product of the last worker hired is less than the marginal
product of the previous worker hired.

37) The law of diminishing returns implies that, with the use of capital 37) ______
fixed, as the use of labour rises,
A) the total product of labour will fall below the marginal product of
labour.
B) the marginal product of labour will fall eventually.
C) total product will fall eventually.
D) the production process will become technologically inefficient
eventually.

38) The law of diminishing returns states that as 38) ______

A) the size of a plant increases, the firm's fixed cost decreases.
B) the size of a plant increases, the firm's fixed cost increases.
C) a firm uses more of a variable input, given the quantity of fixed
inputs, the firm's average total cost will decrease eventually.
D) a firm uses more of a variable input, given the quantity of fixed
inputs, the marginal product of the variable input eventually
diminishes.

Total product
Labour (workers) (units)
0 0
5 1000
10 300
15 4000
20 4500
39) In the above table, between what two levels of output does one first 39) ______
observe the law of diminishing returns?
A) 3000 and 4000. B) 1000 and 3000.
C) 0 and 1000. D) 4000 and 4500.

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Total product
Labour (workers) (shirts)
0 0
1 50
2 120
3 180
4 220
5 250
40) The table above shows the short run product schedule for Virginia's 40) ______
Shirts. What is the marginal product associated with the hiring the fifth
worker?
A) 250 shirts. B) 235 shirts.
C) 30 shirts. D) 50 shirts.

41) The table above shows the short run product schedule for Virginia's 41) ______
Shirts. What is the average product associated with hiring the fourth
worker?
A) 50 shirts. B) 220 shirts.
C) 55 shirts. D) 40 shirts.

42) The table above shows the short run product schedule for Virginia's 42) ______
Shirts. The worker for whom the law of diminishing returns initially
occurs is the ________ worker.
A) 5th B) 2nd C) 3rd D) 4th

Labour Total product

(workers) (books sold per hour)
0 0
1 10
2 24
3 40
4 58
5 73
6 83
7 87
8 89
9 90
10 90
43) The above table shows the short run total product schedule for the 43) ______
campus book store. What is the marginal product (MP) of the 6th
employee at the book store?
A) 13.83 books sold.
B) 83 books sold.
C) 10 books sold.
D) Between 11 and 14 books sold.

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44) The above table shows the short run total product schedule for the 44) ______
campus book store. Which employee has the highest marginal product
(MP)?
A) The 4th employee. B) The 1st employee.
C) The 5th employee. D) The 10th employee.

45) The above table shows the short run total product schedule for the 45) ______
campus book store. What is the average product (AP) of the 4th
employee?
A) 14.5 books sold. B) 58 books sold.
C) 13.3 books sold. D) 18 books sold.

46) The above table shows the short run total product schedule for the 46) ______
campus book store. When the fifth employee is hired, the
A) marginal product is decreasing and is less than average product.
B) marginal product is increasing and is less than average product.
C) marginal product is increasing and is greater than average
product.
D) marginal product is decreasing and is greater than average
product.

47) The above table shows the short run total product schedule for the 47) ______
campus book store. At what levels of books sold per hour will the
marginal product of labour be greater than the average product of
labour?
A) 73 books sold per hour. B) 40 books sold per hour.
C) Both A and B are correct. D) Neither A nor B is correct.

48) The above table shows the short run total product schedule for the 48) ______
campus book store. When the book store hires the 3rd worker,
A) it is still experiencing increasing marginal returns.
B) marginal product is at its maximum.
C) both the marginal product and the average product have already
begun to decline.
D) it has already begun to experience diminishing marginal returns,
but the average product is still rising.

49) The above table shows the short run total product schedule for the 49) ______
campus book store. With which employee do diminishing marginal
returns set in?
A) The 9th employee. B) The 6th employee.
C) The 2nd employee. D) The 5th employee.

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Labour Total product

(workers) (units per hour)
0 0
1 8
2 20
3 34
4 46
5 56
6 64
7
8 74
9 75
50) In the above table, the marginal product of the 7th worker is 6. What is 50) ______
the total product when 7 workers are employed?
A) 76. B) 68. C) 72. D) 70.

51) In the above table, what is marginal product of labour for the 2nd 51) ______
worker?
A) 20. B) 8. C) 12. D) 10.

52) In the above table, what is marginal product of labour for the 5th 52) ______
worker?
A) 9. B) 10. C) 14. D) 11.2.

53) In the above table, what is average product when 4 workers are 53) ______
employed?
A) 12. B) 11.5. C) 10. D) 9.5.

54) In the above table, diminishing marginal returns start to occur when the 54) ______
A) 5th is employed. B) 3rd worker is employed.
C) 6th is employed. D) 4th worker is employed.

55) When the marginal product equals the average product, the 55) ______
A) average product is at its maximum.
B) marginal product is at its maximum.
C) average product curve is downward sloping.
D) average product curve is upward sloping.

56) Which of the following statements is true for any marginal and average? 56) ______
A) When the marginal is less than the average, the average rises.
B) When the marginal is equal to the average, the average falls.
C) When the marginal is rising, the average is rising.
D) When the marginal is greater than the average, the average rises.

57) Which of the following statements is true? 57) ______

A) The marginal product curve always has a positive slope.
B) At every output level the marginal product curve lies above the
average product curve.
C) The marginal product and average product curves intersect when
average product is at its maximum.
D) The marginal and average product curves intersect at the
maximum level of output.

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58) The marginal product and average product curves 58) ______
A) do not intersect at any predictable point.
B) never intersect.
C) intersect at the maximum point of the average product curve.
D) intersect at the maximum point of the marginal product curve.

59) When the marginal product curve is downward sloping, the 59) ______
A) average product curve must also be downward sloping.
B) average product curve may be either upward or downward
sloping.
C) average product curve must be horizontal.
D) average product curve must be upward sloping.

60) If a firm's marginal product of labour is less than its average product of 60) ______
labour, then an increase in the quantity of labour it employs definitely
will
A) decrease its total product.
B) not change its average product of labour.
C) decrease its average product of labour.
D) increase its marginal product of labour.

61) If the marginal product of labour equals 8 and the average product of 61) ______
labour equals 6, then when one more worker is hired, definitely the
A) average product rises. B) marginal product rises.
C) average product falls. D) marginal product falls.

62) Total cost is the sum of fixed costs and 62) ______
A) implicit costs. B) variable costs.
C) accounting costs. D) explicit costs.

63) A firm has fixed costs 63) ______

A) neither in the long run nor in the short run.
B) in the long run but not in the short run.
C) in the short run but not in the long run.
D) in the short run and in the long run.

64) Total fixed cost is the sum of all 64) ______

A) explicit costs.
B) costs associated with the production of goods.
C) costs that rise as output increases.
D) costs of the firm's fixed inputs.

65) Total variable cost is the sum of all 65) ______

A) costs of the firm's fixed inputs.
B) implicit costs.
C) costs associated with the production of goods.
D) costs that rise as output increases.

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66) A firm's marginal cost is the increase in its total cost divided by the 66) ______
increase in its
A) output. B) average revenue.
C) quantity of labour. D) average cost.

67) Marginal cost is 67) ______

A) all the costs of production of goods.
B) all the costs of the fixed inputs.
C) the change in the total cost resulting from a one unit change in
output.
D) all the costs that vary with output.

68) Marginal cost is calculated as 68) ______

A) the increase in total cost divided by the increase in output.
B) total cost divided by output.
C) total cost minus total fixed cost.
D) the increase in total cost divided by the increase in labour, given
the amount of capital.

69) A company could produce 99 units of a good for £316 or produce 100 69) ______
units of the same good for £320. The marginal cost of the 100th unit
A) cannot be calculated with this information.
B) is £3.20.
C) is £320.
D) is £4.00

70) A company could produce 100 units of a good for £320 or produce 101 70) ______
units of the same good for £324. The £4 difference in costs is
A) neither the marginal benefit nor the marginal cost of producing the
101st unit.
B) the marginal cost of producing the 101st unit.
C) both the marginal benefit and the marginal cost of producing the
101st unit.
D) the marginal benefit of producing the 101st unit.

71) As output increases, marginal cost will eventually 71) ______

A) decrease because of the law of diminishing returns.
B) increase because of the law of increasing returns.
C) increase because of the law of diminishing returns.
D) decrease because of the law of increasing returns.

72) By using more labour to produce more output, a firm can always reduce 72) ______
its
A) average cost of labour.
B) average fixed cost.
C) marginal fixed cost of labour.
D) marginal fixed cost of output.

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73) By using more workers to produce more output, a firm can always 73) ______
reduce its
A) average variable cost. B) average total cost.
C) marginal cost. D) average fixed cost.

74) Average total costs are total costs divided by 74) ______
A) total output.
B) the total number of workers employed.
C) total variable costs.
D) total fixed costs.

75) Average total costs are 75) ______

A) the change in total costs divided by the change in output.
B) total output divided by total costs.
C) the change in output divided by the change in total costs.
D) total costs divided by total output.

Cost schedule
Labour Output (units Total fixed cost Total variable
(workers) per day) (pounds) cost (pounds)
0 0 20 0
1 4 20 25
2 9 20 50
3 13 20 75
4 16 20 100
5 18 20 125

76) In the above table, the total cost of producing 9 units of output is 76) ______
A) £30. B) £20. C) £70. D) £50.

77) In the above table, the total cost of producing 16 units of output is 77) ______
A) £100. B) £120. C) £20. D) £60.

78) Using the data in the above table, when output increases from 4 to 9 78) ______
units, the marginal cost of one of those 5 units is
A) £5.00. B) £6.25. C) £4.00. D) £4.25.

79) Using the data in the above table, the average fixed cost of producing 9 79) ______
units per day is
A) £2.22. B) £5.55. C) £5.00. D) £20.00.

80) Using the data in the above table, the average total cost of producing 16 80) ______
units per day is
A) £1.25. B) £7.50. C) £6.25. D) £7.00

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Total variable Total cost

Output (pies) cost (pounds) (pounds)
0 0 300
100 400
200 1,000
300 1,800
400 2,800
81) The above (incomplete) table gives some of the costs of the Delicious Pie 81) ______
Company. What is the total fixed cost of producing 100 pies?
A) £300.
B) £700.
C) £400.
D) More information is needed to calculate the total fixed cost.

82) The above (incomplete) table gives some of the costs of the Delicious Pie 82) ______
Company. The marginal cost of increasing pie output from 200 to 300
pies equals ________ per pie.
A) £6 B) £8 C) £1,800 D) £1,000

83) The above (incomplete) table gives some of the costs of the Delicious Pie 83) ______
Company. What is the average variable cost of producing 300 pies?
A) £6.
B) £1,800.
C) £5.
D) More information is needed to calculate the average variable cost.

84) The above (incomplete) table gives some of the costs of the Delicious Pie 84) ______
Company. What is the average total cost of producing 200 pies?
A) £5.00.
B) More information is needed to calculate the average total cost.
C) £6.50.
D) £650.

Average
Total cost variable cost Marginal cost
Output (units) (pounds) (pounds) (pounds)
0 10
3 80
9 20
14 290
17 380
85) The above (incomplete) table provides information about the 85) ______
relationships between output and various cost measures. The total fixed
cost (TFC) for the firm is
A) Zero.
B) £10.
C) £45.
D) None of the above answers is correct.

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86) The above (incomplete) table provides information about the 86) ______
relationships between output and various cost measures. The total cost
(TC) of producing 9 units of output is
A) £20.
B) £180.
C) £190.
D) None of the above answers is correct.

87) The above (incomplete) table provides information about the 87) ______
relationships between output and various cost measures. The marginal
cost per unit when increasing output from 14 to 17 units is
A) £30.
B) £20.
C) £380.
D) None of the above answers is correct.

Total fixed cost Total variable Total cost

Output (tents) (pounds) cost (pounds) (pounds)
0 50 0 50
1 50 25 75
2 50 45 95
3 50 70 120
4 50 115 165
88) The above table shows some cost data for Tracey's Tents. What is the 88) ______
marginal cost of the 3rd tent?
A) £120. B) £20. C) £25. D) £70.

89) The above table shows some cost data for Tracey's Tents. What is the 89) ______
average total cost when output is 3?
A) £120. B) £50. C) £30. D) £40.

90) The above table shows some cost data for Tracey's Tents. What is the 90) ______
average fixed cost when 4 tents are produced?
A) £12.50. B) £50.00. C) £25.00. D) £37.50.

Quantity
(barrels of Total variable cost
pickles) (pounds)
0 0
1 20
2 35
3 50
4 75
5 110
6 160
91) The above table gives some cost data for Peter's Pickles. Peter's fixed 91) ______
cost is £20. His total cost of producing 6 barrels of pickles is

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A) £450.
B) £180.
C) £160.
D) There is not enough information to answer the question.

92) The above table gives some cost data for Peter's Pickles. The marginal 92) ______
cost of increasing output from 3 to 4 barrels of pickles is
A) £50.
B) £75.
C) £25.
D) There is not enough information to calculate the marginal cost.

93) The above table gives some cost data for Peter's Pickles. Peter's fixed 93) ______
cost is £20. The average total cost (ATC) when 5 barrels of pickles are
produced is
A) £22.
B) £35.
C) £26.
D) There is not enough information to answer the question.

94) The above table gives some cost data for Peter's Pickles. Peter's fixed 94) ______
cost is £20. Average variable cost (AVC) is lowest when output is equal
to
A) 3 barrels of pickles. B) 1 barrel of pickles.
C) 2 barrels of pickles. D) 4 barrels of pickles.

Cost schedule
Labour Output (units Total variable Total cost
(workers) per day) cost (pounds) (pounds)
0 0 0 30
1 3 20 50
2 8 40 70
3 12 60 90
4 14 80 110
5 15 100 130
95) In the above table, the total fixed cost is 95) ______
A) £0. B) £30. C) £20. D) £50.

96) In the above table, the total fixed cost at 3 units of output is 96) ______
A) £0. B) £60. C) £90. D) £30.

97) In the above table, when output increases from 8 to 12 units, the 97) ______
marginal cost of one of those 4 units is
A) £2.00. B) £1.20. C) £15.00. D) £5.00.

98) In the above table, the average fixed cost of producing 15 units of output 98) ______
is
A) £0.50. B) £8.66. C) £6.66. D) £2.00.

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99) In the above table, the average variable cost of producing 14 units of 99) ______
output is
A) £10.00. B) £5.71. C) £7.86. D) £0.175.

100) In the above table, the average total cost of producing 14 units of output 100) _____
is
A) £7.86. B) £5.71. C) £7.00. D) £6.75.

101) A firm's average total cost is £100, its average variable cost is £90, and its 101) _____
total fixed cost is £1,000. Its output is
A) more than 170 units. B) between 70 and 120 units.
C) between 120 and 170 units. D) less than 70 units.

102) A firm's average total cost is £80, its average variable cost is £75, and its 102) _____
output is 50 units. Its total fixed cost is
A) between £200 and £300. B) more than £300.
C) less than £100. D) between £100 and £200.

103) A firm's average variable cost is £60, its total fixed cost is £3,000, and its 103) _____
output is 600 units. Its average total cost is
A) more than £64. B) between £62 and £64.
C) less than £58. D) between £58 and £62.

104) A firm's average variable cost is £90, its total fixed cost is £10,000, and its 104) _____
output is 1,000 units. Its total cost is
A) between £85,000 and £95,000.
B) between £95,000 and £105,000.
C) less than £85,000.
D) more than £105,000.

105) A firm's average total cost is £80, its fixed cost is £1,000, and its output is 105) _____
100 units. Its average variable cost
A) is between £40 and £60.
B) is less than £40.
C) is more than £60.
D) cannot be determined without more information.

106) A firm's marginal cost is £30, its average total cost is £50, and its output 106) _____
is 800 units. Its total cost of producing 801 units is
A) between £40,000 and £40,050.
B) greater than £40,080.
C) less than £40,000.
D) between £40,050 and £40,080.

107) A firm's marginal cost is £82, its average total cost is £50, and its output 107) _____
is 800 units. Its total cost of producing 801 units is
A) greater than £40,080.
B) between £40,000 and £40,050.
C) less than £40,000.
D) between £40,050 and £40,080.

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108) In the above figure, the total fixed cost curve is curve 108) _____
A) A.
B) B.
C) C.
D) none of the curves in the figure.

109) In the above figure, the total variable cost curve is curve 109) _____
A) A.
B) B.
C) C.
D) none of the curves in the figure.

110) In the above figure, the total cost curve is curve 110) _____
A) A.
B) B.
C) C.
D) none of the curves in the figure.

111) In the above figure, the relationship between costs indicates that the 111) _____
distance between curves
A) A and B is equal to the fixed cost.
B) B and C is equal to the average total cost.
C) B and C is equal to the fixed cost.
D) A and B is equal to the variable cost.

112) As output increases, the slope of the curve showing the firm's average 112) _____
fixed cost is
A) always positive. B) first positive then negative.
C) first negative then positive. D) always negative.

113) A firm's output is 80 units, its marginal cost is £42, its average variable 113) _____
cost is also £42, and its average fixed cost is £10. The slope of its average
fixed cost curve is
A) positive and the slope is between 0 and 1.50.
B) positive but the precise slope cannot be calculated.

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C) not able to be calculated without more information.

D) negative.

114) The vertical distance between a firm's total cost (TC) and its total 114) _____
variable cost (TVC) curves
A) is equal to the average variable cost, AVC.
B) decreases as output decreases.
C) is equal to the marginal cost, MC.
D) is equal to the total fixed cost, TFC.

115) The vertical distance between a firm's average total cost curve, ATC, and 115) _____
its average variable cost curve, AVC,
A) is equal to its total fixed cost, TFC.
B) decreases as output increases.
C) is equal to its marginal cost, MC.
D) is equal to its average product.

116) The marginal cost (MC) curve intersects the 116) _____
A) ATC and AVC curves at their minimum points.
B) AVC and AFC curves at their minimum points.
C) ATC and AFC curves at their minimum points.
D) ATC, AVC, and AFC curves at their minimum points.

117) In the above figure, the marginal cost curve is curve 117) _____
A) A. B) B. C) C. D) D.

118) In the above figure, the average fixed cost curve is curve 118) _____
A) A. B) B. C) C. D) D.

119) In the above figure, the average variable cost curve is curve 119) _____
A) A. B) B. C) C. D) D.

120) In the above figure, the average total cost curve is curve 120) _____
A) A. B) B. C) C. D) D.

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121) In the above figure, as output increases, the distance between curves B 121) _____
and C decreases because
A) total cost decreases as output increases.
B) there are increasing marginal costs as output increases.
C) average fixed cost decreases as output increases.
D) there are diminishing returns to average total cost.

122) In the above figure, curve D slopes downward because 122) _____
A) there are diminishing returns.
B) there are decreasing marginal costs.
C) all costs decrease as output increases.
D) average fixed costs decrease as output increases.

123) In the above figure, the intersection of curves A and C is the point at 123) _____
which
A) average total cost is minimized.
B) average fixed cost is minimized.
C) total product is maximized.
D) average variable cost is minimized.

124) In the above figure, the intersection of curves A and B is the point at 124) _____
which
A) average fixed cost is minimized.
B) total product is maximized.
C) average total cost is minimized.
D) average variable cost is minimized.

125) Average variable cost is at a minimum at the same amount of output at 125) _____
which
A) marginal product is at a maximum.
B) marginal product is at a minimum.
C) average product is at a maximum.
D) average product is at a minimum.

126) The range of output over which a firm's average variable cost is 126) _____
decreasing is the same as the range over which its
A) average product is increasing.
B) marginal cost is increasing.
C) average product is decreasing.
D) average fixed cost is decreasing.

127) A change in technology that shifts the firm's total product curve upward 127) _____
without changing the quantity of capital used
A) shifts the average total cost curve upward.
B) shifts the average total cost curve downward.
C) shifts the marginal cost curve upward.
D) does not change the cost curves.

128) Which of the following is FALSE? 128) _____

A) In the long run, both the amount of capital and labour used by the
firm can be changed.

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B) Fixed costs increase in the long run.

C) As a firm produces more output, eventually it experiences
diseconomies of scale.
D) Long run average variable costs equal long run average total
costs.

129) The average total cost curves for plants A, B, C and D are shown in the 129) _____
above figure. Which plant is best to use to produce 20 units per day?
A) Plant A. B) Plant B. C) Plant C. D) Plant D.

130) The average total cost curves for plants A, B, C and D are shown in the 130) _____
above figure. Which plant is best to use to produce 60 units per day?
A) Plant A. B) Plant B. C) Plant C. D) Plant D.

131) The average total cost curves for plants A, B, C and D are shown in the 131) _____
above figure. Which plant is best to use to produce 80 units per day?
A) Plant A. B) Plant B. C) Plant C. D) Plant D.

132) The average total cost curves for plants A, B, C, and D are shown in the 132) _____
above figure. The plant size that is the most economically efficient
A) is plant A.
B) is plant B.
C) is plant C.
D) depends on the desired level of output.

133) The average total cost curves for plants A, B, C, and D are shown in the 133) _____
above figure. It is possible that the long run average cost curve runs
through points
A) b, d, and e. B) d, e, and f.
C) a, b, and c. D) c and d.

134) A firm is operating in its range of economies of scale and is on both its 134) _____
LRAC curve and its short run ATC curve. At that level of output, the
slope of its LRAC curve is

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A) negative and the slope of its ATC curve is negative.

B) negative and the slope of its ATC curve is zero.
C) zero and the slope of its ATC curve is negative.
D) zero and the slope of its ATC curve is zero.

135) When economies of scale are present, the LRAC curve touches each 135) _____
short run ATC curve
A) to the left of the ATC curve's minimum point.
B) at no points.
C) to the right of the ATC curve's minimum point.
D) at the ATC curve's minimum point.

136) Economies to scale refer to 136) _____

A) the range of output over which the long run average cost falls as
output increases.
B) a feature of short run production functions but not long run
production functions.
C) the fact that in the long run, fixed costs remain constant as output
increases.
D) the point at which marginal cost equals average cost.

137) In the short run 137) _____

A) all firms experience increasing returns to scale.
B) some firms experience economies of scale.
C) no firm experiences economies of scale.
D) all inputs are variable.

138) When long run average costs decrease as output increases, there are 138) _____
A) diseconomies of scale. B) economies of scale.
C) constant returns to scale. D) constant marginal costs.

139) "Diseconomies of scale" occur in 139) _____

A) neither the short run nor the long run.
B) the long run, but not the short run.
C) both the short run and the long run.
D) the short run, but not the long run.

140) When long run average costs increase as output increases, there are 140) _____
A) constant returns to scale. B) diseconomies of scale.
C) economies of scale. D) constant marginal costs.

141) A common source of diseconomies of scale is the 141) _____

A) application of the law of diminishing marginal returns to capital.
B) application of the law of diminishing marginal returns to land.
C) growing complexity of management and organizational structure.
D) application of the law of diminishing marginal returns to labour.

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142) In the above figure, the long run average cost curve exhibits economies 142) _____
of scale
A) between 10 and 20 units per hour.
B) along the entire curve.
C) between 5 and 10 units per hour.
D) between 20 and 25 units per hour.

143) In the above figure, between 5 and 10 units per hour, the firm 143) _____
experiences
A) economies of scale. B) constant returns to scale.
C) decreasing total fixed costs. D) diseconomies of scale.

144) In the above figure, the long run average cost curve exhibits constant 144) _____
returns to scale
A) between 5 and 10 units per hour.
B) between 20 and 25 units per hour.
C) between 10 and 20 units per hour.
D) along the entire curve.

145) In the above figure, the long run average cost curve exhibits 145) _____
diseconomies of scale
A) between 5 and 10 units per hour.
B) between 20 and 25 units per hour.
C) between 10 and 20 units per hour.
D) along the entire curve.

146) In the above figure, between 20 and 25 units per hour, the firm 146) _____
experiences
A) economies of scale. B) diseconomies of scale.
C) increasing total fixed costs. D) constant returns to scale.

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147) In the above figure, economies of scale are present up to an output level 147) _____
of
A) 15 tonnes of coffee. B) 13 tonnes of coffee.
C) 10 tonnes of coffee. D) 5 tonnes of coffee.

148) In the above figure, the minimum efficient scale of output is 148) _____
A) 5 tonnes of coffee. B) 10 tonnes of coffee.
C) 15 tonnes of coffee. D) 13 tonnes of coffee.

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