University of Louisiana at Lafaye e ULL ECON 528 –
FINAL WITH COMPLETE SOLUTION RATED A+ NEW
EDITION
If, when a firm doubles all its inputs, its average cost of produc0on decreases, then
produc0on displays
A) diminishing returns.
B) economies of scale.
C) diseconomies of scale.
D) declining fixed costs. - Ans B) economies of scale.
The long-run average cost curve shows
A) the lowest average cost of producing every level of output in the long run.
B) where the most profitable level of output occurs.
C) the average cost of producing where diminishing returns are not present.
D) the plant size or scale that the firm should build. - Ans A) the lowest average cost of
producing every level of output in the long run.
All of the following statements are true of the minimum efficient scale except one. Which
one?
A) All possible economies of scale have been exhausted.
B) The short-run average total cost curve's minimum point is equal to the long run average
cost curve's minimum point.
C) Any increase in the scale of opera0on will encounter diseconomies of scale.
D) An increase in the output level will increase profit. - Ans D) An increase in the output level
will increase profit.
At the minimum efficient scale
,A) all possible economies of scale have not been exhausted.
B) the firm has achieved the lowest possible average cost of produc0on.
C) any increases in the scale of opera0on will encounter further economies of scale.
D) marginal cost is at its minimum. - Ans B) the firm has achieved the lowest possible average
cost of produc0on.
The president of Toyota's Georgetown plant was quoted as saying, "Demand for high
volumes saps your energy. Over a period of 0me, it eroded our focus [and] thinned out the
exper0se and knowledge we painstakingly built up over the years." Based on this quote, what
must be true of the plant's average cost of produc0on curve?
A) It is upward-sloping.
B) It is downward-sloping.
C) It is a ray from the origin.
D) It is U-shaped. - Ans A) It is upward-sloping.
Economies of scope refers to the decrease in average total cost that can occur when a firm
A) produces more than one product.
B) has monopoly power in world markets.
C) controls the raw materials used as inputs.
D) narrows the scope of its regional markets. - Ans A) produces more than one product.
Producing 200 units of good Y and 100 units of good X in the same factory costs the firm
$50,000. In contrast, producing 200 units of good Y in one factory and 100 units of good X in
another factory costs the firm $75,000. So if the firm produces the two goods together, it
achieves:
A) quadra0c returns to scale.
B) diseconomies of scope.
C) economies of scope.
,D) diseconomies of scale and diseconomies of scope. - Ans C) economies of scope.
The marginal revenue product of labor for a firm
A) will increase if the price of the firm's output increases.
B) is the firm's demand curve for labor.
C) will decrease if the firm hires more labor.
D) All of the above are correct. - Ans D) All of the above are correct.
Answer whether the following statements are true or false:
A) Over 0me, more experienced workers will demand higher wages and therefore, will lead to
an increased in the cost of produc0on for the producers.
B) When you produce more, the average cost of produc0on increases. - Ans A) False & B)
False
A reason why a perfectly compe00ve firm's demand for labor curve slopes downward is that
A) each addi0onal unit of labor hired is less efficient than previously hired units.
B) in the short run, as more labor is hired, labor's marginal product falls because of the law of
diminishing returns.
C) the extra cost of hiring addi0onal units of labor increases as a firm hires more units of
labor.
D) the firm's demand curve for the product that uses labor is downward sloping. - Ans B) in
the short run, as more labor is hired, labor's marginal product falls because of the law of
diminishing returns.
The term "derived demand" refers to
A) the demand for financial products called deriva0ves.
B) the demand for a factor of produc0on that is derived from the demand for the good the
factor produces.
, C) a firm's es0mated demand curve derived from sales data.
D) a demand curve that derives from the availability of resources. - Ans B) the demand for a
factor of produc0on that is derived from the demand for the good the factor produces.
12) The price of a factor of produc0on that is in fixed supply is called
A) economic rent.
B) economic profit.
C) a compensa0ng differen0al.
D) opportunity cost. - Ans A) economic rent.
Economies of scale exist as a firm increases its size in the long run because of all of the
following except
a. as a firm expands its produc0on, its profit margin per-unit of output increases.
b. the firm can afford more sophis0cated technology in produc0on.
c. as a larger input buyer, the firm can purchase inputs at a lower per unit cost.
d. labor and management can specialize even further in their tasks. - Ans a. as a firm expands
its produc0on, its profit margin per-unit of output increases.
Over the past twenty years, the number of small family farms has fallen significantly and in
their place, there are fewer but larger, farms owned by corpora0ons. Which of the following
best explains this trend?
a. economies of scale in farming
b. diminishing returns to labor in farming
c. diseconomies of scale in farming - Ans a. economies of scale in farming
The president of Toyota's Georgetown plant was quoted as saying, "Demand for high
volumes saps your energy. Over a period of 0me, it eroded our focus [and] thinned out the
exper0se and knowledge we painstakingly built up over the years." This quote suggests that
FINAL WITH COMPLETE SOLUTION RATED A+ NEW
EDITION
If, when a firm doubles all its inputs, its average cost of produc0on decreases, then
produc0on displays
A) diminishing returns.
B) economies of scale.
C) diseconomies of scale.
D) declining fixed costs. - Ans B) economies of scale.
The long-run average cost curve shows
A) the lowest average cost of producing every level of output in the long run.
B) where the most profitable level of output occurs.
C) the average cost of producing where diminishing returns are not present.
D) the plant size or scale that the firm should build. - Ans A) the lowest average cost of
producing every level of output in the long run.
All of the following statements are true of the minimum efficient scale except one. Which
one?
A) All possible economies of scale have been exhausted.
B) The short-run average total cost curve's minimum point is equal to the long run average
cost curve's minimum point.
C) Any increase in the scale of opera0on will encounter diseconomies of scale.
D) An increase in the output level will increase profit. - Ans D) An increase in the output level
will increase profit.
At the minimum efficient scale
,A) all possible economies of scale have not been exhausted.
B) the firm has achieved the lowest possible average cost of produc0on.
C) any increases in the scale of opera0on will encounter further economies of scale.
D) marginal cost is at its minimum. - Ans B) the firm has achieved the lowest possible average
cost of produc0on.
The president of Toyota's Georgetown plant was quoted as saying, "Demand for high
volumes saps your energy. Over a period of 0me, it eroded our focus [and] thinned out the
exper0se and knowledge we painstakingly built up over the years." Based on this quote, what
must be true of the plant's average cost of produc0on curve?
A) It is upward-sloping.
B) It is downward-sloping.
C) It is a ray from the origin.
D) It is U-shaped. - Ans A) It is upward-sloping.
Economies of scope refers to the decrease in average total cost that can occur when a firm
A) produces more than one product.
B) has monopoly power in world markets.
C) controls the raw materials used as inputs.
D) narrows the scope of its regional markets. - Ans A) produces more than one product.
Producing 200 units of good Y and 100 units of good X in the same factory costs the firm
$50,000. In contrast, producing 200 units of good Y in one factory and 100 units of good X in
another factory costs the firm $75,000. So if the firm produces the two goods together, it
achieves:
A) quadra0c returns to scale.
B) diseconomies of scope.
C) economies of scope.
,D) diseconomies of scale and diseconomies of scope. - Ans C) economies of scope.
The marginal revenue product of labor for a firm
A) will increase if the price of the firm's output increases.
B) is the firm's demand curve for labor.
C) will decrease if the firm hires more labor.
D) All of the above are correct. - Ans D) All of the above are correct.
Answer whether the following statements are true or false:
A) Over 0me, more experienced workers will demand higher wages and therefore, will lead to
an increased in the cost of produc0on for the producers.
B) When you produce more, the average cost of produc0on increases. - Ans A) False & B)
False
A reason why a perfectly compe00ve firm's demand for labor curve slopes downward is that
A) each addi0onal unit of labor hired is less efficient than previously hired units.
B) in the short run, as more labor is hired, labor's marginal product falls because of the law of
diminishing returns.
C) the extra cost of hiring addi0onal units of labor increases as a firm hires more units of
labor.
D) the firm's demand curve for the product that uses labor is downward sloping. - Ans B) in
the short run, as more labor is hired, labor's marginal product falls because of the law of
diminishing returns.
The term "derived demand" refers to
A) the demand for financial products called deriva0ves.
B) the demand for a factor of produc0on that is derived from the demand for the good the
factor produces.
, C) a firm's es0mated demand curve derived from sales data.
D) a demand curve that derives from the availability of resources. - Ans B) the demand for a
factor of produc0on that is derived from the demand for the good the factor produces.
12) The price of a factor of produc0on that is in fixed supply is called
A) economic rent.
B) economic profit.
C) a compensa0ng differen0al.
D) opportunity cost. - Ans A) economic rent.
Economies of scale exist as a firm increases its size in the long run because of all of the
following except
a. as a firm expands its produc0on, its profit margin per-unit of output increases.
b. the firm can afford more sophis0cated technology in produc0on.
c. as a larger input buyer, the firm can purchase inputs at a lower per unit cost.
d. labor and management can specialize even further in their tasks. - Ans a. as a firm expands
its produc0on, its profit margin per-unit of output increases.
Over the past twenty years, the number of small family farms has fallen significantly and in
their place, there are fewer but larger, farms owned by corpora0ons. Which of the following
best explains this trend?
a. economies of scale in farming
b. diminishing returns to labor in farming
c. diseconomies of scale in farming - Ans a. economies of scale in farming
The president of Toyota's Georgetown plant was quoted as saying, "Demand for high
volumes saps your energy. Over a period of 0me, it eroded our focus [and] thinned out the
exper0se and knowledge we painstakingly built up over the years." This quote suggests that
