If equal increments of a variable input are combined with a fixed input, (A) output will eventually increase at a decreasing rate. (B) the increments to output will eventually in- crease. (C) the additions to output will be constant. (D) total cost will eventually decrease. (E) increase in output depends on the long-run econ- omy of scale. The rule for allocating a productive resource effi- ciently across two or more different processes produc- ing the same output is to choose the allocation for which the (A) average product of the resource is the same in every process. (B) marginal product of the resource is the same in every process. (C) total product of the resource is the same in every process. (D) average product is equal to the marginal product of the resource in every process. (E) marginal cost is zero in every process. Which of the followings is not a transaction cost? (A) Searching and matching,

B) Measuring the valuable attributes of what is be- ing exchanged, (C) Production cost, (D) Policing and enforcing agreements. (E) Negotiating terms of the contracts, In most OECD countries, the governments mandate universal healthcare coverage. This is an example of (A) unassisted market. (B) unrelieved hazard. (C) credible commitment. (D) integration. (E) None of the above. Ronald Coase argued that firms exist because (A) they reduce transaction costs. (B) resources are not scarce. (C) people are more productive when they work with others. (D) firms are an important part of capitalism. (E) people will take lower pay to be told what to do by their bosses. Total cost in the short run when output is zero is equal to (A) zero. (B) marginal cost. (C) fixed cost. (D) variable cost. (E) marginal cost plus fixed cost. After the law of diminishing marginal returns has set in and output is expanded, then (A) the total product of labor decreases. (B) smaller successive units of labor can be added to the production process to obtain constant in- creases in the output level. (C) the marginal product of labor will be rising. (D) marginal costs will be rising. (E) all of the above. Let TC = 10 + Q; MC equals (A) 10. (B) 1. (C) 11. (D) a value that varies with the level of output.

(E) None of the above. When a firm owns several factories with different cost structures, the firm should (A) allocate all production to the factory with the lowest average cost. (B) consolidate the factories. (C) improve the technical efficiency of some facto- ries. (D) allocate production at each factory such that their marginal costs are equal. (E) All of the above. A flat horizontal short-run marginal cost curve means that (A) the average variable cost curve is horizontal while the average total cost curve is falling. (B) the average variable and the average total cost curves are rising. (C) the average variable cost curve is falling while the average total cost curve is rising (D) Both the average variable and average total cost curves are horizontal. (E) None of the above. When manufactures look for countries to locate their factories, the most important factors are (A) average wage rate. (B) informal institution. (C) labour productivity. (D) All of the above. (E) A and C only.