QUESTION 20 If a company is producing at a level of output at which the long-run
ID: 1223784 • Letter: Q
Question
QUESTION 20
If a company is producing at a level of output at which the long-run average-total-cost curve reaches a minimum, then the company:
will shut down.
is experiencing diseconomies of scale.
is experiencing economies of scale.
is operating at its minimum efficient scale.
is experiencing increasing returns to scale.
1.5 points
QUESTION 21
“As I add more workers to the factory line, the additional output produced by each additional worker seems to decline. Eventually, the workers just get in each others’ way.”
This statement by a factory supervisor refers to the law of:
diminishing marginal returns.
comparative advantage.
supply.
demand.
increasing returns to scale.
1.5 points
QUESTION 22
At its minimum point, the average-total-cost curve is intersected by the:
total fixed cost curve.
marginal cost curve.
total variable cost curve.
average variable cost curve.
average fixed cost curve.
1.5 points
QUESTION 23
Scenario 9.2
Consider a publicly held firm (one whose stock shares are traded on the stock exchange) that earned revenue worth $350 million and incurred land, labor, and debt costs worth $320 million. The stockholders who have invested a total of $100 million in this firm could have earned 10 percent return on other comparable investments.
According to the information in Scenario 9.2, how much economic profit did the firm make last year?
$30 million
$112 million
$2 million
$20 million
-$20 million
1.5 points
QUESTION 24
Steve is about to start up a business in a monopolistically competitive market. Which of the following can he expect?
He can expect to face an infinitely elastic demand curve.
He can expect to enjoy a huge amount of market power.
He can expect market entry to be difficult as there exist entry barriers.
He can expect to face a highly inelastic demand curve.
He can expect to find close substitutes of the product he is planning to produce.
1.5 points
QUESTION 25
A monopolist faces the least price-elastic demand curve because:
the monopolist produces a standardized product.
the consumers have only one place to buy the good.
the monopolist produces an absolutely necessary good having close substitutes.
the monopolist undertakes a huge expenditure to produce the product.
the monopolist supplies to an insignificant portion of the market.
a.will shut down.
b.is experiencing diseconomies of scale.
c.is experiencing economies of scale.
d.is operating at its minimum efficient scale.
e.is experiencing increasing returns to scale.
Explanation / Answer
20. C
21.A
22. B
23.D,where the total economic profti is $30, but we should deduct the expected return of $10 billion from $30
24. e
25. c