1)In the short-run production function, we assume that: A) Capital and technolog
ID: 1225123 • Letter: 1
Question
1)In the short-run production function, we assume that:
A) Capital and technology are fixed, but firms can add labor to increase output.
B) Capital and labor are fixed, but firms can change the technology they use to increase output.
C)Labor and technology are fixed, but firms can add capital to increase output.
D)Technology is fixed, but firms can add both labor and capital to increase output Capital, labor, and technology are fixed and output can be decreased but not increased.
2)The law of diminishing returns states:
A) As we add a fixed factor of production to a variable factor of production, sooner or later, the marginal product of the fixed factor will fall.
B) As we add a variable factor of production to a fixed factor of production, sooner or later, the marginal product of the variable factor will fall.
C) As we double all inputs, sooner or later, output will more than double.
D) As we double all inputs, sooner or later, output will less than double.
E) As we add a variable factor of production to a fixed factor of production, sooner or later, output will start to decrease at an increasing rate.
3) The stage of negative returns occurs when:
A) Output falls as a firm adds more labor and capital because the firm becomes too bureaucratic.
B) Output falls as a firm adds more labor and capital because of the diminishing quality of the workers hired.
C) Output falls as a firm hires more labor because the workers hired are suffering from a growing disutility of work.
D) Output falls as a firm hires more labor because the workers hired have a negative marginal product of labor.
E) Output falls as a firm hires more labor because the workers hired have a negative average product of labor.
4) The average productivity of labor falls because:
A) Diminishing returns.
B) Decreasing returns to scale.
C) The marginal productivity of labor is rising and above the average productivity of labor.
D) The marginal productivity of labor is falling and below the average productivity of labor.
E) The marginal productivity of labor is constant and above the average productivity of labor.
5) In long-run production function, we assume that:
A)Capital and technology are fixed, but firms can add labor to increase output.
B) Capital and labor are fixed, but firms can change the technology they use to increase output .
C)Labor and technology are fixed, but firms can add capital to increase output.
D) Technology is fixed, but firms can add both labor and capital to increase output.
E) Capital, labor, and technology are fixed and output can be decreased but not increased.
6) A firm may encounter diminishing returns because:
A) The quality of the labor they hire tends to diminish the more workers they employ.
B) A firm may find it impossible to hire additional workers at a certain point because the supply of labor is limited.
C) As the amount of capital is fixed, the capital available per worker declines as they add more labor.
D) As the amount of capital is fixed, the number of customers per worker declines as they add more labor.
E) As they increase their inputs they encounter coordination problems.
7) If firms in an industry use technologies that have decreasing returns to scale, then:
A) Larger firms will have an advantage over their smaller rivals because they can bargain for lower prices from suppliers.
B) Larger firms will have an advantage over their smaller rivals because they have lower production costs.
C) Smaller firms will have an advantage over their larger rivals because they have lower production costs.
D) Smaller firms will have an advantage over their larger rivals because they can offer better service.
E) The size of a firm in the industry will neither be an advantage nor a disadvantage because both large and small firms have the same production costs.
8) If there is constant returns to scale in a competitive industry, then:
A) The long-run supply curve will be horizontal.
B) An increase in demand will raise the average total cost of producing the good.
C) The long-run supply curve will be downward sloping.
D) Then an increase in demand will lower the price in the short run but raise it in the long run.
E) Then an increase in demand will raise the price in the short run as well as raise the price in the long run.
9) Which of the following statements regarding the above diagram is TRUE?
A) If the price is $8 per bushel of wheat, then the typical wheat farmer will earn zero economic profits.
B) If the price is $10 per bushel of wheat, then firms will exit the wheat industry causing the price of wheat to fall in the long run.
C) If the price is $12 per bushel of wheat, then the typical wheat farmer will produce 100,000 bushels of wheatof wheat to increase.
D) If the price of wheat falls from $8 to $6 per bushel of wheat, then the profit maximizing output for the typical wheat farmer will fall from 110,000 bushels to 100,000 bushels of wheat.
E) If the price is $6 per bushel of wheat, then the typical wheat farmer will exit the industry causing the supply.
10) If price is equal to minimum average total costs, then:
A) Firms will begin to shut down immediately.
B) Firms will earn excess profits in the short run and in the long run there will be entry into the industry.
C) Economic profits will be less than zero but firms will not exit because they earn normal profits.
D) Economic profits will be zero but firms will remain in the industry because they earn normal profits.
E) Economic profits are less than zero but firms are paying some of their fixed costs so they will continue to produce in the short term and exit in the long term when their fixed obligations have expired.
11) Assume that the market for CDs is competitive and the typical CD producer breaks even when the price of CD is $10. Which of the following statements concerning the CD market depicted in the diagram above is TRUE?
A) The increase in demand for CDs will raise the price of CDs in the short run, but the higher price will reduce demand in the long run and cause the price of CDs to fall.
B) If the CD industry is a decreasing cost industry, then the increase in demand shown above will lower the price of CDS below $10 per CD in the long run.
C) If the CD industry is an increasing cost industry, then the increase in demand shown above will raise the price of CDs in the short run but lower the price in the long run.
D) The increase in demand for CDs will raise the profits of CD producers in the short run, but reduce economic profits below zero in the long run.
E) If the CD industry has increasing returns to scale, then the increase in demand shown above will raise the price of CDs in the short run but return the price to $10 in the long run.
12) The shut down point is when:
A) A firm can no longer pay its debts.
B) A firm can only earn normal profits.
C) Price is below minimum average total costs.
D) Price is equal to minimum average variable costs.
E) Output falls below minimum marginal costs.
13) A monopolist can increase their profits by bundling their products because bundling allows them:
A) To price discriminate and charge consumers higher prices based on their willingness to pay.
B) Create different varieties of their product at different price and quality levels.
C) Create different varieties of their product at the same price and quality level.
D) Create both different varieties of the product at different price and quality levels and at the same price and quality level.
E) To force consumers to pay for products they have little use for to obtain something that has great value to them.
14) Schumpeter argued that monopolists eventually fall because:
A) Entrepreneurs find away to innovate around the monopolist's control over their market.
B) Eventually an entrepreneur finds a way to compete directly with the monopolist.
C) Consumers tire of the monopolist's product and they stop purchasing it.
D) The government outlaws the monopoly.
E) Consumers band together to counter the monopolist's control over the product.
15) A monopolist's price is:
A) Equal to their minimum average total cost in the long run.
B) Equal to their marginal cost.
C) Below their minimum average total cost in the long run.
D) Above their marginal cost.
E) Equal to their minimum average variable cost in the long run.
16) An example of price discrimination is when:
A) A law firm provides better service to their wealthy clients.
B) An airline charges fees for baggage.
C) A country doctor charges his patients different prices for checkups based on their income.
D) A software maker bundles their programs together rather then sell them separately.
E) A car maker creates a new variety of their product at a higher price and quality level.
17) A monopolist never drops their price to the point where:
A) They can only earn normal profits.
B) It is below minimum average total costs.
C) They earn almost no excess profits.
D) Demand is elastic and marginal revenue is above zero.
E) Demand is inelastic and marginal revenue becomes negative.
18) A monopolist can earn excess profits in the long run because:
A) They can keep their price above their marginal cost.
B) There are good substitutes for the product they produce.
C) They can restrict output to raise their price.
D) They have barriers to entry that prevent competition.
E) They have the power to set their price. •
Explanation / Answer
1. In short run the capital and technoplogy are assumed to be constant due to insufficient time to adjust captal and technology. Whereas in the long run all factors are taken as variable and can be changed. Labor is considered to be the only variable factor in the short run.
So the correct option is
A) Capital and technology are fixed, but firms can add labor to increase output.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.