81) Refer to Figure 8-3. If this firm is producing at point B, then
A) this firm is producing a level of output that is technically inefficient in the long run.
B) this firm is experiencing decreasing returns to scale.
C) this firm could produce the same level of output at a lower cost with plant size 2.
D) it should employ more of its variable factors of production.
E) plant size 1 is optimal.
82) Refer to Figure 8-3. Should this profit-maximizing firm ever consider moving from point E (output level Q3 on SRATC2) to point F (output level Q5 on SRATC3)?
A) No, because they are already producing at their lowest possible cost at point E.
B) Yes, because the firm can take advantage of economies of scale.
C) Yes, because SRATC3 is the optimal plant size for this firm.
D) No, because producing at point F implies a higher cost per unit of output.
E) Yes, if the product price rises enough to lead the firm to expand to plant size 3.
83) Refer to Figure 8-3. Suppose this firm is producing output level Q3 with plant size 2. Now suppose this firm changes to plant size 3 and is producing output level Q5. We can say that
A) the firm is then operating with the optimal plant size.
B) this firm has experienced economies of scale.
C) output has increased more than in proportion to the increase in inputs.
D) output has increased exactly in proportion to the increase in inputs.
E) output has increased less than in proportion to the increase in inputs.
84) Consider the short-run and long-run cost curves for a firm. If there is an improvement in the firm's technology,
A) the firm will move to a lower point on both its long-run and short-run average cost curves.
B) the firm will move to a lower point on its 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.
85) Economists collect and analyze data on output per worker and output per hour of work. What are they trying to measure by doing so?
A) the ratio of marginal products of factors
B) the principle of substitution
C) diminishing marginal returns
D) returns to scale
E) productivity
86) A change in the technique for producing an existing product is known as
A) product innovation.
B) investment.
C) invention.
D) an increase in productivity.
E) process innovation.
87) With respect to innovation, which of the following statements is true?
A) Government policy cannot influence the rate of innovation.
B) Innovation is exogenous to the economic system.
C) The utilization rate of existing plant and equipment and its durability are independent of the pace of innovation.
D) The principal incentive for innovation does not appear to be related to profits.
E) Innovation is often endogenous to the economic system.
88) What is the definition of productivity?
A) output produced per unit of input
B) output produced by a combination of two or more inputs
C) the cost of a unit of output
D) a measure of input used
E) the efficient use of technology
89) Which of the following factors is most important as a source of sustained growth in material living standards?
A) population increase
B) changing relative factor prices
C) decrease in cost of capital
D) technological improvement
E) capital-labour substitution
90) A very-long-run consideration that could change a firm's production function is
A) rising cost of the factors of production.
B) increasing returns to scale of operation.
C) an improvement in education that increases the quality of the economy's labour force.
D) diminishing returns.
E) size of the plant.
