Question :
Figure 11-11
Figure 11-11 illustrates the long-run average cost curve for : 1387762
Figure 11-11
Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc.
33) Refer to Figure 11-11. The minimum efficient scale of output is reached at what rate of output?
A) 10,000 workers
B) 5,000 picture frames
C) 20,000 picture frames
D) 10,000 picture frames
34) Refer to Figure 11-11. For output rates greater than 20,000 picture frames per month,
A) the firm will not make a profit because the average cost of production will be too high.
B) the firm will experience diseconomies of scale.
C) the firm will experience diminishing returns.
D) the short-run average total cost will equal the long-run average total cost of production.
35) Refer to Figure 11-11. Constant returns to scale
A) occur for output rates greater than 5,000 picture frames.
B) occur between 5,000 and 20,000 picture frames per month.
C) occur between 10,000 and 20,000 pictures frames per month.
D) will shift the long-run average cost curve downward.
36) Refer to Figure 11-11. In the short run, if the firm sells fewer than 5,000 picture frames per month,
A) it should produce with the scale of operation associated with ATCa.
B) it should produce with the scale of operation associated with ATCb.
C) it should produce with the scale of operation associated with ATCc.
D) it will experience constant returns to scale.
37) Refer to Figure 11-11. If the firm chooses to produce and sell 25,000 frames per month by operating in the short run with a scale operation represented by ATCc,
A) the firm will not be operating efficiently.
B) the firm will be operating efficiently.
C) the firm would lower its average costs by reducing its scale of operation.
D) the firm will not be able to earn a profit.
Table 11-8
Quantity (sets)
Long Run Average Cost
100
$40
200
35
300
30
400
30
500
35
Elegant Settings manufactures stainless steel cutlery. Table 11-8 shows the company’s cost data.
38) Refer to Table 11-8. Elegant Settings experiences
A) economies of scale up to an output level of 400.
B) diminishing returns up to an output level of 400.
C) increasing returns beyond an output level of 400.
D) economies of scale at an output of 300 or less and diseconomies of scale at an output level above 400.
39) Refer to Table 11-8. What is the minimum efficient scale of production?
A) 100 units
B) 200 units
C) 300 units
D) 400 units
40) The River Rouge plant was built by the Ford Motor Company in the 1920s to produce the company’s Model A car. Which of the following is evidence that the River Rouge plant suffered from diseconomies of scale?
A) Despite an expensive advertising campaign, the Model A did not earn the company a profit.
B) Model A cars made at the River Rouge plant failed to earn Ford a profit. Ford eventually constructed smaller plants to make the Model A at a lower average cost.
C) Model A cars made at the River Rouge plant failed to earn a profit. Ford reduced the average cost of the Model A by cutting its employees’ wages.
D) Model A cars made at the River Rouge plant failed to earn a profit because the price of steel used to manufacture the Model A rose when workers in the steel industry went on strike.
41) Which of the following statements explains the difference between diminishing returns and diseconomies of scale?
A) Diminishing returns are the result of changes in explicit costs. Diseconomies of scale are the result of changes in explicit costs and implicit costs.
B) Diminishing returns refer to production, while diseconomies of scale refer to costs.
C) Diminishing returns cause a firm’s marginal cost curve to rise; diseconomies of scale cause a firm’s marginal cost curve to fall.
D) Diminishing returns apply only to the short run; diseconomies of scale apply only in the long run.
42) Two stores—Lazy Guy’s and Ralph’s Recliners—are located in the same city. Both stores buy recliner chairs from the same manufacturer at the same price and both stores are about the same size, so that the fixed costs of production for both stores are the same. Ralph’s Recliners sells more recliners per month and Ralph’s has a lower average total cost of production. Which of the following can explain why the average total cost of production is lower for Ralph’s Recliners?
A) Because Ralph’s Recliners sells more output, its average fixed costs are lower than Lazy Guy’s average fixed cost.
B) The rent Lazy Guy’s pays for its building is greater than the rent paid by Ralph’s Recliners.
C) Ralph’s explicit costs are less because Ralph owns the land on which his building is located. Lazy Guy must make lease payments for the land on which its store is located.
D) The price of recliners charged by Ralph’s is greater than the price charged by Lazy Guy’s.
