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| 1 | |
The production function in economics is: |
| | A) | the activity of production. |
| | B) | the set of all technically efficient techniques. |
| | C) | a way of converting factors of production into products. |
| | D) | the ability to make more output by using more inputs. |
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| 2 | |
A production technique is technically efficient if: |
| | A) | output is maximized. |
| | B) | inputs are minimized. |
| | C) | there is no way to make a given output using less of one input and no more of the other inputs. |
| | D) | costs are minimized. |
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| 3 | |
A period of time long enough for the firm to adjust all production inputs is described as the long run |
| | A) | True |
| | B) | False |
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| 4 | |
Long-run total cost is the minimum cost of producing each output level when the firm can: |
| | A) | adjust the use of labour. |
| | B) | adjust the use of capital. |
| | C) | adjust all inputs. |
| | D) | change the management. |
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| 5 | |
Long-run marginal cost is the rise in ________ total cost if output rises permanently by ________. |
| | A) | short-run, many units |
| | B) | long-run, many units |
| | C) | short-run, one unit |
| | D) | long-run, one unit |
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| 6 | |
Economies of scale (or increasing returns to scale) mean long-run average cost falls as output rises. |
| | A) | True |
| | B) | False |
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| 7 | |
The lowest output at which the long-run average cost curve reaches its minimum is known as the: |
| | A) | minimum efficient scale. |
| | B) | maximum efficient scale. |
| | C) | minimum inefficient scale. |
| | D) | maximum inefficient scale. |
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| 8 | |
_______ is an example of a fixed factor of production and ______ is an example of a variable factor of production. |
| | A) | fuel, labour |
| | B) | capital, labour |
| | C) | labour, capital |
| | D) | capital, land |
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| 9 | |
Fixed costs vary with output. |
| | A) | True |
| | B) | False |
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| 10 | |
Variable costs change as ______ changes. |
| | A) | the price of capital |
| | B) | the quantity of capital |
| | C) | output |
| | D) | interest rates |
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| 11 | |
The statement that beyond some level of the variable input, further increases in the variable input lead to a steadily decreasing marginal product of that input is the law of: |
| | A) | diminishing returns. |
| | B) | increasing returns. |
| | C) | marginal returns. |
| | D) | variable returns. |
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| 12 | |
Decreasing returns to scale means that ___________ as ______________. |
| | A) | short run marginal costs rises, output rises |
| | B) | long run marginal cost falls, output rises |
| | C) | short run average cost rises, output rises |
| | D) | long run average cost rises, output rises |
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| 13 | |
If a long run average cost curve is falling from left to right this is an example of: |
| | A) | increasing returns to scale. |
| | B) | decreasing returns to scale. |
| | C) | constant returns to scale. |
| | D) | the minimum efficient scale. |
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| 14 | |
When average cost is falling marginal cost is __________ and when average cost is rising marginal cost is __________. |
| | A) | greater than average cost, greater than average cost |
| | B) | less than average cost, greater than average cost |
| | C) | less than average cost, less than average cost |
| | D) | greater than average cost, less than average cost |
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| 15 | |
The firms long run output decision will be where: |
| | A) | long run average cost is lowest. |
| | B) | marginal revenue equals output. |
| | C) | marginal revenue equals long run marginal cost. |
| | D) | marginal cost equals output. |
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| 16 | |
Short run average total costs are equal to the sum of _________ and __________. |
| | A) | short run opportunity costs, profit |
| | B) | short run variable costs, profit |
| | C) | short run average variable costs, profit |
| | D) | short run average variable costs, short run average fixed costs |
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| 17 | |
The short run marginal cost curve cuts the short run total cost curve and short run average variable cost curve ______________. |
| | A) | at their lowest points |
| | B) | when they are declining |
| | C) | when they are increasing |
| | D) | when marginal revenue is zero |
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| 18 | |
Given a long run average cost curve, every point represents a tangency with the lowest point of a short run average cost curve for a fixed plant size. |
| | A) | True |
| | B) | False |
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| 19 | |
Holding all factors constant except one and increasing a variable factor is expected to lead to steadily decreasing marginal product of that factor. This is an example of: |
| | A) | decreasing returns to scale |
| | B) | the law of diminishing returns |
| | C) | constant returns to scale |
| | D) | an inefficient production technique |
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| 20 | |
In the short run a firm will produce zero output if __________. |
| | A) | price is greater than short run average total cost |
| | B) | price is between short run average total cost and short run average variable cost |
| | C) | price is less than short run average variable cost |
| | D) | profit is zero |
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