Question 1

The marginal product curve is a mirror image of
A)The average cost curve
B)The average fixed cost curve
C)The total cost curve
D)The marginal cost curve

Accepted Answer

The marginal product curve shows the additional output produced by each additional unit of input. It is related to the marginal cost curve, which shows the additional cost of each additional unit of output. As marginal product increases, marginal cost decreases, and vice versa. Therefore, the best choice for the mirror image of the marginal product curve would be the marginal cost curve (choice D).

Question 2

The ability to lower the average costs of production for two or more products is possible with
A)Economies of scale
B)Economies of Scope
C)Diseconomies of Scale
D)Diseconomies of Scope

Accepted Answer

Economies of Scope occur when a firm uses its resources and capabilities to produce a range of different products more efficiently than if it were to produce each product separately. This allows the firm to benefit from shared costs, such as marketing and distribution, and can result in lower average costs of production. This is different from Economies of Scale, which occur when a firm produces more of a single product and benefits from lower average costs due to increased efficiency and utilization of resources.

Question 3

All of these factors create economies of scale,except
A)Specialization and Division of Labor
B)Technological Factors
C)Increase in advertisement costs
D)Quantity discounts

Accepted Answer

Increase in advertisement costs do not create economies of scale. In fact, advertising expenses may increase with larger production volumes but may not lead to proportional increases in sales or profits.

Question 4

All these curves are U-shaped except
A)Average fixed cost curve
B)Marginal cost curve
C)Average variable cost curve
D)Average total cost

Accepted Answer

The average fixed cost (AFC) curve is not U-shaped as it continuously decreases as output increases. This is because the fixed costs are spread out over a larger amount of output which reduces the average fixed cost.

Question 5

As long as marginal cost is decreasing,marginal product is
A)less than average product.
B)greater than average product.
C)equal to average output.
D)equal to total product.

Accepted Answer

When marginal cost is decreasing, it means that each additional unit of output is costing less to produce than the previous unit. This indicates that there are still economies of scale in production, and the marginal product (additional output produced by each additional unit of input) is greater than the average product (total output divided by the total input). Therefore, the correct answer is B, which states that the marginal product is greater than average product.

Question 6

The average total cost curve
A)is downward sloping at all levels of output
B)is downward sloping when marginal costs are decreasing and upward sloping when marginal costs are increasing
C)is upward sloping when marginal costs are decreasing and downward sloping when marginal costs are increasing
D)does not vary with output

Accepted Answer

The average total cost curve is the total cost divided by the quantity of output produced. When marginal costs are decreasing, the additional cost of producing each unit of output is less than the average cost of all units produced so far, causing the average total cost to decrease. When marginal costs are increasing, the additional cost of producing each unit of output is greater than the average cost of all units produced so far, causing the average total cost to increase. Therefore, the average total cost curve is downward sloping when marginal costs are decreasing and upward sloping when marginal costs are increasing.

Question 7

As table manufacturing company produces more tables,the average total cost of each table produced increases.This is because:
A)Total fixed costs are decreasing as more tables are produced
B)There is economies of scale
C)There is diseconomies of scale
D)Total variable cost is decreasing as more clubs are produced.

Accepted Answer

This scenario exhibits diseconomies of scale. As production increases, the cost per unit increases. This is typically caused by increased complexity, communication breakdowns, and the need for additional resources to maintain efficiency.

Question 8

All the factors below are causes of diminishing marginal returns,except
A)Difficulty of monitoring and motivating larger workforces
B)Increasing complexity of larger systems
C)Division of Labor
D)The "fixity' of some factor

Accepted Answer

Division of labor actually leads to increasing returns to scale, not diminishing returns. The other three factors listed can all contribute to diminishing returns to scale.

Question 9

When a firm is experiencing decreasing marginal costs,it implies
A)There are diminishing marginal productivity
B)There are increasing average costs
C)There are constant marginal productivity
D)There are increasing marginal productivity

Accepted Answer

When a firm experiences decreasing marginal costs, it means that the additional production of each unit results in a lower cost of production. This implies that the firm is experiencing increasing marginal productivity, as it is able to produce more output with the same amount of resources.

Question 10

The term "bottleneck" refers to
A)when increasing variable inputs must share a fixed amount of complementary input.
B)"fixity" of some factor
C)None of the above
D)Both a and b

Accepted Answer

Option A refers to the concept of diminishing marginal returns where increasing input leads to lower output due to fixed inputs. Option B refers to the presence of fixed factors of production that limit the output level. Both these concepts lead to a bottleneck situation in the production process where output is limited due to the scarcity of a fixed input or factor. Therefore, the best choice is D as it includes both A and B as the possible meanings of bottleneck.

Question 11

In any production process the marginal product of labor equals
A)Change in total output divided by change in labor input
B)Total output divided by total input
C)Total output
D)None of the above

Accepted Answer

The marginal product of labor measures the change in output resulting from a change in labor input. It is calculated by dividing the change in total output by the change in labor input. Therefore, the correct answer is A. B is incorrect because it does not take into account the change in inputs, and C and D are incorrect because they do not take into account the labor input.

Question 12

The marginal cost curve:
A)Declines initially as output increases and rises with further increases in output
B)Is equal to the average variable cost curve
C)Rises initially as output increases and declines with further increases in output
D)Is always constant

Accepted Answer

The marginal cost curve at first decreases as output increases due to the increasing returns to scale (economies of scale), but then it rises as output continues to increase due to decreasing returns to scale (diseconomies of scale). Therefore, choice A) is the best answer. B) is incorrect because the average variable cost curve includes both variable and fixed costs, which the marginal cost curve only measures the additional cost of producing one more unit. C) is incorrect because it is the opposite of what the marginal cost curve actually represents. D) is incorrect because the marginal cost curve cannot be constant as it reflects changes in costs associated with producing additional units.

Question 13

A food company trying to increase its profits by expanding in to the soft drinks business is an example of
A)Economies of scale
B)Economies of Scope
C)Diseconomies of Scale
D)Diseconomies of Scope

Accepted Answer

Economies of scope refer to the cost savings that a company can achieve by producing multiple products or services together, using shared resources and capabilities, rather than producing them separately. In this case, the food company can leverage its existing resources and capabilities to produce soft drinks as well, thereby reducing its costs and increasing its profits.

Question 14

Diseconomies of scale are associated with
A)Inefficiencies
B)Cost reduction
C)Improvement in technology
D)Division of labor

Accepted Answer

Diseconomies of scale occur when a company becomes too large and complex, leading to inefficiencies in management, communication, and coordination. This can result in higher costs and lower productivity, leading to decreased profitability.

Question 15

The ability to lower the average costs of production for one product is possible with
A)Economies of scale
B)Economies of Scope
C)Diseconomies of Scale
D)Diseconomies of Scope

Accepted Answer

Economies of scale refers to the cost advantage that arises with the increase in scale of production. As the scale of production increases, the average cost of production decreases due to factors such as specialization, efficient use of resources, and better bargaining power with suppliers. Therefore, the ability to lower the average costs of production for one product is possible with economies of scale.

Question 16

When there are economies of scale,
A)per-unit costs increase as output increases
B)per-unit costs decrease as output increases
C)per-unit costs are constant as output increases
D)output does not affect per-unit costs

Accepted Answer

Economies of scale refer to the phenomenon where per-unit costs decrease as output increases. This is because fixed costs are spread across a larger number of units, resulting in decreasing average fixed costs. Additionally, as output increases, firms may be able to negotiate better prices with suppliers or invest in more efficient technologies, which can lead to decreasing average variable costs. As a result, per-unit costs tend to decrease with economies of scale.

Question 17

Which of the following statements describes the presence of diminishing returns? All else equal,
A)Marginal product curve is constant
B)Marginal product curve is falling and negative
C)Marginal product curve is positive and rising
D)Marginal product curve is positive and falling

Accepted Answer

The presence of diminishing returns is indicated by a positive and falling marginal product curve. As more units of input are added, the increase in output becomes smaller and smaller, eventually reaching a point where adding an additional unit of input results in a decrease in output.

Question 18

Diminishing marginal returns occur because
A)All inputs are variable in the short-run
B)All inputs are variable in the long-run
C)Some inputs are fixed and some inputs are variable in the short-run
D)None of the above

Accepted Answer

Diminishing marginal returns occur because in the short-run, some inputs are fixed while some are variable. As more and more of the variable inputs are added to the fixed inputs, the marginal product of the variable inputs eventually decreases. This is due to the fact that the fixed inputs (e.g. land or capital) cannot be increased proportionally to the variable inputs, resulting in a point where additional units of the variable input start to yield decreasing returns.

Question 19

Microsoft found that instead of producing a dvd player and a gaming system separate,it is cheaper to incorporate dvd playing capabilities in their new version of the gaming system.Microsoft is taking advantage of
A)Economies of Scale
B)Learning curve
C)Economies of Scope
D)Decreasing marginal costs

Accepted Answer

Economies of scope refer to the cost savings that result from producing multiple products or services together, as opposed to producing them separately. By incorporating dvd playing capabilities in their new gaming system, Microsoft is taking advantage of the cost savings that result from producing two products together, rather than separately. This is an example of economies of scope.

Question 20

A firm experiencing constant economies of scale will have a long-run average cost curve that is:
A)upward sloping
B)vertical
C)downward sloping
D)horizontal

Accepted Answer

A firm experiencing constant economies of scale will have a long-run average cost curve that is horizontal, indicating that its unit costs remain constant as output increases.

Quiz 7: Economies of Scale and Scope

The marginal product curve is a mirror image of

The ability to lower the average costs of production for two or more products is possible with

All of these factors create economies of scale,except

All these curves are U-shaped except

As long as marginal cost is decreasing,marginal product is

The average total cost curve

As table manufacturing company produces more tables,the average total cost of each table produced increases.This is because:

All the factors below are causes of diminishing marginal returns,except

When a firm is experiencing decreasing marginal costs,it implies

The term "bottleneck" refers to

In any production process the marginal product of labor equals

The marginal cost curve:

A food company trying to increase its profits by expanding in to the soft drinks business is an example of

Diseconomies of scale are associated with

The ability to lower the average costs of production for one product is possible with

When there are economies of scale,

Which of the following statements describes the presence of diminishing returns? All else equal,

Diminishing marginal returns occur because

Microsoft found that instead of producing a dvd player and a gaming system separate,it is cheaper to incorporate dvd playing capabilities in their new version of the gaming system.Microsoft is taking advantage of

A firm experiencing constant economies of scale will have a long-run average cost curve that is: