Question : 11) All of the following statements true of the minimum : 1245245

11) All of the following statements are true of the minimum efficient scale except one. Which one?

A) All possible economies of scale have been exhausted.

B) The short-run average total cost curve’s minimum point is equal to the long run average cost curve’s minimum point.

C) Any increase in the scale of operation will encounter diseconomies of scale.

D) An increase in the output level will increase profit.

12) At the minimum efficient scale

A) all possible economies of scale have not been exhausted.

B) the firm has achieved the lowest possible average cost of production.

C) any increases in the scale of operation will encounter further economies of scale.

D) marginal cost is at its minimum.

13) The ABC Company manufactures routers that are used to provide high-speed Internet service. ABC sells an average of 1,000 routers each month, but to exhaust economies of scale in its industry ABC would have to sell 3,000 routers each month. Therefore

A) ABC is experiencing diseconomies of scale.

B) ABC is experiencing diminishing returns.

C) to reach minimum efficient scale ABC would have to sell at least 3,000 routers each month.

D) ABC will soon go out of business.

14) When a firm’s long-run average cost curve is horizontal for a range of output, then that range of production displays

A) increasing returns to scale.

B) constant returns to scale.

C) decreasing returns to scale.

D) constant average fixed costs.

15) Ford Motor Company started producing the Model A at plants scattered around the United States

A) to save on transport costs.

B) because diseconomies of scale at its initial River Rouge plant resulted in high production costs.

C) to locate its production centers closer to its customers.

D) because it was not able to attract skilled workers in Michigan (where its first plant was located).

16) If production displays diseconomies of scale, the long run average cost curve is

A) above the short run average total cost curve.

B) above the long run marginal cost curve.

C) upward sloping.

D) downward sloping.

17) The president of Toyota’s Georgetown plant was quoted as saying, “Demand for high volumes saps your energy. Over a period of time, it eroded our focus [and] thinned out the expertise and knowledge we painstakingly built up over the years.” This quote suggests that

A) Toyota was experiencing an excess demand for its automobiles which it had difficulty keeping up with.

B) as Toyota expanded its capacity, it experienced diseconomies of scale.

C) Toyota was focused on “churning” out cars for which it did not invest sufficiently in training its workers.

18) The president of Toyota’s Georgetown plant was quoted as saying, “Demand for high volumes saps your energy. Over a period of time, it eroded our focus [and] thinned out the expertise and knowledge we painstakingly built up over the years.” Based on this quote, what must be true of the plant’s average cost of production curve?

A) It is upward-sloping.

B) It is downward-sloping.

C) It is a ray from the origin.

D) It is U-shaped.

19) What is the difference between “diminishing marginal returns” and “diseconomies of scale”?

A) Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable.

B) Both concepts explain why average total cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale applies in the long run when all factors are variable.

C) Diminishing marginal returns, which applies only in the short run when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale, which applies in the long run when all factors are variable, explains why average cost increases.

D) Diminishing marginal returns,which applies only in the long run when all factors are variable, explains why average variable cost increases, while diseconomies of scale, which applies in the short run when at least one factor is fixed, explains why average total cost increases.

Figure 8-10

20) Refer to Figure 8-10. Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC4. Now, following a permanent change in demand, it plans to cut production to Qc units. What will happen to its average cost of production?

A) In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37.

B) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41.

C) In the short run, its average cost falls from $47 to $37, and in the long run, average cost rises to $41.

D) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37.