71) Which of the following cost curves demonstrate increasing returns to scale?
A) a downward-sloping long-run average cost curve
B) an upward-sloping long-run average cost curve
C) a horizontal long-run average cost curve
D) a vertical long-run average cost curve
E) returns to scale have nothing to do with the shape of the long-run average cost curve
72) For many firms the LRAC curve is U-shaped. The downward-sloping portion of the LRAC curve can be explained by
A) economies of scale.
B) the spreading of overhead.
C) both (a) and (b).
D) declining prices of the fixed factor
E) decreasing short-run marginal cost.
73) Suppose Farmer Smith hires 4 workers and leases 2 tractors and 15 hectares of farmland for one growing season, and produces 120 000 bushels of crop. The next year he hires 8 workers and leases 4 tractors and 30 hectares of farmland, and produces 210 000 bushels of crop. This firm (the farmer) is exhibiting ________ returns to scale.
A) decreasing
B) increasing
C) constant
D) marginal
E) variable
74) Suppose a shipping company employs 2000 workers, operates 400 delivery trucks and makes 1.5 million domestic shipments in one year. The next year they increase their workforce to 3000 workers, operate 600 trucks and make 2.8 million domestic shipments in one year. This firm is exhibiting ________ returns to scale.
A) decreasing
B) increasing
C) constant
D) marginal
E) variable
75) A short-run average total cost curve and a long-run average cost curve are tangent
A) where the short-run cost curve is downward sloping.
B) where the short-run cost curve is upward sloping.
C) when the plant size is at the optimal level for that level of output.
D) where the short-run cost curve is downward sloping and the plant size is optimal.
E) by coincidence.
76) Consider the short-run and long-run cost curves for a firm. If there is a fall in all factor prices faced by the firm,
A) it will move to a lower point on its existing long-run and short-run average cost curves.
B) it will move to a lower point on its existing long-run average cost curve only.
C) both the long-run and short-run average cost curves will shift downward.
D) there will be a downward shift in the long-run average cost curve but not in the short-run average cost curve.
E) there will be no change in the cost curves in the long run.
77) In the long run, a profit-maximizing firm produces any given level of output by choosing the production method that
A) maximizes the marginal product of all factors.
B) equates the marginal product of all factors.
C) equates the average cost per unit of all factors.
D) is associated with a flat total cost curve.
E) produces that output at the lowest possible cost.
78) Refer to Figure 8-3. What is the difference between the SRATC curves and the LRAC curve?
A) The SRATC curves show the optimal plant size when all factors of production are variable, whereas the LRAC shows the lowest cost attainable associated with each LRAC curve.
B) The SRATC curves show the lowest attainable cost of production at each level of output when all factors are variable in the short run, whereas the LRAC curve shows the same in the long run.
C) The LRAC is an envelope curve, joining the minimum points on all SRATC curves.
D) For the SRATC curves, one or more of the factors of production is fixed, whereas for the LRAC curve, all factors of production are variable.
E) The SRATC curves show diseconomies of scales, whereas the LRAC curve shows economies of scale.
79) Refer to Figure 8-3. Each of the three SRATC curves shows
A) technically inefficient methods of production, given that they lie above the LRAC.
B) the lowest cost attainable, given that the plant size is the largest it can possibly be.
C) the output that is possible when all factors of production are fixed.
D) the lowest cost attainable, holding the plant size constant.
E) optimal plant sizes in the long run.
80) Refer to Figure 8-3. The minimum efficient scale is achieved by this firm at output level
A) Q1.
B) Q2.
C) Q3.
D) Q4.
E) Q5.
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