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D.
25 percent
351. The law of diminishing returns implies that
352. Chris is preparing for a comprehensive course exam by reading a textbook with
chapters of equal length and difficulty. The number of chapters she can comprehend and
master when studying is: (1) hour one, 1.5 chapters; (2) hour two, 2.0 chapters; (3) hour
three, 1.5 chapters; (4) hour four, 1 chapter; (5) hour five, 0 chapters. Diminishing marginal
returns to studying sets in for
Chris after hour
9-194
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Diff icul ty: 02 Medium
Learning Objective: 09-05 Give business examples of short-run costs, economies of scale, and
minimum efficient scale MES.
Test Bank: II
Topic: Applications and Illustrations
353.
Many people have turned to the Internet to get the news. This has caused the circulation
numbers of newspapers to fall drastically, which in turn caused their
354. Which of the following is a typical example of a fixed cost of production in a
manufacturing firm?
355.
A fast-food company spends millions of dollars to develop and promote a new hamburger
on their menu only to find that consumers won't buy it because they don't like the taste. From an
economic perspective, the company should
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A. keep the hamburger on the menu because they've spent so much money and time
developing and promoting the product.
B.
spend more money to develop a more efficient way to cook the hamburger so it cooks in a
shorter time.
C.
pull the hamburger off the menu and treat the development and promotion expenditures
as a sunk cost.
D. keep trying to sell the hamburger so that people who developed and promote it have a
job with the company.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Understand
Diff icul ty: 02 Medium
Learning Objective: 09-05 Give business examples of short-run costs, economies of scale, and
minimum efficient scale MES.
Test Bank: II
Topic: Applications and Illustrations
356.
When the price of gasoline increases significantly, the delivery companies like UPS, FedEx,
and the USPS all find
357.
When the Defense Department ordered 132 new airplanes, the cost per plane was estimated
to be $580 million. A cut in the order to 75 planes increased the per plane cost to $800 million.
This change in per unit cost can be explained by
9-196
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Understand
Diff icul ty: 02 Medium
Learning Objective: 09-05 Give business examples of short-run costs, economies of scale, and
minimum efficient scale MES.
Test Bank: II
Topic: Applications and Illustrations
358.
Which of the following gadgets is hoped to deliver a Third Industrial Revolution?
359.
The mass affordability of the iPhone is the result of the following, except
360. 3-D printers can reduce the cost of producing items because they
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B.
reduce transportation costs significantly.
C.
make use of low-cost materials and low-energy requirements.
D. exploit huge economies of scale in production.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Understand
Diff icul ty: 02 Medium
Learning Objective: 09-05 Give business examples of short-run costs, economies of scale, and
minimum efficient scale MES.
Test Bank: II
Topic: Applications and Illustrations
True / False Questions
361. Normal profit is an implicit cost.
362.
Economic profits are usually larger than accounting profits.
363.
If a firm produces zero output in the short run, then its profits will also be zero.
9-198
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Understand
Diff icul ty: 02 Medium
Learning Objective: 09-01 Explain why economic costs include both explicit revealed and
expressed costs and implicit present but not obvious costs.
Test Bank: II
Topic: Economic Costs
364. In the long run, a firm can increase its output quantity, but it will be limited by the size
of its existing production plant.
365.
When diminishing marginal returns starts occurring, the addition of successive units of a
variable resource to a fixed resource will cause the firm's production to diminish.
366.
Over the range of positive, but diminishing, marginal returns for an input, the total product
curve increases at a decreasing rate.
9-199
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
Diff icul ty: 02 Medium
Learning Objective: 09-02 Relate the law of diminishing returns to a firms short-run
production costs.
Test Bank: II
Topic: Short-Run Production Relationships
367. If the average product of labor equals 4 at all levels of output, the marginal product of
labor is also equal to 4 at all levels of output.
368.
When the total product is at its maximum level, the marginal product is zero.
369.
When total product is increasing at a decreasing rate, marginal product is positive, but
falling.
9-200
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
production costs.
Test Bank: II
Topic: Short-Run Production Relationships
370. The short-run marginal-cost curve is upward-sloping because of the law of
diminishing marginal returns.
371.
Marginal product is highest where marginal cost is lowest.
372. When a firm increases its output, its average fixed costs will stay constant.
373.
When average costs are increasing, marginal costs are greater than average costs.
374. If a firm increases all its inputs by 10 percent and its output increases by 15 percent,
the firm is experiencing diseconomies of scale.
375.
A major factor explaining economies of scale is increased specialization of labor.
376.
Diseconomies of scale are caused by the law of diminishing marginal returns.
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Apply
Di f fi c ul t y: 03 Hard
Learning Objective: 09-04 Use economies of scale to link a firms size and its average costs in
the long run.
Test Bank: II
Topic: Long-Run Production Costs
377. If a firm doubles its resource inputs and as a result output triples, then the long-run
average cost curve must be upward-sloping.
378.
If the minimum efficient scale in an industry were smaller than the size of the market of that
industry, then we would have a natural-monopoly situation.
379. One reason why newspaper-publishers’ cost per paper increases as their circulation
numbers fall is due to diminishing marginal returns.
9-203
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
Diff icul ty: 02 Medium
Learning Objective: 09-05 Give business examples of short-run costs, economies of scale, and
minimum efficient scale MES.
Test Bank: II
Topic: Applications and Illustrations
380.
3-D printers are capable of producing real output like chairs or machine parts using a
computer-controlled special printer at low cost even if you produce only one unit of output.
381. If start-up firms can quickly shift the short-run cost curves up and to the left, they
would improve their chances of becoming profitable.
