Quiz on Long-run Production, Cost, and Supply

Quiz on Long-run Production, Cost, and Supply

Directions: This quiz contains 15 multiple choice questions. Select the correct answer by clicking on the appropriate button. After you have finished the quiz, click on the Grade my Quiz button at the bottom of the page.

After taking the quiz and scoring it, you may wish to change some of your wrong answers and re-grade yourself. Before each retake of the quiz, click on the RELOAD or REFRESH button on your browser to make sure your new answers are graded correctly.

 

1. If brachistochrone production exhibits decreasing returns to to scale, then

(a) Increasing labor by 50 percent raises output by less than 50 percent.
(b) Increasing labor by 50 percent raises output by more than 50 percent.
(c) Increasing all inputs by 50 percent raises output by less than 50 percent.
(d) Increasing all inputs by 50 percent raises output by more than 50 percent.

 

2. If the production of panegyrics occurs under conditions of increasing returns to scale, a possible set of long-run cost functions is illustrated by:


(a)
Choice (a)
(b)
Choice (b)

(c)
Choice (c)
(d)
Choice (d)

 

3. Suppose that a manufacturer of architraves increases production and finds that per-unit production costs fall. Then the production process may be said to exhibit:

(a) decreasing returns to scale.
(b) increasing returns to scale.
(c) constant returns to scale.
(d) diminishing returns to stonemasons.

 

4. The prices of inputs used by the medicinal leech industry do not change as the industry's output expands or contracts. In the long run, the burden of any tax levied on the producers of medicinal leeches:
(a) falls equally on buyers and sellers.
(b) falls on buyers and sellers in proportions that cannot be determined from the information provided.
(c) falls entirely on sellers since they bear the legal obligation to pay the tax.
(d) falls entirely on buyers because the long-run industry supply curve is perfectly elastic.

 

Questions 5 through 11 refer to the following table of cost data for producers of dithyrambs:

q LAC LMC SATC AVC SMC
1 $29.36 $28.73 $34.17 $4.17 $32.48
2 $28.76 $27.60 $32.56 $17.56 $29.50
3 $28.20 $26.60 $31.11 $21.11 $27.02
4 $27.69 $25.73 $29.83 $22.33 $25.02
5 $27.22 $25.00 $28.71 $22.71 $23.51
6 $26.80 $24.40 $27.75 $22.75 $22.50
7 $26.42 $23.93 $26.96 $22.67 $21.97
8 $26.09 $23.60 $26.33 $22.58 $21.93
9 $25.80 $23.40 $25.86 $22.53 $22.39
q LAC LMC SATC AVC SMC
10 $25.56 $23.33 $25.56 $22.56 $23.33
11 $25.36 $23.40 $25.42 $22.69 $24.77
12 $25.20 $23.60 $25.44 $22.94 $26.69
13 $25.09 $23.93 $25.62 $23.32 $29.11
14 $25.02 $24.40 $25.97 $23.83 $32.01
15 $25.00 $25.00 $26.49 $24.49 $35.41
16 $25.02 $25.73 $27.16 $25.29 $39.29
17 $25.09 $26.60 $28.00 $26.24 $43.67
q LAC LMC SATC AVC SMC
18 $25.20 $27.60 $29.01 $27.34 $48.54
19 $25.36 $28.73 $30.17 $28.59 $53.89
20 $25.56 $30.00 $31.50 $30.00 $59.74
21 $25.80 $31.40 $33.00 $31.57 $66.07
22 $26.09 $32.93 $34.65 $33.29 $72.90
23 $26.42 $34.60 $36.47 $35.17 $80.22
24 $26.80 $36.40 $38.46 $37.21 $88.03
25 $27.22 $38.33 $40.60 $39.40 $96.32
q LAC LMC SATC AVC SMC

 

5. Refer to the cost table above. When the market price of dithyrambs is $60, the short-run profit-maximizing output is:

(a) 5.
(b) 10.
(c) 15.
(d) 20.

 

6. Refer to the cost table preceding question 5. When the market price of dithyrambs is $75 and a representative producer of dithyrambs produces the profit-maximizing output, the profit received by the firm is:

(a) 22 x (75.00 - 72.90) = $46.20.
(b) 22 x (75.00 - 34.65) = $887.70
(c) 22 x (75.00 - 32.93) = $925.54.
(d) 22 x (75.00 - 26.09) = $1076.02.

 

7. Refer to the cost table preceding question 5. Suppose again that the market price of dithyrambs is $75 and that a representative producer of dithyrambs produces the profit-maximizing output. If the firm also adjusts its fixed factors of production to their optimal values, the profit received by the firm is:

(a) 22 x (75.00 - 72.90) = $46.20.
(b) 22 x (75.00 - 34.65) = $887.70
(c) 22 x (75.00 - 32.93) = $925.54.
(d) 22 x (75.00 - 26.09) = $1076.02.

 

8. Refer to the cost table preceding question 5. If the prices of inputs used in dithyramb production do not change as the industry expands or contracts, then the long-run equilibrium price of dithyrambs is

(a) $23.33.
(b) $25.00.
(c) $25.56.
(d) $30.00.

 

9. Refer to the cost table preceding question 5. Suppose that the prices of inputs used in dithyramb production do not change as the industry expands or contracts. If the dithyramb industry is in long-run equilibrium, then a representative firm produces output at the rate of:

(a) 5.
(b) 10.
(c) 15.
(d) 20.

 

10. Refer to the cost table preceding question 5. Continue to assume that the prices of inputs used in dithyramb production do not change as the industry expands or contracts. Suppose that the market demand for dithyrambs is described by the equation P = 85 - .02 Q, where Q is the total output of the industry. When the dithyramb industry is in long-run equilibrium, then total industry output equals:

(a) 1500.
(b) 2000.
(c) 2500.
(d) 3000.

 

11. In the situation described in the previous question, the number of firms operating in the dithyramb industry equals:

(a) 200.
(b) 150.
(c) 100.
(d) 50.

 

12. If the prices of inputs do not change as the size of the industry changes, then a $10 per unit tax on semiquavers collected from sellers:

(a) will raise the price buyers pay by $10 in the short run but by less than $10 in the long run.
(b) will raise the price buyers pay by $10 in the long run but by less than $10 in the short run.
(c) will raise the price buyers pay by $10 in both the long run and the short run.
(d) will raise the price buyers pay by less than $10 in both the long run and the short run.

 

13. Unless economic profits are zero, firms have an incentive:
(a) to enter or leave the industry.
(b) to change the level of capital employed.
(c) to change the level of labor employed.
(d) to change the quantity of output produced.

 

14. The cost and revenue functions for do-it-yourself body-piercing kits are illustrated at right. Assume that the market price is P and a firm in the industry is producing Q0 units of output. To maximize profit, the firm should:


Please don't point at the pictures
(a) change output.
(b) change capital.
(c) change labor.
(d) change to a more wholesome product.

 

15. If the prices of factors of production increase as the output of the industry rises, then the long-run industry supply curve:

(a) equals the horizontal sum of the firms' long-run marginal cost functions.
(b) is perfectly elastic and lies at the height equal to the minimum value of the long-run average cost function of a representative firm.
(c) does not exist because the set of firms that are operating in the industry varies with market conditions.
(d) slopes upward.

 



After taking the quiz and scoring it, you may wish to change some of your wrong answers and re-grade yourself. Before each retake of the quiz, click on the RELOAD or REFRESH button on your browser to make sure your new answers are graded correctly.

© 1999 Douglas Blair