Question : 11.6   Costs in the Long Run 1) Long-run cost curves U-shaped : 1387759

11.6   Costs in the Long Run

1) Long-run cost curves are U-shaped because

A) of the law of demand.

B) of the law of diminishing returns.

C) of economies and diseconomies of scale.

D) of the law of supply.

2) If, when a firm doubles all its inputs, its average cost of production decreases, then production displays

A) diminishing returns.

B) economies of scale.

C) diseconomies of scale.

D) declining fixed costs.

3) If production displays economies of scale, the long-run average cost curve is

A) above the short-run average total cost curve.

B) downward sloping.

C) upward sloping.

D) below the long-run marginal cost curve.

4) Economies of scale exist as a firm increases its size in the long run because of all of the following except

A) the firm can afford more sophisticated technology in production.

B) labor and management can specialize even further in their tasks.

C) as a larger input buyer, the firm can purchase inputs at a lower per unit cost.

D) as a firm expands its production, its profit margin per-unit of output increases.

5) Over the past twenty years, the number of small family farms has fallen significantly and in their place there are fewer, but larger, farms owned by corporations. Which of the following best explains this trend?

A) diseconomies of scale in farming

B) economies of scale in farming

C) diminishing returns to labor in farming

D) declining productivity

6) The long-run average cost curve shows

A) the lowest average cost of producing every level of output in the long run.

B) where the most profitable level of output occurs.

C) the average cost of producing where diminishing returns are not present.

D) the plant size or scale that the firm should build.

7) If a firm decreases its plant size and finds that its long-run average costs have decreased, then

A) its labor is more productive in a smaller plant.

B) its diseconomies of scale are less.

C) the firm should reduce its plant size even more.

D) the firm is now profitable.

8) If, when a firm doubles all its inputs, its average cost of production increases, then production displays

A) diminishing returns.

B) economies of scale.

C) diseconomies of scale.

D) declining fixed costs.

9) Which of the following is a reason why a firm would experience diseconomies of scale?

A) To finance an increase in the size of its plant, a firm must borrow more money or sell more shares of stock.

B) As the size of the firm increases, it becomes more difficult to find markets where it doesn’t already have operations.

C) As the size of the firm increases, it becomes more difficult to coordinate the operations of its manufacturing plants.

D) As the size of the firm increases, it must operate in other countries where differences in language, customs and laws increase its average costs.

10) The minimum efficient scale is

A) the level of output where diminishing returns have not set in yet.

B) the plant size that yields the most profit.

C) level of operation where long-run average costs are lowest.

D) the smallest output level where the firm finally reaches productive efficiency.