Econ Test 2

If a firm experiences lower costs per unit as it increases production in the long run, this is an example of: A) increasing returns to scale. B) decreasing returns to scale. C) increasing opportunity costs. D) scale reduction.

A

The marginal cost curve intersects the average variable cost curve at: A) its lowest point. B) its maximum. C) its endpoint. D) no point; the curves don't intersect.

A

Marginal cost ________ over the range of increasing marginal returns and ________ over the range of diminishing marginal returns. A) increases; falls B) falls; increases C) is constant; rises D) increases; is constant

B

Average variable cost is: A) the firm's variable cost per unit multiplied by the quantity. B) total variable cost divided by quantity. C) the difference between average total cost and total cost. D) the difference between total cost and total fixed cost.

B

Diminishing marginal returns means that: A) each additional unit of an input used will cause output to decrease. B) each additional unit of an input used will increase output, but by smaller and smaller amounts. C) each additional unit of an input used will increase output by larger and larger amounts. D) the firm is maximizing profit.

B

A perfectly competitive industry is currently in a state of long-run equilibrium. Which of the following must be true? A) P = MR = MC > ATC B) P = MR = MC = AVC C) P = MR = MC = ATC D) P > MR = MC = AVC

C

Ashley Bakery expects its marginal cost curve will eventually slope upward, because in baking there is (are): A) constant opportunity costs. B) a maximum efficient scale. C) diminishing marginal returns. D) decreasing opportunity costs.

C

Average variable cost is the ratio of: A) total cost to the marginal cost. B) variable to fixed inputs. C) variable cost to the quantity of output. D) fixed cost to variable cost.

C

Decreasing and increasing returns to scale account for the shape of the: A) short-run average total cost curve. B) short-run average variable cost curve. C) long-run average total cost curve. D) marginal cost curve in both the short run and the long run

C

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

C

In the short run: A)all inputs are fixed. B)all inputs are variable. C)some inputs are fixed and some inputs are variable. D)all costs are variable.

C

The slope of a long-run average total cost curve exhibiting decreasing returns to scale is: A) zero. B) infinite. C) positive. D) negative.

C

Total cost divided by the quantity of output produced is: A) always increasing. B) always decreasing. C) average total cost. D) marginal cost.

C

A perfectly competitive firm's short-run supply curve is its: A) average variable cost curve above the marginal cost curve. B) marginal cost curve above the average fixed cost curve. C) marginal cost curve above the average total cost curve. D) marginal cost curve above the average variable cost curve.

D

The curve that shows the additional cost of each additional unit of output is called the: A) average cost curve. B) total cost curve. C) marginal product curve. D) marginal cost curve.

D

The slope of a long-run average total cost curve exhibiting increasing returns to scale is: A) zero. B) infinite. C) positive. D) negative.

D