Morehead State University ECON 661 Quiz 7 SP 2015

Test Quiz 7

• Question 1

1 out of 1 points

Which is most likely to be a long-run adjustment for a firm that manufactures cars on an assembly line basis?

Answers: An increase in the amount of steel that the firm buys

A decrease in the number of production managers in the assembly line

A change in production to a redesigned and retooled facility

An increase in the number of shifts of workers from two to three

• Question 2

1 out of 1 points

In the long run, a firm can increase its output quantity, but it will be limited by the size of its existing production plant.

Answers: True

False

• Question 3

1 out of 1 points

If all resources used in the production of a product are increased by 10 percent and output increases by 12 percent, then the firm is experiencing:

Answers:

Economies of scale

Diseconomies of scale

Constant returns to scale

Decreasing average total costs

• Question 4

1 out of 1 points

Which would contribute most to a firm experiencing "economies of scale"?

Answers: Rising long-run average costs

The law of diminishing marginal returns

Specialization of production within a firm

Deterioration of information and control within a firm

• Question 5

1 out of 1 points

In the long run, which of the following is considered a variable cost?

Answers: Expenditures for research and development

Expenditures for raw materials

Expenditures for capital machinery and equipment

all of the above

• Question 6

1 out of 1 points

An isocost line reveals the

Answers: costs of inputs needed to produce along an isoquant.

costs of inputs needed to produce along an expansion path.

input combinations that can be purchased with a given outlay of funds.

output combinations that can be produced with a given outlay of funds.

• Question 7

1 out of 1 points

Assume that a firm spends $500 on two inputs, labor (graphed on the horizontal axis) and capital (graphed on the vertical axis). If the wage rate is $20 per hour and the rental cost of capital is $25 per hour, the slope of the isocost curve will be

Answers: 500.

25/500.

-4/5.

25/20 or 1.25

• Question 8

1 out of 1 points

At the optimum combination of two inputs,

Answers: the slopes of the isoquant and isocost curves are equal.

costs are minimized for the production of a given output.

the marginal rate of technical substitution equals the ratio of input prices.

all of the above

• Question 9

1 out of 1 points

Which of the following are characteristics of a typical isoquant?

Answers: All input combinations on the isoquant will produce the same level of output.

The marginal rate of technical substitution decreases as more labor is substituted for less capital.

A change in input prices shifts the isoquant map.

both a and b

• Question 10

1 out of 1 points

In the long run a firm will choose a plant size that has the:

Answers: Minimum of average fixed costs

Capacity to produce the largest quantity of the product

Minimum average total cost of producing the target level of output

Maximum level of resource use per unit of the total product of output

• Question 11

1 out of 1 points

XYZ Manufacturing Enterprise’s production process exhibits economies of scale. Currently their long-run average cost is $1/unit. If XYZ doubles its use of all inputs, its new long-run average total cost will be:

Answers: $1/unit

Less than $1/unit

Greater than $2/unit

Greater than $1/unit but less than $2/unit

• Question 12

1 out of 1 points

Which of the following business combinations likely exhibit economies of scope?

Answers: Banking services for individuals and banking services for other business

Retail clothing stores and electronic (internet) clothing sales

Hospitals that perform heart surgery and hospitals that perform cosmetic surgery

all of the above