University of Lethbridge – Department of Economics
ECON 3030 – Managerial Economics
Instructor: Michael G. Lanyi
Spring 2015
Problem Set #8 / Add Help
Chapters 6&7
Production & Cost SR&LR
Answer Sheet
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ECON 3030 Managerial Economics Michael G. Lanyi
1) The long run is a time frame in which
A) the firm can hire all the workers it wants to employ, but it does not have sufficient time to buy more equipment.
B) the firm is able to maximize revenue.
C) the firm may want to build a bigger plant, but cannot do so.
D) economic efficiency is achieved.
E) the quantities of all factors of production can be varied.
2) The short run is a time frame in which
A) the firm is not able to hire more workers.
B) the amount of output produced is fixed.
C) there is a shortage of most factors of production.
D) at least one factor of production is fixed.
E) there is not enough time to make all of the decisions necessary to maximize profit.
3) A production function is the relationship between the maximum output attainable and the
A) price of output.
B) change in technology.
C) demand for output.
D) quantities of inputs used.
E) amount of labour used.
4) A firmʹs total product curve describes
A) the minimum cost of producing a given amount of output.
B) the maximum output that a given quantity of labour can produce.
C) how the maximum attainable output varies as the size of the firmʹs plant varies, given the quantity of labour employed.
D) how the management of the firm makes decisions over the short run.
E) how the amount of labour varies as the amount of output varies.
5) Marginal product of labour is the increase in total product that results from a
A) one-unit increase in the quantity of labour employed, other inputs remaining the same.
B) one-unit increase in the quantity of fixed inputs employed, holding the quantity of the variable inputs constant.
C) one-unit increase in both the quantity of variable and fixed inputs.
D) change in the cost of labour.
E) 1 percent change in the quantity of labour and the quantity of capital employed.
6) Marginal product
A) is always negative.
B) is the slope of the total product curve.
C) is always zero.
D) lies between zero and one.
E) equals average product minus total product.
7) The average product of labour equals
A) the slope of the total product curve.
B) the slope of the marginal product curve.
C) the increase in total product divided by the increase in labour employed.
D) total product divided by the quantity of labour employed.
E) the difference between the total product and the marginal product of labour.
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ECON 3030 Managerial Economics Michael G. Lanyi
8) If energy (E) is the only input used to produce output (Q), what is the formula for average product of energy?
A) ΔQ/ΔE
B) Q/E
C) ΔE/ΔQ
D) E/Q
E) Q*E
9) If energy (E) is the only input used to produce output (Q) , what is the formula for marginal product of energy?
A) Q*E
B) Q/E
C) ΔQ/ΔE
D) ΔE/ΔQ
E) E/Q
Refer to Table 8/9.2.1 below to answer the following 4 questions.
Labour Output
0 0
1 3
2 12
3 19
4 23
5 25
10) Refer to Table 8/9.2.1 which gives Taniaʹs total product schedule. The marginal product when the firm increases the number
of workers from 3 to 4 per day is
A) 6 teapots.
B) 2 teapots.
C) 9 teapots.
D) 7 teapots.
E) 4 teapots.
11) Refer to Table 8/9.2.1 which gives Taniaʹs total product schedule. The average product when the firm hires two workers is
A) 3 teapots per worker.
B) 6 teapots per worker.
C) 7 teapots per worker.
D) 9 teapots per worker.
E) 12 teapots per worker.
12) Refer to Table 8/9.2.1 which gives Taniaʹs total product schedule. Average product of labour reaches its maximum for the
________ worker.
A) first
B) second
C) third
D) fourth
E) fifth
13) Refer to Table 8/9.2.1 which gives Taniaʹs total product schedule. Marginal product of labour reaches its maximum when the
number of workers increases from
A) 0 to 1.
B) 1 to 2.
C) 2 to 3.
D) 3 to 4.
E) 4 to 5
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ECON 3030 Managerial Economics Michael G. Lanyi
Use Figure 8/9.2.1 below to answer the following 4 questions.
14) Refer to Figure 8/9.2.1 which illustrates Taniaʹs total product curve. Which one of the following statements is false?
A) All the points above the curve are unattainable.
B) All the points below the curve are attainable.
C) All the points below the curve are inefficient.
D) The cost of producing at point B equals the cost of producing at point C.
E) All the points on the curve are attainable.
15) Refer to Figure 8/9.2.1 which illustrates Taniaʹs total product curve. Which one of the following statements is true?
A) The points above the curve are attainable and inefficient.
B) The points below the curve are attainable and inefficient.
C) The points below the curve are inefficient and unattainable.
D) The points on the curve are efficient and unattainable.
E) Marginal product is equal at every point on the total product curve.
16) Refer to Figure 8/9.2.1 which illustrates Taniaʹs total product curve. Average product of labour reaches its maximum for the
________ worker.
A) first
B) second
C) third
D) fourth
E) fifth
17) Refer to Figure 8/9.2.1 which illustrates Taniaʹs total product curve. Marginal product of labour reaches its maximum when
the number of workers increases from
A) zero to 1.
B) 1 to 2.
C) 2 to 3.
D) 3 to 4.
E) 4 to 5.
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ECON 3030 Managerial Economics Michael G. Lanyi
18) Diminishing marginal returns refers to a situation where the ________ of an additional worker is less than the ________ of the
previous worker.
A) marginal cost; marginal cost
B) average cost; average cost
C) marginal product; marginal product
D) average product; average product
E) marginal product; average product
Use Table 8/9.2.4 below to answer the following question.
#of Workers Total Product
1 0
2 3
3 7
4 10
5 12
19) Refer to Table 8/9.2.4. The table gives the total product schedule of workers who harvest corn. Diminishing marginal returns
begin when the ________ is hired.
A) 1st labourer
B) 2nd labourer
C) 3rd labourer
D) 4th labourer
E) There are no diminishing marginal returns since total product always rises.
20) When the marginal product of labour is less than the average product of labour,
A) the average product of labour is increasing.
B) the marginal product of labour is increasing.
C) the total product curve is negatively sloped.
D) the firm is experiencing diminishing marginal returns.
E) None of the above.
21) When the marginal product of labour is greater than the average product of labour,
A) the average product of labour is increasing.
B) the marginal product of labour is increasing.
C) the total product curve is negatively sloped.
D) the firm is experiencing diminishing marginal returns.
E) the firm is experiencing constant returns.
22) Suppose the marginal product of energy equals the average product of energy. This implies that
A) marginal product is negative.
B) average product is at its maximum value.
C) marginal product is at its maximum value.
D) the marginal product curve is upward sloping.
E) average product is at its minimum value.
23) Which one of the following statements is correct?
A) When marginal product is increasing, average product is decreasing.
B) When average product is less than zero, marginal product is positive.
C) When marginal product is increasing and greater than average product, average product is increasing.
D) When marginal product is zero, total product is at its minimum.
E) When average product exceeds marginal product, marginal product is increasing.
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ECON 3030 Managerial Economics Michael G. Lanyi
Use Table 8/9.2.3 below to answer the following questions.
Output Marginal Product Average Product
Labour (rubbers boats (rubber boats (rubber boats
(workers per week) per week) per worker) per worker)
0 0
1
1 1 1
1
2 2 1
2
3 4 C)...............
A)...............
4 7 D)...............
4
5 11 2.2
B)...............
6 14 E)...............
2
7 16 2.28
1
8 17 2.13
1
9 18 2
0
10 18 1.8
24) Refer to Table 8/9.2.3. The value of A is
A) 1.75.
B) 2.
C) 3.
D) 7.
E) 4.
25) Refer to Table 8/9.2.3. The maximum value of marginal product occurs where output equals ________, while the maximum
value of average product occurs where output equals ________.
A) 5; 6
B) 6; 5
C) 7; 14
D) 9; 14
E) 14; 11
26) If the marginal product of the fifth worker is 34, then the total product of five workers
A) is 35.
B) is 24.
C) is 170.
D) is 6.8.
E) cannot be calculated with the information given.
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ECON 3030 Managerial Economics Michael G. Lanyi
Use the figure below to answer the following question.
Figure 8/9.3.1
27) Refer to Figure 8/9.3.1. Which one of the following statements is false?
A) The total fixed cost curve A.
B) Total variable cost and total cost both increase with output.
C) The vertical gap between curves B and C is equal to total variable cost.
D) Marginal cost is equal to the slope of curve C.
E) Total fixed cost is constant.
28) Choose the correct equation.
A) TFC=TC/Q
B) TFC=TC-AVC
C) TFC=TC-TVC
D) TFC=TVC/Q
E) TFC=TVC-TC
29) Marginal cost is equal to
A) total cost divided by output.
B) the increase in total cost divided by the increase in output.
C) the increase in total cost divided by the increase in labour input, given the amount of capital.
D) total variable cost minus total fixed cost.
E) the increase in total cost divided by the increase in variable cost.
30) Which one of the following statements is false?
A) Total variable cost plus total fixed cost equals total cost.
B) Marginal cost equals the change in total cost divided by the change in output.
C) Average total cost is calculated by dividing total cost by the level of output.
D) The average cost curve is U-shaped.
E) The total cost curve is U-shaped.
31) Which one of the following statements is false?
A) Average total cost is total cost per unit of output.
B) Average fixed cost plus average variable cost equals average total cost.
C) Marginal cost is the increase in total cost resulting from a one-unit increase in output.
D) Total cost equals fixed cost plus average cost.
E) Marginal cost depends on the amount of labour hired.
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ECON 3030 Managerial Economics Michael G. Lanyi
Use Table 8/9.3.1 below to answer the following questions.
32) Refer to Table 8/9.3.1, which gives Taniaʹs total cost schedule. The average fixed cost of producing 9 teapots per day is
A) $2.22.
B) $1.25.
C) $10.00.
D) $1.11.
E) $1.54.
33) Refer to Table 8/9.3.1, which gives Taniaʹs total cost schedule. The average total cost of producing 16 teapots per day is
A) $2.
B) $5.
C) $3.33.
D) $7.50.
E) $5.51.
34) Refer to Table 8/9.3.1, which gives Taniaʹs total cost schedule. When output increases from 4 to 9 teapots, the marginal cost of
one of the 5 teapots is
A) $4.25.
B) $4.
C) $25.
D) $6.25.
E) $5.
35) Which one of the following statements is false?
A) The average total cost curve and average variable cost curve are U-shaped.
B) The gap between the average total cost curve and the average variable cost curve equals marginal cost.
C) The gap between the average total cost curve and the average variable cost curve narrows as output increases.
D) The marginal cost curve intersects the average variable cost curve at minimum average variable cost.
E) The marginal cost curve intersects the average total cost curve at minimum average total cost.
36) Which one of the following is false?
A) The marginal cost curve intersects the average variable cost curve and the average total cost curve at their maximum points.
B) When marginal cost is greater than average variable cost, average variable cost is increasing.
C) When marginal cost is greater than average total cost, average total cost is increasing.
D) The average total cost curve is U-shaped.
E) The average fixed cost curve is downward sloping.
37) Which type of cost does not change as the quantity of output produced changes?
A) average total cost
B) marginal cost
C) average fixed cost
D) total fixed cost
E) Both C and D are correct.
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ECON 3030 Managerial Economics Michael G. Lanyi
Use the figure below to answer the following 3 questions which illustrates short‐run AVERAGE and MARGINAL COST curves.
38) Which one of the following statements is false?
A) Average fixed cost decreases with output.
B) The vertical gap between curves B and C is equal to average variable
cost.
C) Line B comes closer to line C as output increases because of a decrease
in average fixed cost.
D) Curve D is the marginal cost curve.
E) The vertical gap between curves B and C is equal to average fixed cost.
39) The average variable cost curve is curve
A) A.
B) B.
C) C.
D) D.
E) none of the above.
40) The marginal cost curve is curve
A) A.
B) B.
C) C.
D) D.
E) none of the above.
41) As soon as diminishing returns set in, a firmʹs
A) marginal product increases.
B) average fixed cost decreases.
C) marginal cost decreases.
D) marginal cost increases.
E) total cost decreases.
42) Average variable cost is at a minimum at the same output at which
A) average product is at a maximum.
B) average product is at a minimum.
C) marginal product is at a maximum.
D) marginal product is at a minimum.
E) marginal cost is at a minimum.
43) The range over which average variable cost is decreasing is the same as the range over which
A) marginal cost is increasing.
B) average fixed cost is decreasing.
C) marginal product is decreasing.
D) average product is decreasing.
E) average product is increasing.
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ECON 3030 Managerial Economics Michael G. Lanyi
44) The vertical distance between the TC and TVC curves
A) decreases as output increases.
B) increases as output increases.
C) is equal to AFC.
D) is equal to TFC.
E) is equal to MC.
45) The marginal cost (MC) curve intersects the
A) ATC, AVC, and AFC curves at their minimum points.
B) ATC and AFC curves at their minimum points.
C) AVC and AFC curves at their minimum points.
D) ATC and AVC curves at their minimum points.
E) TC and TVC curves at their minimum points.
46) Given an upward-sloping, straight line total variable cost curve, what does the marginal cost curve look like?
A) an upward-sloping straight line
B) a downward-sloping straight line
C) a U-shaped curve
D) a horizontal line
E) a vertical line
47) A rise in the price of a fixed input shifts a firmʹs
A) average variable cost curve upward.
B) average total cost curve upward.
C) average total cost curve downward.
D) marginal cost curve upward.
E) marginal cost curve downward.
48) If ATC is falling, then MC must be
A) rising.
B) falling.
C) equal to ATC.
D) above ATC.
E) below ATC.
49) If AFC is falling then MC must be
A) rising.
B) falling.
C) above AFC.
D) below AFC.
E) none of the above.
50) The average variable cost curve will shift upward if
A) there is an increase in fixed cost.
B) there is a technological advance.
C) the price of the variable input decreases.
D) the price of the variable input increases.
E) the price of output increases.
51) The ATC curve shifts upward if
A) factor prices rise.
B) a new technology is introduced.
C) more workers are hired.
D) all of the above.
E) none of the above.
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ECON 3030 Managerial Economics Michael G. Lanyi
52) The marginal cost curve slopes upward due to
A) diminishing marginal utility.
B) diminishing marginal returns.
C) technological inefficiency.
D) economic inefficiency.
E) none of the above.
53) The average fixed cost curve slopes downward due to
A) diminishing marginal utility.
B) diminishing marginal returns.
C) technological inefficiency.
D) economic inefficiency.
E) none of the above.
54) The marginal cost curve slopes downward at low outputs because of ________. The marginal cost curve eventually slopes
upward because of ________.
A) greater specialization and division of labour; the law of diminishing returns
B) the law of diminishing returns; increasing average fixed cost
C) falling average fixed cost; the law of diminishing returns
D) the law of diminishing returns; greater specialization and division of labour
E) greater specialization and division of labour; rising average fixed cost
Use Figure 8/9.4.1 below to answer the following questions.
55) Refer to Figure 8/9.4.1 which shows the total product curves for four different plant sizes as Tania varies the quantity of
capital and workers. The curve that represents the plant using the largest amount of capital is
A) plant A.
B) plant B.
C) plant C.
D) plant D.
E) all curves because each plant uses the same number of machines, just different amounts of labour.
56) Refer to Figure 8/9.4.1, which illustrates the total product curves for four different plant sizes. One of the fundamental
technological facts reflected in the shape of each of the total product curves is the
A) price of the inputs.
B) price of the output.
C) law of diminishing marginal returns.
D) law of economies of scale.
E) fact that capital and labour cannot be substituted for each other.
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ECON 3030 Managerial Economics Michael G. Lanyi
57) The marginal product of capital is the
A) change in total product resulting from a 1-unit increase in the quantity of labour employed, holding the quantity of the
capital constant.
B) change in total product resulting from a 1-unit increase in the quantity of capital employed, holding the quantity of the
labour constant.
C) total product divided by the total quantity of capital employed, holding the quantity of the labour constant.
D) total product divided by the total quantity of labour employed, holding the quantity of the capital constant.
E) change in the quantity of capital used resulting from a 1-unit increase in total product, holding constant the quantity of
labour.
58) Suppose a candy manufacturer can triple its production of fudge by doubling its production facility for making fudge. This
indicates the presence of
A) constant returns to scale.
B) economies of scale.
C) diseconomies of scale.
D) market constraints.
E) the law of diminishing returns.
59) If constant returns to scale are present
A) average total cost is decreasing.
B) average total cost is increasing.
C) the LRAC curve is horizontal.
D) the LRAC curve is downward sloping.
E) the LRAC curve is upward sloping.
60) Diseconomies of scale are present when
A) the LRAC curve slopes downward.
B) average total cost falls as input increases.
C) average total cost rises as output increases.
D) the LRAC curve is horizontal.
E) total fixed cost increases.
Use Fact 8/9.1.1 below to answer the following questions.
January 31, 2008: Starbucks will open 75 more stores abroad than originally predicted, for a total of 975.
February 25, 2008: For three hours on Tuesday, Starbucks will shut down every single one of its 7,100 stores so that baristas
can receive a refresher course.
June 2, 2008: Starbucks replaces baristas with vending machines.
July 18, 2008: Starbucks is closing 616 stores by the end of March.
61) Refer to Fact 8/9.1.1. The decisions made on ________ are short-run decisions because they ________.
A) January 31 and July 18; change the number of stores but not necessarily the number of employees
B) February 25 and June 2; change a variable factor of production but not a fixed factor of production
C) February 25, June 2, and July 18; deal with stores located in the United States
D) June 2 and July 18; are the more recent decisions
E) None of the above.
62) Refer to Fact 8/9.1.1. The decisions made on ________ are long-run decisions because they ________.
A) June 2; are changes to labour which affect people for the long term
B) January 31 and July 18; change Starbucksʹ plant
C) February 25, June 2, and July 18; all deal with stores located in the United States
D) January 31 and February 25; are the earliest decisions
E) None of the above.
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ECON 3030 Managerial Economics Michael G. Lanyi
63) Suppose a 1-unit increase in labour, from 2 to 3 workers, increases output from 10 to 15 tea cups. The marginal product
from the increase in the quantity of labour is
A) 1 tea cup.
B) 3 tea cups.
C) 4 tea cups.
D) 5 tea cups.
E) 15 tea cups.
64) If the total product of three workers is 214 and the total product of four workers is 221, then the marginal product of the
fourth worker is
A) 71.3.
B) 55.25.
C) 7.
D) 62.14.
E) 1.75.
Use Figure 8/9.2.2 below to answer the following question.
65) Refer to Figure 8/9.2.2 which shows Taniaʹs average product curve and marginal product curve. The point of maximum
average product is point
A) B.
B) C.
C) D.
D) E.
E) F.
66) When the 7th worker is hired, output increases from 100 units per week to 110 units per week. When the 8th worker is
hired, output increases from 110 units to 118 units. This is an example of
A) diminishing marginal returns.
B) diminishing marginal cost.
C) decreasing returns to scale.
D) labour-intensive production.
E) increasing returns to scale.
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ECON 3030 Managerial Economics Michael G. Lanyi
67) Which of the following quotes best illustrates the idea of marginal product?
A) ʺIf I have 10 workers on my assembly line, I can produce 13 tables a day.ʺ
B) ʺIf I add an 11th worker, I can produce 1 extra table a day.ʺ
C) ʺEach worker produces 2 tables a day.ʺ
D) ʺI find if I add an extra shift at night, table production only rises by 80 percent because I need more maintenance time on the
assembly line.ʺ
E) ʺIf I double workers and double the assembly line, I can make 120 percent more tables.ʺ
68) Which of the following quotes best illustrates the idea of average product?
A) ʺIf I have 10 workers on my assembly line, I can produce 13 tables a day.ʺ
B) ʺIf I add an 11th worker, I can produce 1 extra table a day.ʺ
C) ʺEach worker produces 2 tables a day.ʺ
D) ʺI find if I add an extra shift at night, table production only rises by 80 percent because I need more maintenance time on the
assembly line.ʺ
E) ʺIf I double workers and double the assembly line, I can make 120 percent more tables.ʺ
69) Which of the following quotes best illustrates the idea of total product?
A) ʺIf I have 10 workers on my assembly line, I can produce 13 tables a day.ʺ
B) ʺIf I add an 11th worker, I can produce 1 extra table a day.ʺ
C) ʺEach worker produces 2 tables a day.ʺ
D) ʺI find if I add an extra shift at night, table production only rises by 80 percent because I need more maintenance time on the
assembly line.ʺ
E) ʺIf I double workers and double the assembly line, I can make 120 percent more tables.ʺ
70) Which of the following statements by a restaurant owner refers to the law of diminishing marginal returns?
A) ʺThe higher the quality of the ingredients we use, the higher the cost of producing each meal.ʺ
B) ʺIf we double the size of our premises and double everything else kitchen staff, serving staff, equipment we can
increase the number of meals we serve, but not to double the current levels.ʺ
C) ʺWe can increase the number of meals we serve by just adding more kitchen staff, but each additional worker adds less
meals than the previous worker because traffic in the kitchen will get worse.ʺ
D) ʺWe can serve the same number of meals with fewer kitchen staff, but we would have to buy more labour-saving kitchen
equipment.ʺ
E) ʺWe can serve the same number of meals with less kitchen equipment, but we would have to hire more kitchen staff.ʺ
71) Which of the following are correct? According to the law of diminishing returns,
(1) marginal product eventually rises.
(2) marginal product eventually falls.
(3) marginal cost eventually rises.
(4) marginal cost eventually falls.
A) (1) and (3)
B) (1) and (4)
C) (2) and (3)
D) (2) and (4)
E) (4)
72) If the average variable cost of producing 10 units is $18 and the average variable cost of producing 11 units is $20, we know
that, between 10 and 11 units of output,
A) marginal cost is increasing.
B) average total cost is increasing.
C) average fixed cost is increasing.
D) total cost is either increasing or decreasing.
E) none of the above.
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ECON 3030 Managerial Economics Michael G. Lanyi
73) Total cost is $20 at 4 units of output and $36 at 6 units of output. Between 4 and 6 units of output, marginal cost
A) is less than average total cost.
B) is equal to average total cost.
C) is equal to average variable cost.
D) is greater than average total cost.
E) equals average fixed cost.
74) A firmʹs total fixed cost is $100. If total cost is $200 for one unit of output and $310 for two units, what is the marginal cost
of the second unit?
A) $100
B) $110
C) $200
D) $210
E) $310
75) Which of the following quotes best illustrates the idea of fixed cost?
A) ʺAs we increase output, per-unit costs fall.ʺ
B) ʺMy primary source of overhead cost is the cost of running the head office.ʺ
C) ʺIf I need to, I can negotiate more overtime with my work force to meet unexpected orders.ʺ
D) ʺIf I double the number of workers and trucks, I get only 80 percent more packages delivered.ʺ
E) None of the above.
76) A technological advance will shift
(1) TP, AP, and MP curves up.
(2) TP, AP, and MP down.
(3) TC, ATC, and MC curves up.
(4) TC, ATC, and MC curves down.
A) (1) and (3)
B) (1) and (4)
C) (2) and (3)
D) (2) and (4)
E) none of the above
77) An increase in the cost of labour shifts the
A) total, average, and marginal product curves upward and total, average, and marginal cost curves upward.
B) total, average, and marginal product curves upward and total, average, and marginal cost curves downward.
C) total, average, and marginal product curves downward and total, average, and marginal cost curves upward.
D) total, average, and marginal product curves downward and total, average, and marginal cost curves downward.
E) none of the above.
78) Ernieʹs Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. What is Ernieʹs total
variable cost?
A) $400
B) $8
C) $2
D) $2,400
E) $1,600
79) Ernieʹs Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. What is Ernieʹs
average variable cost?
A) $400
B) $8
C) $2
D) $2,400
E) $1,600
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ECON 3030 Managerial Economics Michael G. Lanyi
Use Table 8/9.4.1 to answer the following questions. The table represents Swankyʹs production possibilities and output levels as
the firm varies the quantities of knitting machines and workers per day.
80) If Swanky increases the number of knitting machines from 2 to 3 and increases the number of workers employed from 2 to
3, the factory experiences
A) economies of scale.
B) constant returns to scale.
C) diseconomies of scale.
D) constant marginal product.
E) minimum efficient scale.
81) If Swanky increases the number of knitting machines from 1 to 2 and increases the number of workers employed from 1 to
2, the factory experiences
A) economies of scale.
B) constant returns to scale.
C) diseconomies of scale.
D) constant marginal product.
E) minimum efficient scale.
Use Figure 8/9.4.2 below to answer the following questions. The Figure illustrates the short-run average total cost curves for four
different plant sizes.
82) Which curve represents the average total cost for the largest of the four plant sizes?
A) ATCA
B) ATCB
C) ATCC
D) ATCD
E) either ATCC or ATCD
83) Which plant has the lowest average total cost for an output rate of 5 sweaters a day?
A) Plant A
B) Plant B
C) Plant C
D) Plant D
E) none of the above
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ECON 3030 Managerial Economics Michael G. Lanyi
Use Figure 8/9.4.3 below to answer the following question.
84) Refer to Figure 8/9.4.3 which shows a firmʹs long-run average total cost curve. An increase in production from Q1 to Q2
sweaters per day produces
A) the minimum efficient scale.
B) economies of scale.
C) diseconomies of scale.
D) constant total costs.
E) constant returns to scale.
Use Figure 8/9.4.4 which illustrates the long-run average total cost curve to answer the following questions.
85) Refer to Figure 8/9.4.4, which one of the following statements is false?
A) Economies of scale exist between 0 and Q0 units of output.
B) Diseconomies of scale exist between 0 and Q1 units of output.
C) Constant returns to scale exist between Q1 and Q2 units of output.
D) Diseconomies of scale exist at quantities greater than Q2 units of output.
E) Constant returns to scale exist between Q0 and Q1 units of output.
86) Refer to Figure 8/9.4.4, which illustrates the long-run average total cost curve. Given an increase in output from Q1 to Q2,
A) economies of scale exist.
B) diseconomies of scale exist.
C) constant returns to scale exist.
D) average total cost is increasing.
E) average total cost is decreasing.
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ECON 3030 Managerial Economics Michael G. Lanyi
87) Diminishing returns to capital ________ occur as the quantity of capital increases because for a given quantity of ________
each additional unit of ________ will result in ________ incremental amounts of output.
A) do not; capital; labour; greater
B) do; labour; capital; smaller
C) do not; labour; capital; greater
D) do; capital; labour; smaller
E) do not; labour; capital; smaller
88) The long-run average cost curve is the relationship between the lowest attainable average total cost and output, when
plant size is ________ and labour is ________. The long-run average cost curve is made up of the segments of individual
average ________ cost curves with the lowest average ________ cost for a given output.
A) varied; varied; variable; variable
B) varied; varied; total; total
C) varied; held constant; variable; variable
D) held constant; varied; total; total
E) held constant; varied; variable; variable
89) Economies of scale refer to the range of output over which
A) long-run average cost rises as output increases.
B) marginal cost exceeds average cost.
C) long-run average cost falls as output increases.
D) the marginal product of labour decreases.
E) marginal product equals average product.
90) Diseconomies of scale refer to the range of output over which
A) long-run average cost rises as output increases.
B) average cost exceeds marginal cost.
C) long-run average cost falls as output increases.
D) the marginal product of labour increases.
E) marginal product equals average product.
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ECON 3030 Managerial Economics Michael G. Lanyi
Answers to the
Additional Practice Problems
Chapters 8/9 — Output and Cost in SR & LR
1) E 16) B 31) D 46) D 61) B 76) B
2) D 17) B 32) A 47) B 62) B 77) E
3) D 18) C 33) D 48) E 63) D 78) E
4) B 19) D 34) E 49) E 64) C 79) B
5) A 20) D 35) B 50) D 65) B 80) C
6) B 21) A 36) A 51) A 66) A 81) A
7) D 22) B 37) D 52) B 67) B 82) D
8) B 23) C 38) B 53) E 68) C 83) A
9) C 24) C 39) B 54) A 69) A 84) B
10) E 25) D 40) D 55) D 70) C 85) B
11) B 26) E 41) D 56) C 71) C 86) C
12) C 27) C 42) A 57) B 72) A 87) B
13) B 28) C 43) E 58) B 73) D 88) B
14) D 29) B 44) D 59) C 74) B 89) C
15) B 30) E 45) D 60) C 75) B 90) A
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