Download Topic 5 - CSUSAP

Topic 5 test
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers
the question.
1) Which of the following is exclusively a short run concept?
A) total variable cost. B) economies of scale.
C) average fixed cost. D) none of the above
Table 10.1
Productivity of Jefferson's Cleaners
Number of Work0
ers
1
2
3
4
5
6
7
8
9
2) If labour is the only variable factor of production, and each worker is paid $60.00 per day, what is the
average variable cost to Jefferson's Cleaners of dry cleaning 100 suits each day?
A) $7. B) $6.00 C) $4.71 D) $75.00
3) A period of time in which the quantity of at least one input is fixed and the quantity of the other inputs
can be varied is called
A) the market period. B) the long run.
C) the short run. D) the intermediate run.
4) If General Motors Holden doubles the quantity of the capital and labour it uses to produce cars and the
quantity produced increases from 100,000 to 150,000 each month, that would be an example of
A) increasing marginal returns. B) constant marginal returns.
C) decreasing marginal returns. D) none of the above
5) Which of the following occurs only in the short run?
A) diminishing marginal returns B) diseconomies of scale
C) both of the above D) neither of the above
6) When the average product of labour is greater than the marginal product of labour,
A) the marginal product of labour must be increasing.
B) the average product of labour is decreasing.
C) there must be increasing marginal returns.
D) all of the above
7) Which of the following would cause a movement rightward along the AVC curve at Barney's Bagel
Bakery?
A) an increase in the price of flour that Barney uses to make his bagels
B) an increase in the number of bagels that Barney's produces each day
C) an increase in the fire insurance premiums that Barney pays on the building he owns and uses
D) all of the above
8) When long run average cost decreases as output increases there are definitely
A) increasing marginal returns. B) economies of scale.
C) both of the above D) neither of the above
9) A firm's total cost (TC) is equal to the sum of its
A) fixed cost plus variable cost.
B) fixed cost plus sunk cost plus variable cost plus marginal cost.
C) fixed cost plus marginal cost.
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D) fixed cost plus variable cost plus marginal cost.
Table 10.2
Daily Productivity of Decent Donuts
Number of Work0
ers
1
2
3
4
5
6
7
8
9
10
10) What is the average product of labour each day when Decent Donuts employs five workers?
A) 17.2 dozen donuts per day B) 16.66 dozen donuts per day
C) 20 dozen donuts per day D) 22 dozen donuts per day
SHORT ANSWER. Write the word or phrase that best completes each statement or answers th
e question.
11) What is the meaning of increasing, constant, and decreasing returns to scale?
12) What is the difference between diminishing marginal returns and diseconomies of scale?
13) Will a decrease in input prices affect the short run and long run cost curves in the same way?
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14) How do the marginal and average products of labour affect a firm's marginal and average variable
costs in the short run?
15) What is the difference between the short run and the long run?
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
16) Diminishing marginal returns and diseconomies of scale are two different names for the same thing.
17) When costs for a firm are being considered over the long run, the firm's total fixed cost will equal zero.
18) The marginal cost curve intersects the average fixed, average variable, and average total cost curves all
at their minimum points.
19) Over the range of output for which the average product of labour is falling, average variable cost must
be rising.
20) A firm's long run average cost curve is derived by adding together its short run average total cost
curves.
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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers
the question.
1) C
2) C
3) C
4) D
5) A
6) B
7) B
8) B
9) A
10) A
SHORT ANSWER. Write the word or phrase that best completes each statement or answers th
e question.
11) When the quantity of all inputs is increased, for example by 50%, output will increase. If output
increases by more than 50%, there are increasing returns to scale. If output increases by exactly 50%, there
constant returns to scale. If output increases by less than 50%, there are decreasing returns to scale.
12) Diminishing marginal returns is a short run concept and occurs when increases in output become
smaller and smaller as more units of a variable input are combined with some fixed input. Diseconomies of
scale is a long run concept and occurs when, as output increases, long-run average cost increases.
13) Yes. A decrease in input prices will cause the entire family of short run cost curves to shift vertically
downward. This shift indicates that any level of output can now be produced at a lower cost than before.
Since the long run curve is derived from the short run curves, that will also shift vertically downward.
14) Over the range of output for which the marginal product is increasing, marginal cost will be decreasing
and vice versa. At the level of output for which the marginal product is at its maximum point, marginal
cost will be at its minimum. And, over the range of output for which the average product is increasing,
average variable cost will be decreasing and vice versa. Finally, the level of output at which the average
product is at its maximum point is the same level at which average variable cost will be at its minimum.
15) The short run is a time period so short that the firm cannot change the quantity of at least one input,
say capital or plant size for a manufacturer or land for a farmer. The only way to increase output, therefore,
is by combining more units of the variable inputs with the fixed input. The long run is a time period
sufficiently long that a firm can change the quantity of all inputs. Nothing is fixed so output can be
produced with whatever combination of inputs the firm chooses.
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
16) FALSE
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17) TRUE
18) FALSE
19) TRUE
20) FALSE
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