Choose the most correct answer for each question. Each question is worth 1/2 point.

1. A firm can use 5 workers and 10 machines, 7 workers and 9 machines, or 8 workers and 9 machines to produce 4 cars. If each worker costs $200 and each machine is rented for $50, the economically efficient input combination is:

A. 5 workers and 10 machines. B. 7 workers and 9 machines. C. 8 workers and 9 machines. D. none of these input combinations would be economically efficient.

2. In the long-run: A. all inputs are fixed. B. all inputs are variable. C. some inputs are not variable. D. per-unit costs are fixed.

3. Which of the following is most likely to be an example of economies of scale? A. The per-unit costs on Excel Publishing Company's manuals fall because it adopted a new technology following a large order from the government. B. Alpha-Beta Inc. raised its price 10 percent following a 5 percent increase in production costs. C. Widget Manufacturing doubled its production by opening a new plant that was identical to its old plant. D. The XYZ Co. increased production 25 percent following a 30 percent increase in all inputs.

4. Refer to the graph above. The output range in region "c" is associated with: A. diminishing marginal productivity. B. constant returns to scale. C. economies of scale. D. diseconomies of scale.

5. Which of the following provides the best explanation for diseconomies of scale? A. The presence of fixed inputs. B. Reduced monitoring costs. C. Loss of team spirit. D. Indivisible set-up costs.

6. Generally, as the size of a firm increases: A. team spirit increases. B. marginal productivity rises. C. economies of scope fall. D. monitoring costs increase.

7. Which of the following is most likely an example of constant returns to scale? A. The per-unit costs on Excel Publishing Company's manuals fell following a large order from the government. B. Alpha-Beta Inc. raised its price 10 percent following a 5 percent increase in production costs. C. Widget Manufacturing doubled its production by opening a new plant that was identical to its old plant. D. The XYZ Co. increased production 25 percent and experienced a 30 percent increase in its total cost.

8. The reason for the merger of two businesses that sell unrelated goods but can share business practices and sales forces might best be explained by: A. indivisible costs. B. learning by doing. C. economies of scope. D. economies of scale.

9. Economies of scale: A. account for the upward-sloping portion of the long-run average total cost curve. B. exist because of the difficulties in coordinating and managing a large business enterprise. C. imply an increase in per-unit costs of production associated with an increase in output. D. arise because large indivisible setup costs are spread out among a larger level of output and because of the efficiencies of greater labor and management specialization.

10. Which of the following is consistent with diseconomies of scale? A. Producing 1,000 lawn mowers costs $100,000 while producing 2,000 lawn mowers costs $220,000. B. 50 workers and 5 machines produce 1,000 units of output while 100 workers and 10 machines produce 2,500 units of output. C. 50 workers and 5 machines produce 1,000 units of output while 60 workers and 5 machines produce 1,200 units of output. D. Producing 1,000 lawn mowers costs $100,000 while producing 2,000 lawn mowers costs $150,000.