Question 1

Economies of scope exist when
A) the total cost of production falls as the output increases.
B) a firm hires specialized resources to produce a range of goods and services.
C) a firm uses outsourcing to produce a good or service.
D) the cost of producing a unit of a good falls as its output increases.

Accepted Answer

The answer of Economies of scope exist when
A) the total...

Question 2

Joe's Pizza Shop only makes pizza. If each pizza requires five people, each of whom specializes in one task, this method of production is an example of
A) economies of scope.
B) team production.
C) economies of monitoring.
D) economies of coordination.

Accepted Answer

Team production is a method where a group of specialized workers work together to produce a product or service. In this case, each pizza requires five specialized workers, indicating that the production process is based on team production. A is incorrect because economies of scope refer to the cost savings achieved by producing a variety of products. C and D are also incorrect because they refer to the cost savings achieved by monitoring and coordinating production, which are not relevant in this scenario.

Question 3

Suppose Angelo Sessa, owner of Sezz Medi Brick Oven Pizza in NYC, earns $350,000 in revenue per year. He spends $800 a month on ash wood for his stove, $2000 a month on rent, and $1500 a month on ingredients. He used to be a lawyer and earned $240,000 a year before he opened up Sezz Medi. Normal profit for a pizza business is $30,000. What is Angelo's economic profit?
A) $28,400
B) $350,000
C) $58,400
D) $268,400

Accepted Answer

The answer of Suppose Angelo Sessa, owner of Sezz Medi...

Question 4

Taco Bell produces both tacos and burritos because when it does so, Taco Bell experiences
A) economies of scope.
B) decreasing scope of costs.
C) increasing normal profit.
D) economies of scale.

Accepted Answer

Economies of scope refer to the cost savings that result from producing two or more products together, rather than separately. By producing both tacos and burritos, Taco Bell is able to share some of the costs and resources between the two products, resulting in economies of scope.

Question 5

Economies of team production exist when the
A) average cost of producing a unit of a good falls as its output rate increases.
B) firm buys parts or products from other firms.
C) firm uses specialized resources to produce a range of goods and services.
D) individuals in a group specialize in mutually supportive tasks in the production process.

Accepted Answer

Economies of team production exist when individuals in a group specialize in mutually supportive tasks in the production process. This leads to higher efficiency and productivity, which can result in lower costs per unit of output. Option A describes economies of scale, while options B and C refer to outsourcing and specialization, respectively, which are not necessarily related to team production.

Question 6

When Jitters Coffee Company, Inc., can lower the cost of packaging a pound of coffee by doubling the quantity packaged each day, it is achieving
A) economies of scale.
B) economies of scope.
C) economies of team production.
D) all of the above

Accepted Answer

Economies of scale occur when a company can lower its cost per unit of production by increasing its output. In this case, Jitters Coffee Company, Inc., is doubling the quantity of coffee packaged each day, thus reducing the cost per pound of coffee packaged. Therefore, the company is achieving economies of scale.

Question 7

Suppose Angelo Sessa, owner of Sezz Medi Brick Oven Pizza in NYC, earns $350,000 in revenue per year. He spends $800 a month on ash wood for his stove, $2000 a month on rent, and $1500 a month on ingredients. He used to be a lawyer and earned $240,000 a year before he opened up Sezz Medi. Normal profit for a pizza business is $30,000. If Angelo switches to oak wood to fire his stove and oak costs an extra $2500 each month, but this change causes his revenues to increase to $351,000. What is Angelo's opportunity cost of production?
A) $351,000
B) $342,000
C) $351,600
D) $321,600

Accepted Answer

The answer of Suppose Angelo Sessa, owner of Sezz Medi...

Question 8

If a firm that repairs both motorcycles and cars is able to do so at a lower cost than a firm that does only one or the other, this would be an example of
A) economies of scope.
B) economies of scale.
C) monitoring.
D) increasing transactions costs.

Accepted Answer

Economies of scope occur when a firm can produce multiple products or services at a lower cost than it would if it specialized in only one. In this case, the firm that repairs both motorcycles and cars can take advantage of shared resources, such as tools and equipment, and possibly even cross-train employees to work on both types of vehicles. This allows them to achieve cost savings that a firm specializing in only motorcycles or only cars would not be able to achieve.

Question 9

When Fatz confectionery can lower the cost of manufacturing and packaging a pound of candy by doubling the quantity manufactured and packaged each day, it will achieve
A) economies of scope.
B) economies of scale.
C) economies of team production.
D) all of the above

Accepted Answer

Economies of scale occur when a company can increase their production and lower their cost per unit by spreading fixed costs over a larger production volume. This scenario describes Fatz confectionery being able to lower the cost of manufacturing and packaging a pound of candy by doubling the quantity manufactured and packaged each day, which is a classic example of economies of scale. Economies of scope and economies of team production are not relevant in this scenario.

Question 10

Economies of scope are cost reductions achieved by
A) the production of multiple, related products.
B) the production of large amounts of a single product.
C) limiting the size of the firm.
D) increasing firm size.

Accepted Answer

Economies of scope refer to the cost-saving benefits that a company can realize when it produces multiple related products. This is because the company can share resources such as production facilities, distribution networks, and advertising expenses across multiple product lines. By doing so, the company can achieve production efficiencies and lower costs compared to a firm that produces only a single product. Therefore, the correct answer is A.

Question 11

Suppose Angelo Sessa, owner of Sezz Medi Brick Oven Pizza in NYC, earns $350,000 in revenue per year. He spends $800 a month on ash wood for his stove, $2000 a month on rent, and $1500 a month on ingredients. He used to be a lawyer and earned $240,000 a year before he opened up Sezz Medi. Normal profit for a pizza business is $30,000. If Angelo switches to oak wood to fire his stove and oak costs an extra $2500 each month, but this change causes his revenues to increase to $351,000. What is Angelo's economic profit?
A) -$1,600
B) -$600
C) $9,000
D) $8,000

Accepted Answer

The answer of Suppose Angelo Sessa, owner of Sezz Medi...

Question 12

Which of the following best defines "economies of scope"?
A) As output expands the cost of producing a good decreases.
B) As output expands the cost of producing a unit of a good decreases.
C) Because firms use specialized resources to produce a range of goods, as the number of products produced increases, the cost of producing a unit decreases.
D) Costs increase as firms seek to find more consumers.

Accepted Answer

Economies of scope refer to the cost savings a firm enjoys as it increases the variety of products it produces. This is because the firm can use specialized resources to produce a range of goods, spreading the fixed costs over a larger number of products and reducing the average cost of producing each unit. A and B are both definitions of economies of scale, where a firm benefits from cost savings as it increases the scale of its operations. D is not a definition of any economic concept.

Question 13

A firm finds that it can produce several different goods at a lower average cost by using some of the same production facilities than it could if it produced each of the goods with separate production facilities. This firm is
A) gaining economies of scope.
B) gaining economies of team production.
C) gaining economies of scale.
D) incurring diseconomies of scale.

Accepted Answer

The firm is benefiting from economies of scope, which means that the cost of producing multiple different goods is lower than the cost of producing each of them separately. This is because the firm can use the same production facilities and resources more efficiently by producing multiple goods.

Question 14

Which of the following may yield economies of team production for Jitters Coffee Company, Inc.?
A) dividing the process of packaging and shipping coffee into several specialized tasks, each performed by different people
B) expanding into a larger coffee packaging plant
C) expanding into the packaging and sale of tea and powdered chocolate
D) all of the above

Accepted Answer

Dividing the process of packaging and shipping coffee into specialized tasks allows for each team member to focus on a specific task, leading to increased productivity and potentially lower costs. Expanding into a larger plant or into different product lines may not necessarily lead to economies of team production.

Question 15

U.S. auto sales took a beating in September 2008 as the nation's worsening economy turned dealer showrooms into ghost towns. Automakers reported a sharp drop-off in sales in the last ten days of the month as news of bank failures and a stock market meltdown increased economic uncertainty. What type of constraint do the automakers face when there is increased economic uncertainty?
A) information constraint
B) technology constraint
C) marketmconstraint
D) price constraint

Accepted Answer

Increased economic uncertainty leads to information constraint as consumers become less certain about their future income and spending, making them more hesitant to make large purchases like cars.

Question 16

Team production is a production process in which
A) pay is based on group output.
B) individuals specialize in mutually supportive tasks.
C) competing groups perform identical tasks.
D) individuals rotate from one task to another.

Accepted Answer

In team production, individuals specialize in mutually supportive tasks, working together towards a common goal or output. This differs from competing groups performing identical tasks and rotating from one task to another. While pay may be based on group output in some instances, it is not a defining characteristic of team production.

Question 17

Quick Auto Service will do oil changes. If each oil change is done by five people, each of whom specializes in one task, this is an example of
A) economies of scope.
B) team production.
C) economies of monitoring.
D) economies of coordination.

Accepted Answer

Team production refers to a process in which a group of individuals work together in a coordinated manner to produce a good or service. In this case, the five people who specialize in different tasks work together to complete an oil change.

Question 18

A firm with a sales department, a production department, and a marketing department provides an example of
A) team production.
B) joint production.
C) economies of scale.
D) economies of different departments.

Accepted Answer

The answer of A firm with a sales department, a...

Question 19

Suppose Angelo Sessa, owner of Sezz Medi Brick Oven Pizza in NYC, earns $350,000 in revenue per year. He spends $800 a month on ash wood for his stove, $2000 a month on rent, and $1500 a month on ingredients. He used to be a lawyer and earned $240,000 a year before he opened up Sezz Medi. Normal profit for a pizza business is $30,000. What is Angelo's opportunity cost of production?
A) $350,000
B) $312,600
C) $288,000
D) $321,600

Accepted Answer

The answer of Suppose Angelo Sessa, owner of Sezz Medi...

Question 20

"When the cost of producing a unit of a good falls because the firm uses specialized resources to produce a range of goods and services" is the definition of
A) economies of scope.
B) economies of scale.
C) economic efficiency.
D) technological efficiency.

Accepted Answer

The definition given specifically mentions the use of specialized resources to produce a range of goods and services, which is a characteristic of economies of scope. Economies of scale refer to the cost reductions that occur as a firm increases its production output, regardless of whether the production is specialized or varied. Economic efficiency and technological efficiency are broader concepts that encompass various factors beyond the cost of production.

Quiz 10: Organizing Production

Economies of scope exist when

Joe's Pizza Shop only makes pizza. If each pizza requires five people, each of whom specializes in one task, this method of production is an example of

Taco Bell produces both tacos and burritos because when it does so, Taco Bell experiences

Economies of team production exist when the

When Jitters Coffee Company, Inc., can lower the cost of packaging a pound of coffee by doubling the quantity packaged each day, it is achieving

If a firm that repairs both motorcycles and cars is able to do so at a lower cost than a firm that does only one or the other, this would be an example of

When Fatz confectionery can lower the cost of manufacturing and packaging a pound of candy by doubling the quantity manufactured and packaged each day, it will achieve

Economies of scope are cost reductions achieved by

Which of the following best defines "economies of scope"?

A firm finds that it can produce several different goods at a lower average cost by using some of the same production facilities than it could if it produced each of the goods with separate production facilities. This firm is

Which of the following may yield economies of team production for Jitters Coffee Company, Inc.?

Team production is a production process in which

Quick Auto Service will do oil changes. If each oil change is done by five people, each of whom specializes in one task, this is an example of

A firm with a sales department, a production department, and a marketing department provides an example of

"When the cost of producing a unit of a good falls because the firm uses specialized resources to produce a range of goods and services" is the definition of