Question 1

In which of the following industries are economies of scale exhausted at relatively low levels of output?

Accepted Answer

Concrete mixing exhibits economies of scale that are exhausted at relatively low levels of output due to the perishable nature of its product and the localized nature of its markets, which limit the benefits of increasing production scale.

Question 2

In order to apply the concept of diminishing returns to study time,

Accepted Answer

The concept of diminishing returns, when applied to study time, implies that as one input (study time) increases, while all other inputs (such as textbooks, lecture quality, health, etc.) are held constant, the incremental gains in learning outcomes will eventually decrease. This mirrors the economic principle of diminishing returns in production, where increasing one factor of production while holding others constant eventually yields lower additional output.

Question 3

If there are 10 plants producing the total domestic consumption of a product and each plant is operating at minimum efficient scale, then each plant accounts for what percentage of domestic consumption?

Accepted Answer

If there are 10 plants and each is operating at the minimum efficient scale, then each plant would account for 1/10th of the total production, which is 10 percent.

Question 4

When the price of gasoline increases significantly, the delivery companies like UPS, FedEx, and the USPS all find

Accepted Answer

When the price of gasoline increases, the variable costs for delivery companies increase because fuel is a variable cost. This causes the total variable cost (TVC) curve to shift upward.

Question 5

Which of the following is an example of a sunk cost, as it relates to a firm?

Accepted Answer

A sunk cost is a cost that has already been incurred and cannot be recovered. The expenditure on a nonrefundable, nontransferable airline ticket fits this definition because once the ticket is purchased, the money spent cannot be recovered, regardless of whether the ticket is used.

Question 6

Which of the following is a typical example of a fixed cost of production in a manufacturing firm?

Accepted Answer

Depreciation of capital is a fixed cost because it does not change with the level of production or sales. It is a cost that the company incurs over time for the use of its fixed assets, such as machinery and equipment, regardless of how much it produces.

Question 7

Past costs that are not affected by new decisions are known as

Accepted Answer

Sunk costs are past costs that have already been incurred and cannot be recovered or changed by any current or future action. They are not relevant to new decisions because they cannot be altered by any decision made now or in the future.

Question 8

The mass affordability of the iPhone is the result of the following, except

Accepted Answer

The law of diminishing returns in manufacturing suggests that after a certain point, adding more of one factor of production while keeping others constant will result in lower incremental per-unit output, which doesn't directly contribute to the mass affordability of the iPhone. Instead, mass production, economies of scale, and distribution cost savings are the factors that contribute to affordability by reducing the cost per unit.

Question 9

The following table shows the short-run total cost data for a firm.  All of the following are correct, except that the firm has

Accepted Answer

The answer of The following table shows the short-run total...

Question 10

Chris is preparing for a comprehensive course exam by reading a textbook with chapters of equal length and difficulty. The number of chapters she can comprehend and master when studying is: (1)hour one, 1.5 chapters; (2)hour two, 2.0 chapters; (3)hour three, 1.5 chapters; (4)hour four, 1 chapter; (5)hour five, 0 chapters. Diminishing marginal returns to studying sets in for Chris after hour

Accepted Answer

Diminishing marginal returns to studying for Chris set in after hour two, as evidenced by the decrease in the number of chapters she can comprehend and master from hour three onwards.

Question 11

The law of diminishing returns implies that

Accepted Answer

The law of diminishing returns suggests that after a certain point, each additional unit of input (in this case, hours spent studying) will result in a smaller increase in output (knowledge gained). It does not imply that you will know less or learn more with each added hour, but rather that the efficiency of studying decreases over time.

Question 12

Susie purchased a nonrefundable ticket to a soccer match for $20. It will cost her $10 worth of gas and wear and tear to drive to the match and $5 to park her car. On the day of the match, Susie's boss offers her $100 to come to work instead. In considering what to do, which of the above would be considered a sunk cost?

Accepted Answer

The $20 ticket to the match is a sunk cost because it is a cost that has already been incurred and cannot be recovered, regardless of whether Susie goes to the match or not. The costs to drive and park would only be incurred if she decides to go to the match, and the $100 offer is a potential income, not a cost.

Question 13

Because of higher gasoline prices, firms using gasoline intensively in the production or distribution of their goods have experienced

Accepted Answer

Higher gasoline prices increase the variable costs for firms that use gasoline intensively, leading to an upward shift in their Marginal Cost (MC), Average Variable Cost (AVC), and Average Total Cost (ATC) curves. Fixed costs (AFC) are not affected by changes in variable input prices.

Question 14

If the law of diminishing returns applies to study time,

Accepted Answer

The law of diminishing returns suggests that after a certain point, each additional unit of input (in this case, study time) results in a smaller increase in output (productivity or learning). Thus, the tenth hour of study is likely to be less productive than the third.

Question 15

Many people have turned to the Internet to get the news. This has caused the circulation numbers of newspapers to fall drastically, which in turn caused their

Accepted Answer

When circulation numbers of newspapers fall, their revenue decreases but their fixed costs (such as rent, machinery, and salaries for permanent staff) remain unchanged. This means they are spreading these fixed costs over fewer units (newspapers sold), causing the average fixed cost per unit to increase.

Question 16

Which of the following types of firms are least likely to have their MC, AVC, and ATC curves affected by fluctuations in gasoline prices?

Accepted Answer

Firms like iTunes, which distribute their products over the Internet, are least likely to be affected by fluctuations in gasoline prices because their operations do not rely on gasoline-powered transportation.

Question 17

Refer to the provided graph. There are diseconomies of scale

Accepted Answer

The answer of  Refer to the provided graph. There...

Question 18

Introduction of the Verson Stamping Machine helped firms in the automobile industry

Accepted Answer

The Verson Stamping Machine allowed firms to produce at a larger scale more efficiently, thus achieving greater economies of scale by reducing the average cost per unit as production increases.

Question 19

When the Defense Department ordered 132 new airplanes, the cost per plane was estimated to be $580 million. A cut in the order to 75 planes increased the per plane cost to $800 million. This change in per unit cost can be explained by

Accepted Answer

The increase in per unit cost when the order was reduced from 132 to 75 planes is due to the loss of economies of scale. Economies of scale occur when producing more units of a good or service can be done at a lower cost per unit, often because fixed costs are spread over more units. Reducing the order size means fixed costs are spread over fewer units, increasing the cost per plane.

Question 20

Refer to the provided graph. There are economies of scale

Accepted Answer