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| 1 | |
Which of the following is correct in reference to the long run? |
| | A) | All inputs are variable. |
| | B) | Only one input is variable, and all others are fixed. |
| | C) | Only one input is fixed, and all others are variable. |
| | D) | All inputs are fixed. |
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| 2 | |
If economies of scale are present, then: |
| | A) | Average variable costs are falling but average fixed costs are constant |
| | B) | Average costs are constant |
| | C) | Average costs are decreasing |
| | D) | Average costs are increasing |
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| 3 | |
Which of the following statements is correct? |
| | A) | A firm can operate in either the short run or the long run. |
| | B) | While a firm can plan as if it is in the long run, it can operate only in the short run. |
| | C) | The short run is a period of time of less than six months. |
| | D) | The short run is a period of time of less than one year. |
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| 4 | |
What is meant by the term "economic capacity"? |
| | A) | The output level at which the firm is physically unable to increase output |
| | B) | The output level at which average variable cost is at a minimum |
| | C) | The output level at which average total cost is at a minimum |
| | D) | The output level at which marginal cost is at a minimum |
| | E) | 5 |
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| 5 | |
Which of the following statements is correct if constant returns to scale are present? |
| | A) | A doubling of inputs will lead to output more than doubling. |
| | B) | A doubling of inputs will lead to output also doubling. |
| | C) | A doubling of output will lead to inputs more than doubling. |
| | D) | Output remains constant irrespective of inputs. |
| | E) | 5 |
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| 6 | |
Economies of scale: |
| | A) | Is another term for constant returns to scale |
| | B) | Are cost advantages achieved as a result of large-scale operations |
| | C) | Only come in pecuniary forms |
| | D) | Are the same as decreasing returns to scale |
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| 7 | |
The ability of a person to supervise twelve workers just as well as eight is an example of: |
| | A) | Division of labour |
| | B) | Labour specialization |
| | C) | Management specialization |
| | D) | Decreasing returns to scale |
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| 8 | |
All of the following, except one, are examples of pecuniary economies of scale. Which is the exception? |
| | A) | A lower interest rate paid on money borrowed |
| | B) | The ability to sell the by-products of production |
| | C) | The ability to use specialized inputs, such as a robotic assembly line |
| | D) | The ability to obtain lower prices by buying in bulk |
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| 9 | |
Which of the following illustrates the fact that a one-minute television commercial costs a large firm no more than a small firm? |
| | A) | Increasing returns to scale |
| | B) | Pecuniary economies of scale |
| | C) | Technical economies of scale |
| | D) | Management specialization |
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| 10 | |
Which of the following is the most likely cause of diseconomies of scale? |
| | A) | Increasing returns to scale |
| | B) | A small scale of operations and output |
| | C) | Low productivity |
| | D) | Bureaucracy |
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| 11 | |
Which of the following statements is correct if a firm builds a larger plant and, at any particular output, its short-run average cost increases? |
| | A) | Diseconomies of scale must be present. |
| | B) | Economies of scale must be present. |
| | C) | Constant returns to scale must be present. |
| | D) | Economies, diseconomies, and constant returns to scale are all possible. |
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| 12 | |
What does the term "minimum efficient scale" mean? |
| | A) | The smallest size a firm can be in order to minimize both short-run and long-run average costs |
| | B) | The smallest size a firm can be in order to minimize short-run marginal cost |
| | C) | The smallest size a firm can be in order to minimize short-run average cost |
| | D) | The smallest size a firm can be in order to minimize long-run marginal cost |
| | E) | The smallest size a firm can be in order to minimize both short-run and long-run marginal cost |
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| 13 | |
Suppose that a firm's total cost of producing an output of 400 units a day is currently $2000. If technology and the price of inputs remain unchanged, what level of output would be produced if total cost rises to $4000 and increasing returns to scale exist? |
| | A) | 5 units |
| | B) | More than 400 but less than 800 units |
| | C) | 800 units |
| | D) | More than 800 units |
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| 14 | |
Which of the following statements is true about the division of labour? |
| | A) | It causes the marginal product of labour to increase, but it has no effect on the average product of labour. |
| | B) | It was first thought of by David Ricardo in his example of a hat factory. |
| | C) | It is an idea that has little application in the real world. |
| | D) | Its application results in both the marginal and average products of labour increasing. |
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