WorksheetsThe Long Run
Total questions: 12
Worksheet time: 12mins
Name
Class
Date
1.
Wolfsburg Wagon is a small automaker. Wolfsburg's long run average total cost is shown in the table. For what levels of output does the firm experience increasing returns to scale?
a)
1-4
b)
4-6
c)
6-8
d)
1-8
2.
TRUE or FALSE?
The short-run average TOTAL cost can never be less than the long-run average total cost.
a)
TRUE
b)
FALSE
3.
TRUE or FALSE?
The short-run average VARIABLE cost can never be less than the long-run average total cost.
a)
TRUE
b)
FALSE
4.
Which of the following must be true if a firm is experiencing economies of scale?
a)
All costs are explicit.
b)
Economic profits decrease as the firm’s output increases.
c)
Long-run average total cost remains constant as the firm’s output decreases.
d)
Long-run average total cost decreases as the firm’s output increases.
5.
Which of the following must be true of the long run?
a)
It is at least one year in duration.
b)
At least one factor of production is fixed.
c)
All factors of production are variable.
d)
Average total costs are constant.
6.
If the output of a firm doubles when the firm doubles all of its inputs, the firm must be experiencing:
a)
economies of scale
b)
constant returns to scale
c)
decreasing returns to scale
d)
increasing returns to scale
7.
At output level Q, the firm can minimize costs by using factory size ______.
a)
SRATC
b)
SRATC1
c)
SRATC2
8.
To produce output level Q1, the firm should use factory size ______.
a)
SRATC
b)
SRATC1
c)
SRATC2
9.
TRUE or FALSE?
The short-run average total cost curve declines and then increases as inputs increase because of economies & diseconomies of scale.
The short-run average total cost curve declines and then increases as inputs increase because of economies & diseconomies of scale.
a)
TRUE
b)
FALSE
10.
Which one of the following would most likely be caused by a firm growing too large and experiencing difficulties in communication and coordination?
a)
Economies of scale
b)
Constant returns to scale
c)
Increasing returns to scale
d)
Decreasing returns to scale
11.
A farmer grows wheat using two inputs: labor and land whose prices are constant. If she doubles her inputs, she finds that the quantity of wheat produced more than doubles. Therefore, it must be true that in this output range her long-run average total cost curve is
a)
Upward sloping
b)
Downward sloping
c)
Horizontal
d)
U-shaped
12.
If a firm’s production process exhibits economies of scale, which of the following will occur when the firm’s output increases?
a)
Its short-run average total costs will rise.
b)
Its short-run total costs will fall.
c)
Its long-run average total costs will fall.
d)
Its long-run total costs will fall.
100 %
