Econ ch 12

The Law of Diminishing Returns causes an increase in:

all of the above

When a firm is experiencing constant returns to scale its long-run:

average total cost remains unchanged as the level of output increases

A production function

shows the type and amount of output that can be attained from a set of inputs when those inputs are combined in a specific

According to the Law of Diminishing Returns, as additional units of a variable factor are added to a fixed factor, beyond some point:

the additional product from each additional unit of the variable factor decreases

A firm can vary the amounts of all of its factors of production in:

the long run but not the short run

Which of the following is NOT calculated for the long run?

Fixed cost.

The disappearance of cassette tape recordings is best explained by:

creative destruction caused by the development of compact discs and mp3 players.

To an economist, the long run refers to a time period:

during which all factors of production are variable in amount.

When a firm's long-run average total cost decreases as output increases, it is experiencing:

economies of scale.

In the short run, all factors of production are:

either fixed or variable

In the short run, all costs are:

either fixed or variable.

If a firm incurs a cost of $5 million even though it is producing nothing, that $5 million is a:

fixed cost, and the firm is operating in the short run

The Law of Diminishing Returns governs production:

in the short run.

The efficient method of production:

is the least-cost method

In economics it is most often assumed that the main concern of a firm in choosing a production technique is to:

maximize profit.

Industries are groups of firms that:

produce similar products or use similar processes.

Creative destruction benefits an economy because:

replacing old technology with new technology increases efficiency.