Multiple Choice Questions
1. As a golf club production company produces more clubs, the average total cost of each club produced decreases. This is because:
a. Total fixed costs are decreasing as more clubs are produced.
b. Average variable cost is decreasing as more clubs are produced.
c. There are scale economies.
d. Total variable cost is decreasing as more clubs are produced.
2. What might you reasonably expect of an industry in which firms tend to have economies of scale?
a. Exceptional competition among firms
b. A large number of firms
c. Highly diversified firms
d. A small number of firms
3. Following are the costs to produce Product A, Product B, and Products A and B together. Which of the following exhibits economies of scope?
a. 50, 75, 120
b. 50, 75, 125
c. 50, 75, 130
d. All of the above
4. According to the law of diminishing marginal returns, marginal returns:
a. Diminish always prior to increasing.
b. Diminish always.
c. Diminish sometimes.
d. Diminish eventually.
5. A company faces the following costs at the respective production level in addition to its fixed costs of $50,000:

How would you describe the returns to scale for this company?
a. Increasing
b. Decreasing
c. Constant
d.Marginal

Transcribed Image Text:

Quantity Marginal Cost $10,000 $11,000 $12,000 $13,000 $14,000 Marginal Return $10,000 $9,000 $8,000 $7,000 $6,000 Sale Price $20,000 $20,000 $20,000 $20,000 $20,000