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Multiple Choice Quiz
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1
A firm achieves technological efficiency when:
A)it becomes the biggest firm in the industry.
B)it achieves the maximum output possible from a given set of inputs.
C)it maximizes its marginal product.
D)it maximizes its average product.
2
A firm achieves economic efficiency when:
A)it minimizes marginal cost.
B)it achieves the maximum output possible from a given set of inputs.
C)it produces output at the lowest possible cost.
D)it maximizes revenue.
3
The relationship between output and the inputs used in the transformation process is known as:
A)the production function.
B)economic efficiency.
C)technological efficiency.
D)profit maximization.
4
A period of time in which a firm can adjust all of its factors of production, but not its technology is known as the:
A)market period.
B)short run.
C)long run.
D)very long run.
5
In the short run, when capital is fixed, production depends on the number of workers. This relationship is known as the:
A)utility function.
B)total product function.
C)total cost function.
D)average product function.
6
When a firm hires an additional worker in the short run, output may rise. We call the relationship between the additional worker and the additional output:
A)average product of labour.
B)marginal product of capital.
C)marginal product of labour.
D)total product.
7
When we add labour to a fixed amount of capital, the marginal product of labour eventually falls. This concept is known as:
A)the law of diminishing returns.
B)diminishing marginal utility.
C)the law of supply.
D)the substitution effect.
8
Marginal product ____ be negative and average product ____ be negative.
A)can; can
B)cannot; cannot
C)can; cannot
D)cannot; can
9
Fixed costs are typically associated with:
A)labour.
B)capital.
C)raw materials.
D)employee benefits.
10
Research and development spending by Nortel is an example of:
A)fixed costs.
B)variable costs.
C)marginal costs.
D)sunk costs.
11
The cost of producing each additional unit of output is known as the _________ and its behaviour is determined by the _________.
A)average cost; average product.
B)average product; average cost.
C)marginal cost; marginal product.
D)marginal product; marginal cost.
12
When increasing plant size, there comes a time when no further cost reductions are possible. At this point the firm has exhausted the gains from _____________.
A)economies of scale.
B)economies of scope.
C)diseconomies of scale.
D)diminishing marginal product.
13
The LRAC curve differs from the SRAC curve in that in the case of the LRAC:
A)labour is considered to be fixed.
B)plant size is flexible.
C)all economies of scale have been exhausted.
D)sunk costs matter.
14
Globalization, the integration of international markets, is largely a result of :
A)American foreign policy.
B)the growth of the economies of China and India
C)technological change and the resulting cost reductions.
D)the global threat of terrorism.
15
Unit costs of production may decrease as a result of:
A)technological change.
B)learning by doing.
C)economies of scope.
D)all of the above.





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