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1 | |
A production technique is technically efficient if |
| | A) | output is maximized |
| | B) | inputs are minimized |
| | C) | there is no way to make a given output using less of one input and no more of the other inputs |
| | D) | costs are minimized |
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2 | |
A period of time long enough for the firm to adjust all production inputs is described as the long run |
| | A) | TRUE |
| | B) | FALSE |
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3 | |
Decreasing returns to scale means that ___________ as ______________ |
| | A) | short run marginal costs rises, output rises |
| | B) | long run marginal cost rises, output rises |
| | C) | short run average cost rises, output rises |
| | D) | long run average cost rises, output rises |
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4 | |
If a long run average cost curve is falling from left to right this is an example of |
| | A) | increasing returns to scale |
| | B) | decreasing returns to scale |
| | C) | constant returns to scale |
| | D) | the minimum efficient scale |
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5 | |
If a firm is not operating at the output necessary to achieve all scale economies, it has not achieved its |
| | A) | Efficient scale |
| | B) | Average efficient scale |
| | C) | Maximum efficient scale |
| | D) | Minimum efficient scale |
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6 | |
When average cost is falling marginal cost is __________ and when average cost is rising marginal cost is __________ |
| | A) | greater than average cost, greater than average cost |
| | B) | less than average cost, greater than average cost |
| | C) | less than average cost, less than average cost |
| | D) | greater than average cost, less than average cost |
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7 | |
The firms long run output decision will be where |
| | A) | long run average cost is lowest |
| | B) | marginal revenue equals output |
| | C) | marginal revenue equals long run marginal cost |
| | D) | marginal cost equals output |
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8 | |
Short run average total costs are equal to the sum of _________ and __________ |
| | A) | short run opportunity costs, profit |
| | B) | short run variable costs, profit |
| | C) | short run average variable costs, profit |
| | D) | short run average variable costs, short run average fixed costs |
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9 | |
The short run marginal cost curve cuts the short run total cost curve and short run average variable cost curve ______________ |
| | A) | At their lowest points |
| | B) | When they are declining |
| | C) | When they are increasing |
| | D) | When marginal revenue is zero |
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10 | |
Given a long run average cost curve, every point represents a tangency with the lowest point of a short run average cost curve for a fixed plant size |
| | A) | TRUE |
| | B) | FALSE |
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11 | |
Holding all factors constant except one and increasing a variable factor is expected to lead to steadily decreasing marginal product of that factor. This is an example of |
| | A) | decreasing returns to scale |
| | B) | the law of diminishing returns |
| | C) | constant returns to scale |
| | D) | an inefficient production technique |
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12 | |
In the short run a firm will produce zero output if __________ |
| | A) | price is greater than short run average total cost |
| | B) | price is between short run average total cost and short run average variable cost |
| | C) | price is less than short run average variable cost |
| | D) | profit is zero |
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13 | |
In a competitive industry each buyer and seller _____________ |
| | A) | Is a price taker |
| | B) | Produce different products |
| | C) | Believes that can influence price |
| | D) | Prevents the entry of competitors |
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14 | |
For a competitive firm, its short run supply curve is ________ and its long run supply curve is __________ |
| | A) | SMC, LMC |
| | B) | SMC above SAVC, LMC above LAC |
| | C) | SMC below SAVC, LMC above LAC |
| | D) | SMC below SAVC, LMC below LAC |
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15 | |
For perfect competition to work there must be |
| | A) | many buyers and sellers |
| | B) | a standard product |
| | C) | free entry and exit |
| | D) | perfect information |
| | E) | all of the above |
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16 | |
If there are short run excess profits in a competitive industry, in the long run they will disappear because of new entrants |
| | A) | TRUE |
| | B) | FALSE |
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17 | |
A competitive firms demand curve is |
| | A) | horizontal |
| | B) | vertical |
| | C) | downward sloping |
| | D) | fairly elastic |
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18 | |
A competitive firm produces a level of output at which _________ |
| | A) | price is greater than marginal cost |
| | B) | price equals marginal cost |
| | C) | price is less than marginal cost |
| | D) | none of the above |
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2003 A McGraw-Hill Online Learning Centre