ECO204 Quizzes Week 3 - Quiz

Question 1

The principles of production are a foundation for __________.

entrepreneurship

establishing ownership

Correct Answer

analyzing costs

the laws of supply and demand

The answer can be found in Chapter 7, Section 7.5, The Choice of Inputs.

Question 2

What is the marginal product of labor?

the difference between the average output of labor and the average output of capital.

the total output divided by the quantity of labor.

Correct!

the change in the output produced by the addition of one more worker.

the change in total output divided by the total number of workers.

Question 3

A firm that owns a wheat farm, a grain elevator, a flour mill, a commercial bakery, and a grocery store chain is __________.

a conglomerate

a monopoly

horizontally integrated

Correct!

vertically integrated

Question 4

What do economists call the process of transforming inputs, or resources, into marketable outputs?

construction

conglomeration

Correct!

production

efficiency

Question 5

What does the principle of diminishing returns state?

In the short run, at least one input is fixed.

In the long run, fixed inputs are added to variable inputs.

As more units of a variable input are added to another set of variable inputs, output will increase or diminish, depending on the ratio of the input sets.

Correct!

As more units of a variable input are added to a set of fixed inputs, the resulting additions to output eventually become increasingly smaller.

Question 6

Which of the following scenarios MOST exemplifies a benefit of economies of scale?

Grady’s Grocery Store holds weekly sales on its dairy products.

The Department of Motor Vehicles has many layers of bureaucracy.

Correct Answer

COSTCO sells items for less than traditional brick-and-mortar stores.

The Intaglios, a big Italian family, eat a large quantity of pasta.

The answer can be found in Chapter 8, Section 8.3, Cost in the Long Run.

Question 7

When marginal revenue is greater than marginal cost, what happens to total profit?

Correct Answer

It increases.

It is in a state of equilibrium.

It is not affected.

You Answered

It decreases.

Question 8

As AdirondackChairsPlus.com ’s plant size grew, it became more productive and cost effective to run. However, as its scale increased too much, it became less efficient and incurred higher long-run average costs. This second scenario reflects __________.

average cost savings

economies of scale

Correct!

diseconomies of scale

short-run expenditures

Question 9

When Henry Ford introduced the assembly line to his automobile manufacturing plant, he significantly improved his company’s ¬¬¬¬__________.

small-scale production

Correct!

economy of scale

short-run average cost

profit minimization

Question 10

Which of the following formulas determines accounting profit?

Correct!

total revenue – explicit costs

total revenue – implicit costs

total revenue – opportunity costs

total revenue – (explicit costs + implicit costs)