Managerial Economics 4th Edition by Luke M. Froeb – Test Bank

Managerial Economics 4th Edition by Luke M. Froeb – Test Bank

Chapter 07

1. The law of diminishing marginal productivity states that
a. As you expand output, your marginal productivity eventually increases
b. As you expand output, your marginal productivity eventually declines
c. As you expand output, the total product eventually increases

d. None of the above

ANSWER: b
TOPICS: Section 1: Increasing Marginal Cost

2. Average costs curves initially fall
a. Due to declining average fixed costs
b. Due to rising average fixed costs

c. Due to rising fixed costs

d. Due to rising marginal costs

ANSWER: a
TOPICS: Section 1: Increasing Marginal Cost

3. Average costs curves rise with production
a. Due to declining average fixed costs

b. Due to rising average fixed costs

c. Due to marginal costs being less than average costs
d. Due to rising marginal costs

ANSWER: d
TOPICS: Section 1: Increasing Marginal Cost

4. Which one of the statements is true?
a. Diminishing returns is a long-run concept while decreasing returns to scale is a short-run concept.
b. Diminishing returns is a short-run concept while decreasing returns to scale is a long-run concept.
c. Diminishing returns is a both short and long-run concept while decreasing returns to scale is a short-run concept.
d. Diminishing returns is a long-run concept while decreasing returns to scale is a short and long-run concept.
ANSWER: b
TOPICS: Section 1: Increasing Marginal Cost

5. Which of the following statements describes the presence of diminishing returns? All else equal,
a. Marginal product is constant as output increases
b. Marginal product is falling as output increases
c. Marginal product is rising as output increases

d. Marginal product is zero

ANSWER: b
TOPICS: Section 1: Increasing Marginal Cost

6. The term “bottleneck” refers to
a. when increasing amounts of variable inputs must share a fixed input.
b. “fixity” of some factor of production

c. None of the above

d. Both a and b

ANSWER: d
TOPICS: Section 1: Increasing Marginal Cost

7. All the factors below are causes of diminishing marginal returns, except
a. Difficulty of monitoring and motivating larger workforces
b. Increasing complexity of larger systems

c. Specialization and division of Labor

d. The “fixity’ of some factor

ANSWER: c
TOPICS: Section 1: Increasing Marginal Cost

8. When a firm is experiencing increasing marginal costs, it implies
a. A constant marginal productivity
b. decreasing average costs

c. decreasing marginal productivity
d. increasing marginal productivity
ANSWER: c
TOPICS: Section 1: Increasing Marginal Cost

9. If average cost is decreasing, then marginal cost
a. Must be increasing

b. Must be greater than average cost
c. Must be less than average cost

d. None of the above

ANSWER: c
TOPICS: Section 1: Increasing Marginal Cost

10. Marginal productivity is
a. The total output associated with total inputs
b. The total output associated with extra inputs
c. The extra output associated with total inputs
d. The extra output associated with extra inputs
ANSWER: d
TOPICS: Section 1: Increasing Marginal Cost