1			Which of the following statements is correct if a firm’s capacity output increases from 400 to 800 and its total costs rise from $60 000 to $110 000?
			A)	The firm is experiencing constant returns to scale.
			B)	The firm is experiencing diseconomies of scale.
			C)	The firm is experiencing economies of scale.
			D)	The firm’s long-run average cost must have decreased, but its short-run average cost could have either decreased or increased.
2			If a firm builds a larger plant and constant returns to scale apply, which of the following statements is correct?
			A)	The capacity output of the larger plant has a lower average cost.
			B)	The capacity output of the larger plant has the same average cost.
			C)	Economies of scale are present.
			D)	LRAC will decrease as output increases.
3			Which of the following statements is correct if the appropriately sized firm is one with a large output?
			A)	Constant returns to scale must begin at low levels of output.
			B)	Economies of scale must prevail until high levels of output are reached.
			C)	Diseconomies of scale must begin at low levels of output.
			D)	Constant returns to scale must be absent.
4			Graphically, what is the effect of technological change?
			A)	The long-run average cost curve will shift down, but the short-run curves will not change.
			B)	Both the long-run and short-run average cost curves will shift down.
			C)	The long-run average cost curve will shift up, but the short-run curves will not change.
			D)	Both the long-run and short-run average cost curves will shift up.
			E)	It will reduce the size of the average firm.

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=png::::/sites/dl/free/1259030687/1059322/Ch07_Intermediate_Q5_6.PNG','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (26.0K)</a>

5			All of the following statements, except one, are correct. Which is the exception?
			A)	Plant 1 has excess capacity at output level Q1.
			B)	Output level Q2 is economic capacity for plant 1.
			C)	Output level Q3 can be produced cheaper in plant 2 than in plant 1.
			D)	Plant 2 achieves minimum efficient scale.
			E)	Economies of scale are experienced when output is increased from Q1 to Q4.

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=png::::/sites/dl/free/1259030687/1059322/Ch07_Intermediate_Q5_6.PNG','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (26.0K)</a>

6			All of the following statements, except one, are correct. Which is the exception?
			A)	AC1, AC2, and AC3 are short-run average cost curves.
			B)	The long-run average cost curve illustrates both economies of and constant returns to scale.
			C)	Constant returns to scale exist between outputs Q4 and Q5.
			D)	Plant 3 achieves minimum efficient scale.
			E)	Both the short run and the long run are illustrated in this graph.

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=png::::/sites/dl/free/1259030687/1059322/Ch07_Intermediate_Q7_8.PNG','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (4.0K)</a>

7			Assume that technology and the price of inputs remain unchanged. If the firm builds a bigger plant and all of its inputs exactly double, what will be its output at economic capacity in the new plant under conditions of constant returns to scale?
			A)	Exactly 800
			B)	Exactly 1000
			C)	More than 500 but less than 1000
			D)	More than 1000

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=png::::/sites/dl/free/1259030687/1059322/Ch07_Intermediate_Q7_8.PNG','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (4.0K)</a>

8			If the firm builds a bigger plant and all of its inputs exactly double, what will be the value of its fixed cost?
			A)	$6000
			B)	$12 000
			C)	$32 000
			D)	More information is needed to answer this question
9			What does MES refer to?
			A)	The marginal efficient size of a firm
			B)	The biggest-sized plant that is capable of achieving economies of scale
			C)	The biggest-sized plant that is capable of achieving diseconomies of scale
			D)	The smallest-sized plant that is capable of achieving diseconomies of scale
			E)	The smallest-sized plant capable of achieving the lowest long-run average cost of production