iVAT Chapter 12

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Question #1

An example of economies of scope is:

A Decreasing per unit costs given increased unit production.

B Increasing per unit costs given increased unit production.

C The 200,000 unit production threshold for GM to make a profit on a car model.

D None of the available answers.

E Google utilizing its information processing capabilities to provide data analysis services to other firms.

Question #2

Proctor and Gamble’s expansion from soap production to shampoo production is an example of:

A None of the available answers.

B Economies of scope.

C Diseconomies of scale.

D Economies of scale.

E Constant returns to scale.

Question #3

The long-run average cost of producing 19 units of output is $56, and the long-run average cost of producing 20 units is also $56. These numbers illustrate:

A Diseconomies of scale.

B Economies of scale.

C Decreasing marginal productivity.

D Constant returns to scale.

Question #4

The long-run average cost curve’s shape is primarily determined by:

A Economies of scope.

B Technological change.

C Economies and diseconomies of scale.

D The macroeconomic conditions.

E Indivisible set up costs.

Question #5

Suppose a firm has diseconomies of scale over all levels of its output, its long-run average total cost curve will:

A Be relatively flat.

B Slope downward.

C Be horizontal.

D Be vertical.

E Be upward sloping.

Question #6

Suppose a firm has economies of scale over all levels of its output and production levels, its long-run average total cost curve will:

A Slope downward.

B Be horizontal.

C Be vertical.

D Slope upward.

E Be extremely upwardly sloping and steep.

Question #7

Suppose that per-unit costs for Alpha-Zeta Co. are $25 when they are producing 50,000 units. Now suppose that the firm increases production to 50,100 units and total costs are $2,000,000 at that level of production.
Question:
What is occurring as the firm increases production from 50,000 to 50,100 units?

A Economies of scale due to the fact that per-unit costs decreased from $25 to $22.

B Diseconomies of scale due to the fact that per-unit costs increased from $25 to $39.92.

C Economies of scale due to the fact that per-unit costs decreased from $25 to $23.56.

D Diseconomies of scale due to the fact that per-unit costs increased from $25 to $41.92.

Question #8

Which of the following is most likely an example of diseconomies of scale?

A The per-unit costs on Excel Publishing Company’s manuals fell after it received a large order from the government.

B Widget Manufacturing doubled its production by opening a new plant that was identical to its old plant.

C Alpha-Beta Inc. raised its price by 10 percent after a 5 percent increase in production costs.

D The Dynasty Co. increased production capacity by 25 percent and experienced a 50 percent increase in its total cost.

Question #9

A firm finds that producing 30,000 books costs $180,000 and producing 40,000 books costs $200,000. This pattern might be explained by:

A Economies of scope.

B Diminishing marginal productivity.

C Diseconomies of scale.

D Economies of scale.

Question #10

Economies of scale are associated with:

A Increased levels of bureaucracy within a firm.

B Increased monitoring costs.

C Declining per-unit costs.

D Increasing per-unit costs.

Question #11

LCD screens replaced plasma screens because a LCD manufacturing facility can produce various sized screens for various products (smartphones, TVs, tablets, etc.). This is an example of a technology:

A Providing inconstant returns to scale.

B Providing constant returns to scale.

C None of the available answers.

D Reducing indivisible setup costs.

E Increasing diseconomies of scale.

Question #12

Which of the following statements is true?

A Many different production processes can be economically efficient, but only the method that involves the lowest possible cost is technically efficient.

B There are many production processes that are both technically and economically efficient, but only one of these involves the lowest possible cost.

C Many different production processes can be technically efficient, but only the method that involves the lowest possible cost is economically efficient.

D There is only one production process that is technically efficient, and this process is also economically efficient.

Question #13

In order to achieve economic efficiency, managers of a firm should:

A Use the highest quality inputs.

B Produce the most output with the least amount of inputs.

C Hire the most highly skilled employees.

D Use the least costly input combination.

E Use the most sophisticated technology.

Question #14

A firm can use 50 workers and 10 machines, 70 workers and 9 machines, or 75 workers and 9 machines to produce 40 chairs. If each worker costs $20 and each machine is rented for $500, the economically efficient input combination is:

A 120 workers and 19 machines.

B 70 workers and 9 machines.