QUESTION 1
You own a pizza restaurant, and the members of your kitchen staff are great workers and equally able. However, you notice that your kitchen productivity is subject to diminishing marginal returns. If so, does this mean that the third person to show up for work generates higher marginal product than the seventh person to show up for work?
TRUE
FALSE
2 points

QUESTION 2
The manufacturing process for electric automobiles is subject to learning curves, so future average cost of production declines as current production increases. Which of the following actions by the manufacturer would take advantage of the learning curve character?
A. Increase current production above the profit maximizing level in order to gain cost advantages in the future
B. Decrease current production below the profit maximizing level in order to earn higher profits in the future
C. Increase current production above the profit maximizing level in order to avoid higher costs in the future
D. Decrease current production below the profit maximizing level in order to save money now and in the future
2 points

QUESTION 3
When marginal cost of production rises above the average total cost of production, we know that:
A. average total cost is increasing
B. the firm has economies of scale
C. marginal cost is negative
D. average total cost is decreasing
2 points

QUESTION 4
The following sets of number represent the average costs for producing Good A, Good B, and Goods A and B together. Which of these cases represents economies of scope for the production of Goods A and B?
A. 40, 50, 120
B. 40, 50, 80
C. 50, 60, 120
D. 40, 50, 90
2 points

QUESTION 5
Suppose the monthly total costs of production for a firm may be described with the following equation: TC = 30,000,000 + 250*Q where Q is the number of items produced. True or false — this cost structure exhibits diseconomies of scale?

Sample Solution