45. Average total cost and marginal cost express information that is already contained in a firm’s total cost.
a.
True
b.
False
46. Average total cost reveals how much total cost will change as the firm alters its level of production.
a.
True
b.
False
47. If the marginal cost of producing the tenth unit of output is $3, and if the average total cost of producing the tenth unit
of output is $2, then at ten units of output, average total cost is rising.
a.
True
b.
False
48. If the marginal cost of producing the tenth unit of output is $2.50, and if the average total cost of producing the tenth
unit of output is $3, then at ten units of output, average total cost is rising.
a.
True
b.
False
49. If the marginal cost of producing the fifth unit of output is higher than the marginal cost of producing the fourth unit
of output, then at five units of output, average total cost must be rising.
a.
True
b.
False
50. The shape of the marginal cost curve tells a producer something about the marginal product of her workers.
a.
True
b.
False
51. The marginal-cost curve intersects the average-fixed-cost curve at the minimum of marginal cost.
a.
True
b.
False
52. When average total cost is above marginal cost, average total cost is rising.
a.
True
b.
False
53. When average total cost rises if a producer either increases or decreases production, then the firm is said to be
operating at efficient scale.
a.
True
b.
False
54. In the long run, a factory is usually considered a fixed input.
a.
True
b.
False
55. Fixed costs are those costs that remain fixed no matter how long the time horizon is.
a.
True
b.
False
56. The fact that many inputs are fixed in the short run but variable in the long run has little impact on the firm’s cost
curves.
a.
True
b.
False
57. There is general agreement among economists that the long-run time period exceeds one year.
a.
True
b.
False
58. As a firm moves along its long-run average cost curve, it is adjusting the size of its factory to the quantity of
production.
a.
True
b.
False
59. Because of the greater flexibility that firms have in the long run, all short-run cost curves lie on or above the long-run
curve.
a.
True
b.
False
60. Economies of scale often arise because higher production levels allow specialization among workers.
a.
True
b.
False
61. If long-run average total cost is rising, then the firm is experiencing economies of scale.
a.
True
b.
False
62. In some cases, specialization allows larger factories to produce goods at a lower average cost than smaller factories.
a.
True
b.
False
63. The use of specialization to achieve economies of scale is one reason modern societies are as prosperous as they are.
a.
True
b.
False
64. When a firm experiences economies of scale, long-run average total cost falls as the quantity of output increases.
a.
True
b.
False
65. Diseconomies of scale often arise because higher production levels allow specialization among workers.
a.
True
b.
False
Table 13–20
Listed in the table are the long-run total costs for three different firms.
Quantity
1
2
3
4
5
Firm A
100
100
100
100
100
Firm B
100
200
300
400
500
Firm C
100
300
600
1,000
1,500
66. Refer to Table 13–20. Firm A is experiencing economies of scale.
a.
True
b.
False
67. Refer to Table 13–20. Firm A is experiencing constant returns to scale.
a.
True
b.
False
68. Refer to Table 13–20. Firm B is experiencing constant returns to scale.
a.
True
b.
False
69. Refer to Table 13–20. Firm B is experiencing diseconomies of scale.
a.
True
b.
False
70. Refer to Table 13–20. Firm C is experiencing diseconomies of scale.
a.
True
b.
False
71. Refer to Table 13–20. Firm C is experiencing economies of scale.
a.
True
b.
False
72. Adam Smith’s example of the pin factory demonstrates that economies of scale result from specialization.
a.
True
b.
False
73. Adam Smith describes a visit to a car factory when discussing economies of scale in his book An Inquiry into the
Nature and Causes of the Wealth of Nations.
a.
True
b.
False
74. Economists include both explicit and implicit costs while accountants include only implicit costs.
a.
True
b.
False
75. Jaxon borrows $10,000 from a bank and withdraws $20,000 from his personal savings to open a tattoo parlor. The
interest rate is 3 percent for both the bank loan and his personal savings. Jaxon’s implicit costs are $900.
a.
True
b.
False
76. Jaxon borrows $10,000 from a bank and withdraws $20,000 from his personal savings to open a tattoo parlor. The
interest rate is 3 percent for both the bank loan and his personal savings. Jaxon also quit his job as a waiter, which paid
$20,000. According to an economist, Jaxon’s opportunity cost of opening the tattoo parlor equals $20,900.
a.
True
b.
False
77. If the production function exhibits diminishing marginal product, the total cost function gets steeper as the quantity of
output increases.
a.
True
b.
False
78. A firm produces 60 units of output with 5 workers, 65 units with 6 workers, and 68 units with 7 workers. The firm’s
production function exhibits diminishing marginal productivity between 5 and 7 workers.
a.
True
b.
False
79. The U-shaped average-total-cost curve reflects the U-shaped average-fixed-cost curve.
a.
True
b.
False
80. If the average-total-cost curve is falling, then the marginal-cost curve must also be falling.
a.
True
b.
False
81. If the average-total-cost of producing five units is $10, and the marginal-cost of producing the fifth unit is $10, then
the average-total-cost curve is at its minimum at five units.
a.
True
b.
False
82. If an industry exhibits economies of scale, one larger firm may be able to produce goods at a lower long-run average
cost than two smaller firms.
a.
True
b.
False
83. Economies of scale commonly arise because of coordination problems.
a.
True
b.
False