Production and Costs of the Firm Quiz

A  buys extra machines for its workers to use.

B  allows fixed cost to become variable.

C  retrains Joe the welder as a painter and Pat the painter as a welder.

D  replaces unskilled labor with automated machinery.

A  firms always make handsome profits.

B  the government feels responsible for breaking up the firm.

C  costs fall as the size of the product is increased.

D  costs per unit decline as output expands.

A  mortgage on the building

B  steel to produce refrigerators

C  worker bonuses

D  electricity

A  difference between total cost and total expenditure.

B  change in total cost resulting from the purchase of one more unit of the variable input.

C  change in total cost resulting from the production of one more unit of output.

D  difference between total fixed cost and total variable cost.

A  decreasing returns to scale.

B  increasing costs per unit of output.

C  increasing returns to scale.

D  constant returns to scale.

A  spreading fixed costs over larger outputs and increasing returns to the variable inputs.

B  rising total product.

C  declining administrative costs as output increases.

D  falling fixed costs.

A  the airline industry has constant returns to scale.

B  there are increasing returns to scale in the airline industry.

C  airlines are experiencing decreasing returns to scale.

D  the larger airlines are not profitable.

A  output.

B  marginal physical product times output.

C  total revenue product.

D  total consumer’s surplus.

A  increases as output increases.

B  remains constant even if the firm shuts down.

C  is always zero.

D  declines as output increases.

A  rent of airport space

B  insurance

C  jet fuel

D  property taxes

A  is a composite of short-run AC curves.

B  depends on the firm’s planning horizon.

C  shows the lowest possible short-run AC corresponding to each output level.

D  All of these are correct.

A  large firms are less-efficient producers.

B  there is no economic reason to break up large firms that may have some control over the market.

C  large firms have a concentration of economic power.

D  many smaller firms would be less-efficient producers.

A  it must have increasing returns to each input at low levels of production and decreasing returns to each input at high levels of production.

B  its fixed cost rises as output rises.

C  it must have increasing returns to scale at low levels of production and decreasing returns to scale at high levels of production.

D  the firm can maximize its output by operating at the point of minimum long-run average cost.

A  change its input mix so that the marginal physical product of the input whose price has risen falls and the marginal physical product of the other input rises.

B  buy more of the higher priced input and less of the lower priced input.

C  reduce its output.

D  buy less of that input and more of the other input.

A  marginal physical product of that input must be below its average physical product.

B  producer should expand the use of that input.

C  price of the input will automatically rise in a free market.

D  producer should reduce the use of that input.

A  how much the last input added to the total amount of revenue.

B  how much the last input added to the total amount of production.

C  how much profit will be made at each level of production.

D  at what point to stop adding inputs to the production process.

A  output quantity and input price.

B  output quantity and output price.

C  input quantity and input price.

D  input quantity and output price.

A  decreasing returns to scale.

B  increasing long-run average cost.

C  decreasing short-run average variable cost.

D  diminishing returns to labor.