Question 15 The “Law of Diminishing Returns†is
a. a legal statute in the U.S. only
b. a legal statute in the U.S., the European Union, and in other developed countries around the world
c. not a statute law, but rather a precident established in courts through case law
d. not a legal statute at all but rather an old terms for a well established empirical observation (that is, an observation about how things are in the real world)
e. a theoretical proposition with very little relevance for the real world
Question 16 Which of the following was, according to Thomas Malthus, the reason why food production could not possibly keep up with the growth of population?
a. economies of scale
b. diseconomies of scale
c. the Law of Diminishing Returns
d. the Law of Averages
e. Murphy’s Law (that is, Whatever can go wrong will go wrong)
Question 17 At your current output level, your firm’s marginal costs are greater than its average variable costs. If you increase output, you should expect your average variable costs to
a. fall
b. increase
c. stay the same
d. turn negative
e. change, but there is too little information here to say how they will change
Question 18 All of your firm’s inputs are variable, that is, you can consider any scale of operation. What economic time period is your firm operating in? ___________________________
Question 19 Chapter Seven introduces the study of market structures. Although we have not covered this in class yet, you should be able to identify the different types of market structures form the description of their features in the text. Which market structure has many small firms selling differentiated products?
a. Pure or Perfect Competition
b. Oligopoly
c. Monopoly
d. Monopolistic Competition
Question 20 Chapter Seven introduces the study of market structures. Although we have not covered this in class yet, you should be able to identify the different types of market structures form the description of their features in the text. Which market structure has a few very large sellers who dominate their market?
a. Pure or Perfect Competition
b. Oligopoly
c. Monopoly
d. Monopolistic Competition
Question 21 If a firm’s long run average costs are increasing as scale increases, the firm must
a. heave encountered economies of scale
b. must have encountered diseconomies of scale
c. must have reached the point of diminishing returns
d. must have inverted its implicit costs
Question 22 Chapter Seven introduces the study of market structures. Although we have not covered this in class yet, you should be able to identify the different types of market structures form the description of their features in the text. Which market structure has virtually no barriers to entry?
a. Pure or Perfect Competition
b. Oligopoly
c. Monopoly
d. Monopolistic Competition
Question 23 At the beginning of this course, we noted different types of competition. One type of competition was the “competition of capitals.†If firms earn positive economic profits, the competition of capitals would
a. stop working
b. bring about a government antitrust suit
c. cause firms in a free open market to enter the industry
d. cause firms in a free open market to exit the industry
e. reduce interest rates
Question 24 Anything that increases productivity will
a. increase cost
b. decrease cost
c. have no effect on cost because productivity is measured in physical units while cost is measured in financial units (e.g., dollars)
d. have an effect on cost, but the direction and extent cannot be determined without more information
e. reduce the demand for labor
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