Suppose Toyota produces 100,000 cars per year at its California plant at an average cost of 6,000 and it doubles output and total costs by building an identical plant in Kentucky. Toyota has exhibited
a. diminishing marginal returns
b. economies of scale
c. constant average costs
d. an upward-sloping planning curve
e. production inefficiency
QUESTION 2Diseconomies of scale are pictured on a graph by the upward-sloping portion of the
a. marginal product curve
b. short-run marginal cost curve
c. long-run marginal cost curve
d. short-run average cost curve
e. long-run average cost curve
QUESTION 3If a firm is experiencing diseconomies of scale, its long-run marginal cost curve is upward sloping.
a. True
b. False
QUESTION 4If a firm triples all of its inputs and its output doubles, it is said to be experiencing
a. diminishing marginal returns
b. increasing marginal returns
c. diseconomies of scale
d. economies of scale
e. constant average costs
QUESTION 5As output increases, diseconomies of scale
a. lead to rising long-run average costs
b. lead to declining long-run average costs
c. lead to rising short-run average total costs
d. lead to declining short-run total cost
e. means the law of diminishing marginal returns is affecting production
QUESTION 6If General Electric finds that when it doubles both its plant size and the amount of associated inputs, its output level does not double, then
a. the law of diminishing returns is in effect
b. long-run average costs must be decreasing
c. the firm is experiencing diseconomies of scale
d. the firm should increase production
e. the firm is experiencing constant returns to scale
QUESTION 7Which of the following reflects diseconomies of scale?
a. Marginal product decreases as output increases.
b. Short-run marginal cost increases as output increases.
c. Long-run marginal cost increases as output increases.
d. Short-run average cost increases as output increases.
e. As output doubles, long-run total cost more than doubles.
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