978-1259723223 Test Bank TBChap009 Part 9

2

760

3

900

4

1,040

5

1,220

The firm has a U-shaped

296. Over the range of output where the slope of the short-run total cost curve becomes

steeper,

297. Which statement is correct?

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the marginal cost curve cuts the average cost curve.

D.

If average variable cost is increasing, then average total cost must be increasing too.

298.

Refer to the provided graph. If the firm is producing at Q1, the area 0BEQ1 represents

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among total, average, and marginal costs.

Test Bank: II

Topic: Short-Run Production Costs

299.

Refer to the provided graph. If the firm is producing at Q1, the area BADE represents

300.

Refer to the provided graph. If the firm is producing at Q1, the area 0ADQ1 represents

301. If the total cost of 20 units of a product is $20, and the total cost of 21 units is $21,

then from 20 to 21 units of product the

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AACSB: Knowledge Application

A c c e s s i b i l i t y : Keyboard Navigation

Blooms: Understand

Difficu lty: 02 Medium

Learning Objective: 09–03 Describe the distinctions between fixed and variable costs and

among total, average, and marginal costs.

Test Bank: II

Topic: Short-Run Production Costs

302.

A firm with fixed costs produces at the lowest point on its U-shaped average variable cost

curve. If it raises output by 1 unit, then average

303.

If marginal cost exceeds average total cost in the short run, then which is likely to be true?

304.

The firm‘s short-run marginal-cost curve is increasing when

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A. marginal product is increasing.

B. marginal product is decreasing.

C.

total fixed cost is increasing.

D.

average fixed cost is decreasing.

305. When average variable cost is at a minimum,

306.

If the price of a fixed factor of production increases by 50 percent, what effect would this

have on the marginal-cost schedule facing a firm?

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Test Bank: II

Topic: Short-Run Production Costs

307. If the price of labor or some other variable resource decreased, the

308. If the price of a variable resource increased for the typical firm, there would be

309. If a more efficient technology was discovered by a firm, there would be

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Blooms: Understand

Difficu lty: 02 Medium

Learning Objective: 09–03 Describe the distinctions between fixed and variable costs and

among total, average, and marginal costs.

Test Bank: II

Topic: Short-Run Production Costs

310.

Which of the following statements is true, given the total cost function: Total cost = 10Q +

5Q2 + 100?

311. The phrase “don‘t cry over spilt milk” could be rephrased in economic terms by

saying,

312.

The following statements about the “sunk cost fallacy” are true, except

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B.

it comes from a desire to “get one‘s money’s worth” out of a past expenditure.

C. it refers to the fact that average fixed costs are not a major part of production costs.

D. it could lead one to “throw good money after bad.”

313. A firm encountering economies of scale over some range of output will have a

314. Round Things, Inc.’s production process exhibits economies of scale. Currently their

long-run average cost is $12/unit. If Round Things doubles its use of all inputs, its new

long-run average total cost will be

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Test Bank: II

Topic: Long-Run Production Costs

315.

The table shows three short-run cost schedules for three plants of different sizes that a

firm might build in the long run.

Plant 1

Plant 2

Plant3

Output

ATC

Output

ATC

Output

ATC

10

$10

10

$15

10

$20

20

9

20

10

20

15

30

8

30

7

30

10

40

9

40

10

40

8

50

10

50

14

50

9

What is the long-run average cost of producing 30 units of output?

316. The table shows three short-run cost schedules for three plants of different sizes that a firm

might build in the long run.

Plant 1

Plant 2

Plant3

Output

ATC

Output

ATC

Output

ATC

10

$10

10

$15

10

$20

20

9

20

10

20

15

30

8

30

7

30

10

40

9

40

10

40

8

50

10

50

14

50

9

If the three plant sizes shown are the only ones possible, then there are economies of scale

in producing

317.

“The bigger the volume, the lower the cost, and we pass these savings on to you” is a

familiar slogan. Its idea is illustrated in which of the provided graphs?

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B. graph B

C. graph C

D.

graph D

318.

If long-run average total cost decreases as output increases, this is due to

319.

When a firm doubles its inputs and finds that its output has more than doubled, this is known

as

320.

The larger the diameter of a natural gas pipeline, the lower is the average total cost of

transmitting 1,000 cubic feet of gas 1,000 miles. This is an example of one reason for

321.

Which of the following would contribute most to a firm experiencing “economies of scale”?

322.

In the long run, a firm will choose a plant size that has the

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Di f f i c u l 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

323.

If all resources used in the production of a product are increased by 10 percent and output

increases by less than 5 percent, then the firm is experiencing

324.

If all resources used in the production of a product are increased by 20 percent and

output increases by 20 percent, then there must be

325.

In the graph provided, LRTC = long–run total cost of a firm. The firm is experiencing

326. When a firm is experiencing economies of scale,

327.

A firm doubles the quantity of all resources it employs and, as a result, output doubles.

Which of the following is correct?

328.

Refer to the provided graphs. They show the long-run average total cost (LRATC) for cars.

For which graph are there economies of scale throughout the entire range of output of cars?

329.

Refer to the provided graphs. They show the long-run average total cost (LRATC) for cars.

For which graph is the output level Q0 at minimum efficient scale?

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330.

Refer to the provided graphs. They show the long-run average total cost (LRATC) for cars.

Just after World War II, the Ford Motor Company opened a large automobile

manufacturing facility near Detroit with capacity Q0 autos per year. Shortly thereafter, the

plant was closed and two smaller ones were opened in the same vicinity, each more profitably

producing about one-half as

many cars as the old facility. Which graph best shows the

situation just described, when only one plant was operating?

331. When a firm is experiencing diseconomies of scale,

332.

If the long-run average total cost curve for a firm is horizontal in the relevant range of

production, then it indicates that there

333.

The ability of Intel to spread product development and other “start-up” costs over a larger

number of units of output results in