Question 1

-This firm's total cost at an output of zero units is:

Accepted Answer

A)   $0.
B)   $100.
C)   $500.
D)   $600.E) None of the above
F) C) and D)

Question 2

If two firms are in the same industry, then they must also be in the same producing sector of the economy.

Accepted Answer

A) True 
 B)False

Question 3

If a firm incurs a cost of $50,000 when nothing is produced and $50,010 when one unit is produced:

Accepted Answer

A)   the firm is operating in the short run.
B)   the total variable cost of the first unit produced is $10.
C)   the average total cost of the first unit produced is $50,010.
D)   all of the above.E) B) and D)
F) A) and D)

Question 4

A business could experience diseconomies of scale because of:

Accepted Answer

A)   the difficulty in effectively managing a large organization.
B)   the need to hire more managers as an organization grows.
C)   the amount of time required to pass commands and information through a large organization.
D)   all of the above.E) B) and D)
F) C) and D)

Question 5

If the long-run total cost of producing the first unit of output is $600, then the:

Accepted Answer

A)   total cost when nothing is produced must be $600.
B)   variable cost of producing the first unit must be $600.
C)   marginal cost of producing the second unit must be $600.
D)   none of the above.E) All of the above
F) C) and D)

Question 6

If the marginal cost curve is above the average total cost curve, then average total cost must be:

Accepted Answer

A)   constant.
B)   increasing.
C)   decreasing.
D)   either constant or decreasing.E) A) and B)
F) A) and C)

Question 7

If increasing output in the long run causes per unit costs to increase, then the firm is experiencing economies of scale.

Accepted Answer

A) True 
 B)False

Question 8

Firms producing similar products are in:

Accepted Answer

A)   the same industry and the same producing sector.
B)   the same industry but different producing sectors.
C)   different industries but the same producing sector.
D)   different industries and different producing sectors.E) C) and D)
F) All of the above

Question 9

If a firm's long-run average total cost is decreasing, it is experiencing economies of scale.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following explanations gives the correct cause-and-effect sequence for production in the short run?

Accepted Answer

A)   The behavior of marginal cost causes the behavior of both average fixed cost and average variable cost.
B)   The Law of Diminishing Returns causes the behavior of total fixed cost, which causes the behavior of all the other costs.
C)   Economies and diseconomies of scale cause the behavior of marginal cost, which causes the Law of Diminishing Returns to go into effect.
D)   The Law of Diminishing Returns causes the behavior of marginal cost, which influences the behavior of average variable cost and average total cost.E) None of the above
F) B) and C)

Question 11

The cost per unit of output produced:

Accepted Answer

A)   is average total cost.
B)   cannot be calculated for short-run production.
C)   is equal to total fixed cost plus total variable cost at all units of output produced.
D)   all of the above.E) B) and C)
F) All of the above

Question 12

A firm can vary the amounts of all of its factors of production in:

Accepted Answer

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

Question 13

The type and amount of output that can be obtained from a particular group of inputs when they are combined in a certain way is shown by a:

Accepted Answer

A)   production sector.
B)   production function.
C)   product supply curve.
D)   production technology curve.E) B) and D)
F) A) and B)

Question 14

Creative destruction refers to the:

Accepted Answer

A)   loss of trees and countryside due to mining.
B)   pollution of the environment that results from the production of different types of goods.
C)   opportunity cost that results when materials that go into one good cannot be used in other goods.
D)   disappearance of less efficient resources and processes as more efficient resources and processes are introduced.E) A) and D)
F) B) and C)

Question 15

Which of the following statements is FALSE?

Accepted Answer

A)   The industry classification is narrower than the sector classification.
B)   An individual firm may operate in several industries at the same time.
C)   The industry classification is the narrowest classification possible for viewing data about firms.
D)   Over the years, the relative importance of some of the producing sectors in the economy has changed.E) All of the above
F) A) and B)

Question 16

Short-run average total cost is equal to average variable cost plus marginal cost.

Accepted Answer

A) True 
 B)False

Question 17

A firm has a fixed cost of $1,000, a total cost of $1,050 when one unit of output is produced, and a total variable cost of $80 when two units of output are produced.
-At two units of output this firm has a total cost of:

Accepted Answer

A)   $80.
B)   $230.
C)   $1,080.
D)   $1,130.E) None of the above
F) All of the above

Question 18

A firm is experiencing constant returns to scale if its long-run average total cost increases at a constant rate as the level of output increases.

Accepted Answer

A) True 
 B)False

Question 19

Industries:

Accepted Answer

A)   are more narrowly defined than sectors.
B)   are made up of firms that use similar processes.
C)   are made up of firms that produce similar products.
D)   all of the above.E) A) and D)
F) C) and D)

Question 20

Given the following table, what is the total cost of producing 30 units of output?

Accepted Answer

A)   $123.00.
B)   $440.00.
C)   $1,140.00.
D)   $1,480.00.E) A) and D)
F) B) and C)

Exam 12: Production and the Costs of Production

The type and amount of output that can be obtained from a particular group of inputs when they are combined in a certain way is shown by a:

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-This firm's total cost at an output of zero units is:

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If increasing output in the long run causes per unit costs to increase, then the firm is experiencing economies of scale.

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A firm can vary the amounts of all of its factors of production in:

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If the marginal cost curve is above the average total cost curve, then average total cost must be:

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A firm has a fixed cost of $1,000, a total cost of $1,050 when one unit of output is produced, and a total variable cost of $80 when two units of output are produced. -At two units of output this firm has a total cost of:

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If two firms are in the same industry, then they must also be in the same producing sector of the economy.

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Given the following table, what is the total cost of producing 30 units of output?

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If a firm incurs a cost of $50,000 when nothing is produced and $50,010 when one unit is produced:

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A firm is experiencing constant returns to scale if its long-run average total cost increases at a constant rate as the level of output increases.

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If a firm's long-run average total cost is decreasing, it is experiencing economies of scale.

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Firms producing similar products are in:

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Creative destruction refers to the:

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Industries:

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The cost per unit of output produced:

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Which of the following statements is FALSE?

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Short-run average total cost is equal to average variable cost plus marginal cost.

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A business could experience diseconomies of scale because of:

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If the long-run total cost of producing the first unit of output is $600, then the:

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Which of the following explanations gives the correct cause-and-effect sequence for production in the short run?

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