1. In the short run marginal product is diminishing because: A. barriers to entr

Question

1. In the short run marginal product is diminishing because:
A. barriers to entry prevent new firms from entering the industry.
B. the firm does not have sufficient time to change the size of its plant.
C. the firm does not have sufficient time to cut its rate of output to zero.
D. a firm does not have sufficient time to change the amounts of any of the resources it employs.

2. The law of diminishing marginal product indicates that:
A. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.
B. because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped.
C. the demand for goods produced by purely competitive industries is downsloping.
D. beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.

3. Fixed cost is:
A. the cost of producing one more unit of capital, say, machinery.
B. any cost which does not change when the firm changes its output.
C. average cost multiplied by the firm's output.
D. usually zero in the short run.

Explanation / Answer

1

D. a firm does not have sufficient time to change the amounts of any of the resources it employs.

2

A. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.

3

B. any cost which does not change when the firm changes its output.

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