For building contractors, doubling the size of an office building does not require double the inputs because there are common walls. This is an example of
a. increasing marginal product
b. diminishing marginal returns
c. economies of scale
d. diseconomies of scale
e. constant returns to scale
QUESTION 2Doubling the circumference of an oil pipeline more than doubles the volume of oil that can be pumped through. This is an example of
a. production inefficiency
b. diminishing marginal returns
c. diseconomies of scale
d. constant returns to scale
e. economies of scale
QUESTION 3Which economic concept explains why a large drugstore chain can produce at a lower average cost than Whoville Pharmacy, an individually owned drugstore?
a. increasing marginal returns
b. diminishing marginal returns
c. economies of scale
d. diseconomies of scale
e. constant returns to scale
QUESTION 4Economies of scale occur where
a. long-run average cost falls as new firms enter the industry
b. short-run average cost falls as new firms enter the industry
c. long-run average cost falls as one firm expands plant size
d. short-run average cost falls as one firm expands plant size
e. long-run average cost rises as one firm expands plant size
QUESTION 5If a firm experiencing economies of scale decreases its output, its long-run average cost will decrease.
a. True
b. False
QUESTION 6If a firm is producing at its minimum efficient scale, increasing its output slightly will lead to diseconomies of scale.
a. True
b. False
QUESTION 7The shape of the long-run average cost curve reflects
a. market demand
b. economies and diseconomies of scale
c. increasing and diminishing marginal returns
d. productivity of fixed inputs
e. all of the above
QUESTION 8Empirical studies of production suggest that the long-run average cost curve
a. is U-shaped
b. has an inverted L shape
c. is L-shaped
d. is horizontal
e. shows diminishing marginal returns