Quiz 4

A fixed resource is one that A) cannot be varied in the short run. B) is physically tied to a specific location. C) costs more than the average daily revenue of the firm. D) can be disposed of only if the firm goes out of business.

A) cannot be varied in the short run.

A basic distinction between the long run and the short run is that A) in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted. B) the opportunity costs of production are lower in the short run than in the long run. C) in the long run, some inputs are fixed, while in the short run, all inputs are variable. D) if a firm produces no output in the long run, it still incurs a cost.

A) in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted.

Constant returns to scale are illustrated by A)a downward sloping long-run average cost curve. B)a horizontal long-run average cost curve. C) an upward sloping long-run average cost curve. D) a long-run average cost curve that is shaped like an upside down U.

B)a horizontal long-run average cost curve.

In the short run, average total cost is A) sometimes higher and sometimes lower than average variable cost. B)higher than average variable cost. C) less than average variable cost. D) equal to average variable cost.

B)higher than average variable cost.

Which of the following is correct? A) TC = TFC / TVC B) TC = TFC-TVC C) TC = TFC + TVC D) TC = TFC * TVC

C) TC = TFC + TVC

Minimum efficient scale is defined as A) the point at which marginal cost, average variable cost, and average fixed cost are all equal. B) the amount of labor that maximizes the marginal product of labor. C) the lowest output level at which long-run average costs are at their minimum. D)the point at which economies of scale are at their maximum.

C) the lowest output level at which long-run average costs are at their minimum.

Which of the following is a short-run decision for a firm? A) investing in a new addition to the firm's manufacturing plant B) expanding the firm's distribution network of long-haul freight trucks and smaller delivery trucks C) downsizing the firm's manufacturing plant D) firing workers

D) firing workers

The relationship between inputs and outputs is known as A) a production function. B) business. C) marginal product. D) manufacturing.

A) a production function.

A decrease in the long-run average costs resulting from increasing output is referred to as A) diseconomies of scale. B) economies of scale. C) constant return to scale. D) a scale invariant process.

B) economies of scale.

In economics, the planning horizon is defined as A) the period of time for which technology is fixed. B) the long run, during which all inputs are variable. C) one year for every firm. D) the longest time period over which the firm can make decisions.

B) the long run, during which all inputs are variable.

Refer to the above figure. Average total costs are represented by curve A) 1. B) 2. C) 3. D) 4.

B) 2.

Suppose that a firm is currently producing 500 units of output. At this level of output, TVC = $10,000 and TFC = $25,000. What is the firms ATC? A) $50 B) $100 C) $70 D) $20

C) $70

Which of the following is TRUE about the long run? A) At least one resource is fixed. B) All resources are fixed. C) All resources are variable. D) none of the above

C) All resources are variable.

Use the above figure. At an output equal to "Q" the total cost for the firm will be the area A) OQFA. B) OQEB. C) OQDC. D) OQBC.

C) OQDC.

Average fixed costs will A) rise as output rises. B) fall then rise as output rises. C) fall as output rises. D) rise then fall as output rises.

C) fall as output rises.

When total product is rising A) fixed cost must be rising. B) variable cost must be declining. C) marginal product must be positive. D) marginal product must be negative.

C) marginal product must be positive.

Diseconomies of scale occur A) because of fixed costs. B) only in the short run. C) only in the long run. D) none of the above.

C) only in the long run.

Changes in production functions are associated with changes in A) the level of output. B) the levels of costs. C) technology. D) demand.

C) technology.

The typical shape of the long-run average cost curve is like A) the letter "C." B) an inverse of the letter "V." C) the letter "U." D) a circle.

C) the letter "U."

The short run is A) the period of time in which the firm can vary its rate of output. B) a year or less. C) the period of time in which the firm cannot change its use of at least one input. D) up to three years.

C) the period of time in which the firm cannot change its use of at least one input.

Use the above figure. The TFC at output level 10 is A) $3. B) $1. C) $2. D) $10.

D) $10.

Suppose that one worker can produce 15 cookies, two workers can produce 40 cookies together, and three workers can produce 75 cookies together. What is the marginal product of the 2nd worker? A) 40 cookies B) 35 cookies C) 20 cookies D) 25 cookies

D) 25 cookies

The long-run average cost curve A) should always be horizontal. B) is always a downward sloping straight line. C) is identical to the marginal cost curve. D) is a curve which is tangent to each member of a set of short-run average cost curves.

D) is a curve which is tangent to each member of a set of short-run average cost curves.

All of the following are most likely to be fixed costs EXCEPT the cost relating to A) rent. B) insurance. C) taxes. D) packaging.

D) packaging.

If marginal product is negative, then A) total product is rising. B) marginal cost is falling. C) average profit is rising. D) total product is falling.

D) total product is falling.