Chapter 7

The future of cities in the United States and in other countries will be determined by their ability to benefit from the _________________ and to minimize or counterbalance the ______________________.

economies of agglomeration; corresponding diseconomies

economies of scale; agglomeration factors

diverse population; greater returns to scale of illegal activities

constant returns to scale; market-orientated system

economies of agglomeration; corresponding diseconomies

The graph above illustrates the total cost function for GoodieCookie Co. The changing slope of the total cost curve reflects this company's

decreasing average total costs.

decreasing marginal costs.

decreasing average variable costs.

decreasing fixed costs.

decreasing marginal costs.

______________ include all of the costs of production that increase with the quantity produced.

Fixed costs

Variable costs

Average costs

Average variable costs

Variable costs

If the firm produces 5 units that it sells at a price of $30.00 each, what will its profits or losses equal?

losses equal $15

profits equal $15

profits equal $25

losses equal $25

losses equal $15

Mindy's company manufactures rubber balls used by elementary schools for playground activities. The table below sets out her firm's production cost information. Some values are missing. Which of the following statements is correct?

A = 20; E = 45

A = 25; E = 45

A = 25; E = 5

A = 20; E = 5

A = 20; E = 5

Approximately what percentage of the US labor force is employed by firms that have fewer than 100 employees?

63%

50%

45%

35%

35%

I'MaGadgetCo. produces and sells widgets. Last year, it produced 9,000 widgets and sold each one for $8. To produce the 9,000 widgets, the company incurred variable costs of $27,000 and a total cost of $36,000. I'MaGadgetCo's average fixed cost to produce 9,000 widgets was

$1.00

$3.00

$4.00

$7.00

$1.00

In economics, a firm that faces no competitors is referred to as _________________.

an oligopoly

a monopoly

a perfect competitor

an oligopolizor

a monopoly

The term "constant returns to scale" describes a situation where

expanding all inputs does not change the average cost of production.

a larger-scale firm can produce at a lower cost than a smaller-scale firm.

expanding all inputs changes the average cost of production.

the quantity of output rises and the average cost of production falls.

expanding all inputs does not change the average cost of production.

I'MABigCorp. produces and sells kitchen wares. Last year, it produced 7,000 can openers and sold each one for $6. To produce the 7,000 can openers, the company incurred variable costs of $28,000 and a total cost of $45,000. I'MABIGCorp.'s average fixed cost to produce the 7,000 can openers was

$1.50

$1.23

$2.25

$2.43

$2.43

The marginal cost curve is generally ______________, because diminishing marginal returns implies that additional units are _______________

downward-sloping; more costly to produce

upward-sloping; more costly to produce

downward-sloping; less costly to produce

upward-sloping; less costly to produce

upward-sloping; more costly to produce

In order to determine ____________, the firm's total costs must be divided by the quantity of its output.

diminishing marginal returns

fixed costs

variable cost

average cost

average cost

A situation where the level of output, scale and average costs are all rising is called

decreasing returns to scale

diseconomies of scale

diminishing returns to scale

both a and b are correct

both a and b are correct

The economies-of-scale curve is a long-run average cost curve because

it allows all factors of production to change.

fixed costs cannot be changed.

only variable costs are allowed to change.

only marginal costs are allowed to change

it allows all factors of production to change.

If this information were used to create a total cost graph, the curve should

begin at 40 on the vertical axis and slope upward.

become steeper as quantity increases.

become steeper due to diminishing returns.

reflect all of the above.

reflect all of the above.

In order to calculate marginal cost, the change in ______________ is divided by the amount of change in quantity.

either total cost or average cost

increasing marginal returns

either total cost or variable cost

decreasing marginal returns

either total cost or variable cost

Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it?

physical space for the gallery

costs of purchasing art work to sell in the gallery

wages paid to three part-time employees

accountant's fees for preparing tax returns

physical space for the gallery

A situation known as _____________________ occurs when all production inputs are allowed to expand, but that expansion does not result in much of a change in the average cost of production.

returns to scale

economies of scale

constant returns to scale

diminishing marginal returns

constant returns to scale

Which of the following falls outside of the classification of business expenditures that fall into the category of variable costs?

costs that increase with the quantity produced

costs of research and development

costs related to labor expenditures

costs related to physical inputs

costs of research and development

The table below sets out cost information for the production of volley balls. Some values are missing. Which of the following statements is correct?

A = 42; E = 40

A = 70; E = 40

A = 42, E = 12

A = 70; E = 12

A = 42, E = 12