ULL ECON 528 – FINAL || QUESTIONS AND
ANSWERS SOLVED 100% CORRECT!!!
If, when a firm doubles all its inputs, its average cost of production decreases, then
production displays
A) diminishing returns.
B) economies of scale.
C) diseconomies of scale.
D) declining fixed costs. correct answers B) economies of scale.
The long-run average cost curve shows
A) the lowest average cost of producing every level of output in the long run.
B) where the most profitable level of output occurs.
C) the average cost of producing where diminishing returns are not present.
D) the plant size or scale that the firm should build. correct answers A) the lowest average
cost of producing every level of output in the long run.
All of the following statements are true of the minimum efficient scale except one. Which
one?
A) All possible economies of scale have been exhausted.
B) The short-run average total cost curve's minimum point is equal to the long run average
cost curve's minimum point.
C) Any increase in the scale of operation will encounter diseconomies of scale.
D) An increase in the output level will increase profit. correct answers D) An increase in the
output level will increase profit.
At the minimum efficient scale
A) all possible economies of scale have not been exhausted.
B) the firm has achieved the lowest possible average cost of production.
C) any increases in the scale of operation will encounter further economies of scale.
D) marginal cost is at its minimum. correct answers B) the firm has achieved the lowest
possible average cost of production.
The president of Toyota's Georgetown plant was quoted as saying, "Demand for high
volumes saps your energy. Over a period of time, it eroded our focus [and] thinned out the
expertise and knowledge we painstakingly built up over the years." Based on this quote, what
must be true of the plant's average cost of production curve?
A) It is upward-sloping.
B) It is downward-sloping.
C) It is a ray from the origin.
D) It is U-shaped. correct answers A) It is upward-sloping.
Economies of scope refers to the decrease in average total cost that can occur when a firm
A) produces more than one product.
B) has monopoly power in world markets.
C) controls the raw materials used as inputs.
D) narrows the scope of its regional markets. correct answers A) produces more than one
product.
,Producing 200 units of good Y and 100 units of good X in the same factory costs the firm
$50,000. In contrast, producing 200 units of good Y in one factory and 100 units of good X in
another factory costs the firm $75,000. So if the firm produces the two goods together, it
achieves:
A) quadratic returns to scale.
B) diseconomies of scope.
C) economies of scope.
D) diseconomies of scale and diseconomies of scope. correct answers C) economies of scope.
The marginal revenue product of labor for a firm
A) will increase if the price of the firm's output increases.
B) is the firm's demand curve for labor.
C) will decrease if the firm hires more labor.
D) All of the above are correct. correct answers D) All of the above are correct.
Answer whether the following statements are true or false:
A) Over time, more experienced workers will demand higher wages and therefore, will lead
to an increased in the cost of production for the producers.
B) When you produce more, the average cost of production increases. correct answers A)
False & B) False
A reason why a perfectly competitive firm's demand for labor curve slopes downward is that
A) each additional unit of labor hired is less efficient than previously hired units.
B) in the short run, as more labor is hired, labor's marginal product falls because of the law of
diminishing returns.
C) the extra cost of hiring additional units of labor increases as a firm hires more units of
labor.
D) the firm's demand curve for the product that uses labor is downward sloping. correct
answers B) in the short run, as more labor is hired, labor's marginal product falls because of
the law of diminishing returns.
The term "derived demand" refers to
A) the demand for financial products called derivatives.
B) the demand for a factor of production that is derived from the demand for the good the
factor produces.
C) a firm's estimated demand curve derived from sales data.
D) a demand curve that derives from the availability of resources. correct answers B) the
demand for a factor of production that is derived from the demand for the good the factor
produces.
12) The price of a factor of production that is in fixed supply is called
A) economic rent.
B) economic profit.
C) a compensating differential.
D) opportunity cost. correct answers A) economic rent.
Economies of scale exist as a firm increases its size in the long run because of all of the
following except
a. as a firm expands its production, its profit margin per-unit of output increases.
b. the firm can afford more sophisticated technology in production.
,c. as a larger input buyer, the firm can purchase inputs at a lower per unit cost.
d. labor and management can specialize even further in their tasks. correct answers a. as a
firm expands its production, its profit margin per-unit of output increases.
Over the past twenty years, the number of small family farms has fallen significantly and in
their place, there are fewer but larger, farms owned by corporations. Which of the following
best explains this trend?
a. economies of scale in farming
b. diminishing returns to labor in farming
c. diseconomies of scale in farming correct answers a. economies of scale in farming
The president of Toyota's Georgetown plant was quoted as saying, "Demand for high
volumes saps your energy. Over a period of time, it eroded our focus [and] thinned out the
expertise and knowledge we painstakingly built up over the years." This quote suggests that
a. as Toyota expanded its capacity, it experienced diseconomies of scale.
b. high demand for Toyota's cars prevented the company from focusing on its strength: auto
design.
c. Toyota was experiencing an excess demand for its automobiles which it had difficulty
keeping up with.
d. Toyota was focused on "churning" out cars for which it did not invest sufficiently in
training its workers. correct answers a. as Toyota expanded its capacity, it experienced
diseconomies of scale.
If the marginal product of capital is six times as large as the marginal product of labor and the
price of capital is three times as large as the price of labor, for costs to be minimized:
Select one:
a. more labor should be used but the use of capital should remain constant.
b. more capital should be used and less labor.
c. more labor should be used and less capital.
d. the price of capital must fall. correct answers b. more capital should be used and less labor.
The marginal revenue product of labor for a firm
Select one:
a. will decrease if the firm hires more labor.
b. All of the above are correct.
c. is the firm's demand curve for labor.
d. will increase if the price of the firm's output increases. correct answers b. All of the above
are correct.
Would you expect economies of scope to occur in the following situation; Producing two
goods that use the same resource
Select one:
a. I cannot answer based on the available information
b. I do not know.
c. No
d. Yes correct answers d. Yes
Would you expect economies of scope to occur in the following situation; Producing two
goods that are complementary to each for the buyer such as coffee and sugar.
Select one:
, a. Cannot be determined based on the provided information
b. Yes
c. No
d. I do not know correct answers c. No
Evaluate the Statement; Cost approach is the easier approach to achieve optimal production
when the firm is at the start of their production plan
Select one:
a. True
b. False correct answers b. False
Evaluate the Statement; Resource approach is the easier approach to achieve optimal
production after the firm has already established a production plan and requires only
incremental changes in their plan to achieve the maximum possible profit
Select one:
a. True
b. False correct answers b. False
The demand for labor is described as a derived demand because
a. it is derived by workers seeking to earn income to fund the consumption of goods and
services.
b. it is derived by producers seeking to make profits by starting new businesses.
c. it is derived from the demand for products that use labor in the production process.
d. it is derived from government institutions which rely on labor markets for the purpose of
raising tax revenue. correct answers c. it is derived from the demand for products that use
labor in the production process.
Which type of workers is most likely to enjoy substantial economic rent?
Select one:
a. Those with low wages which result from no need to have a period of training.
b. Those with high wages which result from them possessing the innate ability to develop
some skill to a very high level
c. Those with high wages which compensate them for unpleasant aspects of their jobs.
d. Those with low wages which can be paid because their jobs have other very pleasant
aspects. correct answers b. Those with high wages which result from them possessing the
innate ability to develop some skill to a very high level
What is the difference between "diminishing marginal returns" and "diseconomies of scale"?
a. Diminishing marginal returns, which applies only in the short run when at least one factor
is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in
the long run when all factors are variable, explains why average cost increases.
b. Diminishing marginal returns, which applies only in the long run when all factors are
variable, explains why average variable cost increases, while diseconomies of scale, which
applies in the short run when at least one factor is fixed, explains why average total cost
increases.
c. Both concepts explain why average total cost increases after some point but diminishing
marginal returns applies only in the short run when there is at least one fixed factor, while
diseconomies of scale apply in the long run when all factors are variable.
d. Both concepts explain wh correct answers a. Diminishing marginal returns, which applies
only in the short run when at least one factor is fixed, explains why marginal cost increases,
