Question 1

In the long run the local coffee shop incurs total costs of $625 when output is 1,250 cups of coffee and $750 when output is 1,500 cups of coffee. For this range of output, the coffee shop exhibits

Accepted Answer

The answer of In the long run the local coffee...

Question 2

Which of the following statements is not correct?

Accepted Answer

Economies of scale can occur in both the short run and the long run.

Question 3

When a firm's long­run average total costs do not vary as output increases, the firm exhibits

Accepted Answer

When a firm exhibits constant returns to scale, it means that increases in input or output do not affect the average cost of production, indicating that the firm is efficiently utilizing its resources. Therefore, it is not experiencing either economies or diseconomies of scale.

Question 4

In the long run a company that produces and sells laundry detergent incurs total costs of $2,500 when output is 1,250 units and $2,750 when output is 1,500 units. For this range of output, the laundry detergent company exhibits

Accepted Answer

The answer of In the long run a company that...

Question 5

The Big Blue Sky jet company has long-run total costs of $20 million if it produces 5 jets and long-run total costs of $24 million if it produces 6 jets. The Big Blue Sky jet company is experiencing

Accepted Answer

The answer of The Big Blue Sky jet company has...

Question 6

If a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would

Accepted Answer

If a firm experiences constant returns to scale, it means that increasing all inputs by the same proportion increases output by the same proportion. This means that there are no benefits or costs associated with changing the scale of production. As a result, the long-run average total cost curve would be horizontal, indicating that the average cost of producing each unit of output remains constant regardless of the scale of production.

Question 7

When a firm experiences constant returns to scale,

Accepted Answer

Constant returns to scale means that when all inputs are increased by a certain percentage, output increases by the same percentage. In this case, long-run average total cost remains unchanged, even when output increases, since the same amount of inputs are used in the same proportion, resulting in the same cost per unit of output.

Question 8

Suppose that a firm's long­run average total costs of producing an individual income tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200 returns. For this range of output, the firm is experiencing

Accepted Answer

The fact that the long-run average total cost per unit remains constant even as production increases from 1,000 to 1,200 suggests that the firm is experiencing constant returns to scale, meaning that output increases proportionally with an increase in all inputs, resulting in no change in average cost per unit.

Question 9

Constant returns to scale occur when the firm's long­run

Accepted Answer

Constant returns to scale means that as the firm increases its inputs (such as labor and capital) in the long run, output also increases proportionally without any change in the average total cost per unit. Therefore, option B is the correct answer as it states that the average total costs remain constant as output increases. Option A is incorrect as it only refers to total costs, not average total costs. Option C is also incorrect as it describes economies of scale, which occur when the average cost curve is falling as output increases. Option D describes diseconomies of scale, which occur when the average cost curve is rising as output increases.

Question 10

In the long run a company that produces and sells covers for cell phones incurs total costs of $2,500 when output is 1,250 covers and $4,000 when output is 1,500 covers. For this range of output, the cell phone cover company exhibits

Accepted Answer

The total costs increased as output increased, which means that the company experienced an increase in average total costs as output increased. This suggests that the company is experiencing diseconomies of scale.

Question 11

Constant returns to scale occur when a firm's

Accepted Answer

Constant returns to scale means that as a firm increases its output in the long run, the proportionate increase in all inputs leads to an equal proportionate increase in output, so the long-run average total costs do not vary as output increases.

Question 12

Diseconomies of scale occur when

Accepted Answer

Diseconomies of scale occur when long-run average total costs rise as output increases. This can be due to factors such as increased complexity, communication problems, and difficulty in managing larger operations. As a result, unit costs increase with larger production quantities, and companies may see diminishing returns on their investments in production.

Question 13

When a firm is experiencing diseconomies of scale, long-run

Accepted Answer

The answer of When a firm is experiencing diseconomies of...

Question 14

When a firm experiences diseconomies of scale,

Accepted Answer

Diseconomies of scale occur when long-run average total cost increases with increasing output. This can be caused by the inefficiencies that come with managing a larger organization, such as coordination difficulties, communication breakdowns, and bureaucratic red tape, all of which raise costs per unit of output.

Question 15

Firms may experience diseconomies of scale when

Accepted Answer

Diseconomies of scale occur when a firm grows so large that its costs per unit increase. This often happens due to bureaucratic inefficiencies in large management structures, where decision-making becomes slower and more complex.

Question 16

In the long run a company that produces and sells kayaks incurs total costs of $15,000 when output is 30 kayaks and $20,000 when output is 40 kayaks. The kayak company exhibits

Accepted Answer

The answer of In the long run a company that...

Question 17

Diseconomies of scale occur when a firm's

Accepted Answer

Diseconomies of scale occur when, as a firm increases its output in the long run, its long-run average total costs start to increase rather than decrease. This can happen due to various reasons such as congestion, bureaucracy, communication breakdowns, and coordination problems when a firm becomes too large.

Question 18

In the long run, when marginal cost is above average total cost, the average total cost curve exhibits

Accepted Answer

When marginal cost is above average total cost, it means that producing one additional unit incurs more than the average cost of all the units produced so far, indicating an inefficient use of resources. This represents diseconomies of scale, as the cost per unit is increasing as output increases.

Question 19

In the long run a company that produces and sells dog beds incurs total costs of $1,200 when output is 30 beds and $1,600 when output is 40 beds. Firm A exhibits

Accepted Answer

The answer of In the long run a company that...

Question 20

At low levels of production, the firm

Accepted Answer

The answer of At low levels of production, the firm
...

Quiz 12: The Costs of Production

In the long run the local coffee shop incurs total costs of $625 when output is 1,250 cups of coffee and $750 when output is 1,500 cups of coffee. For this range of output, the coffee shop exhibits

Which of the following statements is not correct?

When a firm's longrun average total costs do not vary as output increases, the firm exhibits

In the long run a company that produces and sells laundry detergent incurs total costs of $2,500 when output is 1,250 units and $2,750 when output is 1,500 units. For this range of output, the laundry detergent company exhibits

The Big Blue Sky jet company has long-run total costs of $20 million if it produces 5 jets and long-run total costs of $24 million if it produces 6 jets. The Big Blue Sky jet company is experiencing

If a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would

When a firm experiences constant returns to scale,

Suppose that a firm's longrun average total costs of producing an individual income tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200 returns. For this range of output, the firm is experiencing

Constant returns to scale occur when the firm's longrun

In the long run a company that produces and sells covers for cell phones incurs total costs of $2,500 when output is 1,250 covers and $4,000 when output is 1,500 covers. For this range of output, the cell phone cover company exhibits

Constant returns to scale occur when a firm's

Diseconomies of scale occur when

When a firm is experiencing diseconomies of scale, long-run

When a firm experiences diseconomies of scale,

Firms may experience diseconomies of scale when

In the long run a company that produces and sells kayaks incurs total costs of $15,000 when output is 30 kayaks and $20,000 when output is 40 kayaks. The kayak company exhibits

Diseconomies of scale occur when a firm's

In the long run, when marginal cost is above average total cost, the average total cost curve exhibits

In the long run a company that produces and sells dog beds incurs total costs of $1,200 when output is 30 beds and $1,600 when output is 40 beds. Firm A exhibits

At low levels of production, the firm

Quiz 12: The Costs of Production

In the long run the local coffee shop incurs total costs of $625 when output is 1,250 cups of coffee and $750 when output is 1,500 cups of coffee. For this range of output, the coffee shop exhibits

Which of the following statements is not correct?

When a firm's long­run average total costs do not vary as output increases, the firm exhibits

In the long run a company that produces and sells laundry detergent incurs total costs of $2,500 when output is 1,250 units and $2,750 when output is 1,500 units. For this range of output, the laundry detergent company exhibits

The Big Blue Sky jet company has long-run total costs of $20 million if it produces 5 jets and long-run total costs of $24 million if it produces 6 jets. The Big Blue Sky jet company is experiencing

If a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would

When a firm experiences constant returns to scale,

Suppose that a firm's long­run average total costs of producing an individual income tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200 returns. For this range of output, the firm is experiencing

Constant returns to scale occur when the firm's long­run

In the long run a company that produces and sells covers for cell phones incurs total costs of $2,500 when output is 1,250 covers and $4,000 when output is 1,500 covers. For this range of output, the cell phone cover company exhibits

Constant returns to scale occur when a firm's

Diseconomies of scale occur when

When a firm is experiencing diseconomies of scale, long-run

When a firm experiences diseconomies of scale,

Firms may experience diseconomies of scale when

In the long run a company that produces and sells kayaks incurs total costs of $15,000 when output is 30 kayaks and $20,000 when output is 40 kayaks. The kayak company exhibits

Diseconomies of scale occur when a firm's

In the long run, when marginal cost is above average total cost, the average total cost curve exhibits

In the long run a company that produces and sells dog beds incurs total costs of $1,200 when output is 30 beds and $1,600 when output is 40 beds. Firm A exhibits

At low levels of production, the firm

When a firm's longrun average total costs do not vary as output increases, the firm exhibits

Suppose that a firm's longrun average total costs of producing an individual income tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200 returns. For this range of output, the firm is experiencing

Constant returns to scale occur when the firm's longrun