FINAL ECON

The long run is a planning period: A. over which a firm can consider all inputs as variable. B. of 6 months to 5 years. C. of more than six months. D. of at least five years.

A

When marginal cost is rising: A. average variable cost and average total cost must be falling. B. both average variable cost and average total cost may be rising or falling. C. average variable cost must be rising. D. average total cost must be rising.

B

In economics, the short run is defined as: A. the period in which some inputs are fixed, but it cannot exceed 1 year. B. less than 1 year. C. the period in which some inputs are considered to be fixed in quantity. D. less than 6 months.

C. In economics, the short run is defined as the period in which some inputs are considered to be fixed in quantity.

If marginal cost is equal to average total cost: A. average total cost is at its maximum. B. average total cost is increasing. C. marginal cost is decreasing. D. average total cost is at its minimum.

D. average total cost is at its minimum.

(Figure: The Total Product) Look at the figure The Total Product. Labor added from L1 and up to L2 is: A. subject to diminishing marginal returns. B. adding negative amounts to total product and subject to diminishing marginal returns. C. adding increasing amounts to total product. D. adding negative amounts to total product.

A

If Marie Marionettes is operating under conditions of diminishing marginal product, the marginal costs will be: A. decreasing. B. increasing. C. constant. D. equal to average total cost.

D

The term diminishing returns refers to: A. a reduction in profits caused by increasing output beyond the optimal point. B. a decrease in total output due to the firm hiring uneducated workers. C. a falling interest rate that can be expected as one's investment in a single asset increases. D. a decrease in the extra output due to the use of an additional unit of variable input when all other inputs are held constant.

D

The average total cost has a U shape because the __________ ____ effect is dominant at low levels of output, and the ____ effect is dominant at high levels of output. A. diminishing returns; spreading B. absolute advantage; comparative advantage C. comparative advantage; absolute advantage D. spreading; diminishing returns

D low levels the spreading effect