Question 1

If long-run average total cost decreases as output increases, this is due to

Accepted Answer

Economies of scale occur when long-run average total cost decreases as output increases, due to factors such as improved efficiency and spreading fixed costs over more units of output.

Question 2

The ABC Corporation decreases all of its inputs by 12 percent and finds that its output falls by 8 percent. This means that initially it was producing

Accepted Answer

The answer of The ABC Corporation decreases all of its...

Question 3

When a firm doubles its inputs and finds that its output has more than doubled, this is known as

Accepted Answer

Economies of scale occur when increasing the inputs leads to a more than proportional increase in output, indicating that the firm is becoming more efficient as it grows.

Question 4

Refer to the diagram. Diseconomies of scale

Accepted Answer

The answer of  Refer to the diagram. Diseconomies of...

Question 5

If a firm increases all of its inputs by 10 percent and its output increases by 15 percent, then

Accepted Answer

This scenario describes economies of scale, where an increase in inputs leads to a proportionally larger increase in output, indicating that the firm is becoming more efficient in its production process.

Question 6

In the long run, a firm will choose a plant size that has the

Accepted Answer

In the long run, a firm aims to minimize costs and maximize efficiency. Choosing a plant size that has the minimum average total cost of producing the target level of output ensures that the firm is operating at the most efficient scale, balancing the costs of production with the output level. This is crucial for long-term profitability and competitiveness.

Question 7

Round Things, Inc.'s production process exhibits economies of scale. Currently their long-run average cost is $12/unit. If Round Things doubles its use of all inputs, its new long-run average total cost will be

Accepted Answer

Economies of scale mean that as production increases, the average cost per unit decreases. If Round Things doubles its use of inputs, it will likely see a decrease in its average cost per unit, meaning the new long-run average total cost will be less than $12/unit.

Question 8

A firm encountering economies of scale over some range of output will have a

Accepted Answer

Economies of scale occur when increasing production leads to lower average costs, which is represented by a falling long-run average cost curve.

Question 9

Refer to the diagram. Minimum efficient scale

Accepted Answer

The answer of  Refer to the diagram. Minimum efficient...

Question 10

Refer to the diagram. Constant returns to scale

Accepted Answer

The answer of  Refer to the diagram. Constant returns...

Question 11

If all resources used in the production of a product are increased by 10 percent and output increases by less than 5 percent, then the firm is experiencing

Accepted Answer

This scenario describes diseconomies of scale, where increasing all inputs by a certain percentage results in a less than proportional increase in output, indicating reduced efficiency as the scale of production increases.

Question 12

Which of the following would contribute most to a firm experiencing "economies of scale"?

Accepted Answer

Economies of scale occur when a firm's production costs per unit decrease as its output increases. Specialization of labor and management within the firm can lead to more efficient production processes, higher productivity, and thus contribute significantly to economies of scale.

Question 13

The long-run average total cost curve

Accepted Answer

The long-run average total cost curve indicates the lowest unit costs at which a firm can produce any given level of output when it has had enough time to adjust all of its inputs, including plant size. This curve reflects the most efficient scale of operation for a firm in the long run.

Question 14

The larger the diameter of a natural gas pipeline, the lower is the average total cost of transmitting 1,000 cubic feet of gas 1,000 miles. This is an example of one reason for

Accepted Answer

Economies of scale occur when increasing the scale of production leads to a lower cost per unit of output. In this case, using a larger diameter pipeline for natural gas transmission reduces the average total cost of transmitting gas, illustrating economies of scale.

Question 15

"The bigger the volume, the lower the cost, and we pass these savings on to you" is a familiar slogan. Its idea is illustrated in which of the provided graphs?

Accepted Answer

The answer of  "The bigger the volume, the lower...

Question 16

If all resources used in the production of a product are increased by 20 percent and output increases by 20 percent, then there must be

Accepted Answer

This scenario describes constant returns to scale, where increasing all inputs by a certain percentage results in an equal percentage increase in output.

Question 17

The table shows three short-run cost schedules for three plants of different sizes that a firm might build in the long run.  If the three plant sizes shown are the only ones possible, then there are economies of scale in producing

Accepted Answer

The answer of The table shows three short-run cost schedules...

Question 18

Suppose a firm is in a range of production where it is experiencing economies of scale. Knowing this, we can predict that

Accepted Answer

Economies of scale occur when an increase in input results in a greater proportionate increase in output, meaning a 10 percent increase in all inputs will increase output by more than 10 percent.

Question 19

The table shows three short-run cost schedules for three plants of different sizes that a firm might build in the long run.  What is the long-run average cost of producing 30 units of output?

Accepted Answer