ECON 528 - Module 4 (QUESTIONS AND ANSWERS)
VERIFIED 100% CORRECT!!
Which of the following is a reason why a firm would experience diseconomies of scale?
a. As the size of the firm increases it becomes more difficult to coordinate the operations of
its manufacturing plants.
b. To finance an increase in the size of its plant a firm must borrow more money or sell more
shares of stock.
c. As the size of the firm increases, it becomes more difficult to find markets where it doesn't
already have operations.
d. As the size of the firm increases, it must operate in other countries where differences in
language, customs and laws increase its average costs.
Feedback correct answers a. As the size of the firm increases it becomes more difficult to
coordinate the operations of its manufacturing plants.
The minimum efficient scale is
a. level of operation where long-run average costs are lowest.
b. the plant size that yields the most profit.
c. the level of output where diminishing returns have not set in yet.
d. the smallest output level where the firm finally reaches productive efficiency. correct
answers level of operation where long-run average costs are lowest.
Which of the following is not a reason why firms experience economies of scale?
a. Workers and managers can become more specialized, enabling them to be more
productive.
b. Technology can make it possible to increase production with a smaller increase in at least
one input.
c. As output increases, the managers can begin to have difficulty coordinating the operations
of their firms.
d. Larger firms may be able to purchase inputs at lower costs than smaller competitors.
correct answers c. As output increases, the managers can begin to have difficulty
coordinating the operations of their firms.
Economies of scope exist between book publishing and magazine publishing if
a. the cost of a publishing a book is not subject to diminishing marginal returns.
, b. the cost of publishing a book falls over time as the publisher acquires more experience.
c. the cost of publishing a magazine is lower for firms that publish many magazines than for
firms that publish only one magazine.
d. the cost of publishing a magazine is lower for book publishers than for other firms. correct
answers d. the cost of publishing a magazine is lower for book publishers than for other
firms.
Learning curves represent the relationship between
a. average variable cost and the rate of increase in technology
b. total cost and technology
c. average variable cost and the cumulative number of units
produced
d. average variable cost and the number of units produced per time period correct answers c.
average variable cost and the cumulative number of units produced
If the marginal product of labor is 2, the marginal product of capital is 4, the wage rate is $3,
the rental price of capital is $6, and the price of output is $1.50, then the firm should
a. Decrease output by reducing the quantity of capital, reducing the number of units of labor,
or both
b. Increase output by hiring more labor, more capital, or both
c. Hold output constant, but hire more labor and less capital
d. None of the above is correct correct answers d. None of the above is correct
Answer whether the following statement is true or false:
If the marginal revenue product of an input is less than the price of that input, the input is too
expensive and the firm should stop using that input and try to find some alternate inputs.
Select one:
True
False correct answers False
Answer whether the following statement is true or false:
Economic rent for an input is higher if the input is abundant is supply
Select one:
True
False correct answers False
VERIFIED 100% CORRECT!!
Which of the following is a reason why a firm would experience diseconomies of scale?
a. As the size of the firm increases it becomes more difficult to coordinate the operations of
its manufacturing plants.
b. To finance an increase in the size of its plant a firm must borrow more money or sell more
shares of stock.
c. As the size of the firm increases, it becomes more difficult to find markets where it doesn't
already have operations.
d. As the size of the firm increases, it must operate in other countries where differences in
language, customs and laws increase its average costs.
Feedback correct answers a. As the size of the firm increases it becomes more difficult to
coordinate the operations of its manufacturing plants.
The minimum efficient scale is
a. level of operation where long-run average costs are lowest.
b. the plant size that yields the most profit.
c. the level of output where diminishing returns have not set in yet.
d. the smallest output level where the firm finally reaches productive efficiency. correct
answers level of operation where long-run average costs are lowest.
Which of the following is not a reason why firms experience economies of scale?
a. Workers and managers can become more specialized, enabling them to be more
productive.
b. Technology can make it possible to increase production with a smaller increase in at least
one input.
c. As output increases, the managers can begin to have difficulty coordinating the operations
of their firms.
d. Larger firms may be able to purchase inputs at lower costs than smaller competitors.
correct answers c. As output increases, the managers can begin to have difficulty
coordinating the operations of their firms.
Economies of scope exist between book publishing and magazine publishing if
a. the cost of a publishing a book is not subject to diminishing marginal returns.
, b. the cost of publishing a book falls over time as the publisher acquires more experience.
c. the cost of publishing a magazine is lower for firms that publish many magazines than for
firms that publish only one magazine.
d. the cost of publishing a magazine is lower for book publishers than for other firms. correct
answers d. the cost of publishing a magazine is lower for book publishers than for other
firms.
Learning curves represent the relationship between
a. average variable cost and the rate of increase in technology
b. total cost and technology
c. average variable cost and the cumulative number of units
produced
d. average variable cost and the number of units produced per time period correct answers c.
average variable cost and the cumulative number of units produced
If the marginal product of labor is 2, the marginal product of capital is 4, the wage rate is $3,
the rental price of capital is $6, and the price of output is $1.50, then the firm should
a. Decrease output by reducing the quantity of capital, reducing the number of units of labor,
or both
b. Increase output by hiring more labor, more capital, or both
c. Hold output constant, but hire more labor and less capital
d. None of the above is correct correct answers d. None of the above is correct
Answer whether the following statement is true or false:
If the marginal revenue product of an input is less than the price of that input, the input is too
expensive and the firm should stop using that input and try to find some alternate inputs.
Select one:
True
False correct answers False
Answer whether the following statement is true or false:
Economic rent for an input is higher if the input is abundant is supply
Select one:
True
False correct answers False
