Question : 8.6   Costs in the Long Run 1) Long-run cost curves U-shaped : 1267124

8.6   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) In 1955, the chairman of the Sony corporation offered to sell transistor radios through department stores in the United States. Sony based its selling price on its average total cost of production. If a store bought 5,000 radios, Sony would sell them at $29.95 each. For 10,000 there would be a discount, and for more than 10,000 the price would begin to climb. Based on this information, 10,000 radios was located at the 

A) minimum point on Sony’s average total cost curve.

B) maximum point on Sony’s average total cost curve.

C) minimum point on Sony’s marginal cost curve.

D) maximum point on Sony’s marginal cost curve.

8) In 1955, the chairman of the Sony corporation offered to sell transistor radios through department stores in the United States. Sony based its selling price on its average total cost of production. If a store bought 5,000 radios, Sony would sell them at $29.95 each. For 10,000 there would be a discount, and for more than 10,000 the price would begin to climb. Based on this information, Sony reached minimum efficient scale

A) at a quantity below 5,000 radios.

B) at a quantity of 5,000 radios.

C) at a quantity of 10,000 radios.

D) at a quantity above 10,000 radios.

9) 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.

10) 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.