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7. To economists, the main difference between the short run and the long run is that: 

B. in the long run all resources are variable, while in the short run at least one resource is fixed.

8. Marginal product is: 

A. the increase in total output attributable to the employment of one more worker.

9. The law of diminishing returns indicates that: 

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

10. Which of the following best expresses the law of diminishing returns? 

C. As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra output will decline.

11. Marginal product: 

C. may initially increase, then diminish, and ultimately become negative.

12. The first, second, and third workers employed by a firm add 24, 18, and 9 units to total product respectively. Therefore, the: 

A. marginal product of the third worker is 9.

13. Refer to the above data. The average product (AP) when two units of labor are hired is: 

C. 10.

14. Diminishing returns begin to occur with the hiring of the _________ unit of labor. 

C. third

15. Marginal product becomes negative with the hiring of the __________ unit of labor. 

D. seventh
16. Fixed cost is: 

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

17. Which of the following is most likely to be a fixed cost? 

B. property insurance premiums

18. Which of the following is most likely to be a variable cost? 

A. fuel and power payments

19. Marginal cost is the: 

B. change in total cost that results from producing one more unit of output.

20. Average fixed cost: 

D. declines continually as output increases.
21. Which of the following is correct as it relates to cost curves? 

B. Marginal cost intersects average total cost at the latter's minimum point.

22. The relationship between the marginal cost and the average total cost schedule is such that: 

D. if MC is declining, ATC must also be declining.
23. Other things equal, if the prices of a firm's variable inputs were to fall: 

C. marginal cost, average variable cost, and average total cost would all fall.

24. If a firm decides to produce no output in the short run, its costs will be: 

C. its fixed costs.

25. Refer to the above information. Average fixed cost is: 

C. TFC / Q

26. Refer to the above information. Average total cost is: 

D. TFC +TVC / Q  
27. Refer to the above information. Marginal cost is: 

28. Refer to the above information. Total cost is: 


In the above figure, curves 1, 2, 3, and 4 represent the: 

C. MC, ATC, AVC, and AFC curves respectively.

30. Which of the following is correct

D. When MP is rising MC is falling, and when MP is falling MC is rising.
31. If a technological advance increases a firm's labor productivity, we would expect its: 

B. average total cost curve to fall.

32. If marginal cost is: 

C. rising, then average total cost could be either falling or rising.

33. A firm's total variable cost will depend on: 

D. all of these.  
34. The short-run average total cost curve is U-shaped because: 

B. of increasing and diminishing returns.

35. Refer to the above diagram. The profit-maximizing level of output for this firm: 

D. cannot be determined from the information given.
36. Economies of scale are indicated by: 

B. the declining segment of the long-run average total cost curve.

37. Diseconomies of scale: 

A. pertain to the long run.

38. The long-run average total cost curve: 

D. is based on the assumption that all resources are variable.
39. If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that: 

B. economies of scale are being realized.

40. A natural monopoly exists when: 

A. unit costs are minimized by having one firm produce an industry's entire output.

42. Diseconomies of scale arise primarily because: 

B. of the difficulties involved in managing and coordinating a large business enterprise.

43. In the above diagram it is assumed that: 

B. all costs are variable.

44. Refer to the above diagram. Economies of scale: 

D. occur only over the Q1Q3 range of output.
45. Refer to the above diagram. Diseconomies of scale: 

C. begin at output Q3.

1. In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies? 

B. oligopoly

2. Which of the following industries most closely approximates pure competition? 

A. agriculture

3. In which of the following industry structures is the entry of new firms the most difficult? 

A. pure monopoly

4. A one-firm industry is known as: 

C. pure monopoly.

5. An industry comprised of four firms, each with about 25 percent of the total market for a product is an example of: 

B. oligopoly.

6. An industry comprised of a very large number of sellers producing a standardized product is known as: 

D. pure competition.
7. A purely competitive seller is: 

C. a "price taker."

8. Which of the following is not a characteristic of pure competition? 

A. price strategies by firms

9. The demand schedule or curve confronted by the individual purely competitive firm is: 

B. perfectly elastic.

10. Which of the following is characteristic of a purely competitive seller's demand curve? 

A. Price and marginal revenue are equal at all levels of output.

11. Refer to the above information. For a purely competitive firm, total revenue: 

A. graphs as a straight, upsloping line.

12. Refer to the above information. For a purely competitive firm, marginal revenue: 

C. is a straight line, parallel to the horizontal axis.

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