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Economics
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13 Dec 2019

As a firm increases its output level in the short run, the costs of producing additional units of out-put eventually increase because of: A. Diseconomies of scale. B. Diminishing marginal returns. C. Increases in average fixed costs. D. Specialization and division of labor.

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Related questions

What is the difference between "diminishing marginal returns" and "diseconomies of scale"?
Ā 
(i) Diminishing marginal returns that apply only in the short run, when at least one factor is fixed, explains why marginal cost increases, while diseconomies of scale which applies in the long run, when all factors are variable, explains why average cost increases.
(ii) Diminishing marginal returns which apply only in the short run, when at least one factor is fixed, explains why average variable cost increases, while diseconomies of scale which applies in the long run, when all factors are variable, explains why average total cost increases.
(iii) Both concepts explain why marginal cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale apply in the long run when all factors are variable.
(iv) Both concepts explain why average total cost increases after some point but diminishing marginal returns applies only in the short run when there is at least one fixed factor, while diseconomies of scale apply in the long run when all factors are variable.

36) A firm encountering economies of scale over some range of output will have a:

a) rising long-run average cost curve.

b) falling long-run average cost curve.

c) constant long-run average cost curve.

d) rising, then falling, then rising long-run average cost curve.

37) When a firm doubles its inputs and finds that its output has more than doubled, this is known as:

a) economies of scale.

b) constant returns to scale.

c) diseconomies of scale.

d) a violation of the law of diminishing returns.

38) The larger the diameter of a natural gas pipeline, the lower is the average total cost of transmitting 1,000 cubic feet of gas 1,000 miles. This is an example of:

a) economies of scale.

b) normative economies.

c) diminishing marginal returns.

d) an increasing marginal product of labor.

39) If all resources used in the production of a product are increased by 20 percent and output increases by 20 percent, then there must be:

a) economies of scale.

b) constant returns to scale.

c) diseconomies of scale.

d) increasing the average total costs.

40) Economies and diseconomies of scale explain why the:

a) short-run average fixed cost curve declines so long as output increases.

b) marginal cost curve must intersect the minimum point of the firm's average total cost curve.

c) long-run average total cost curve is typically U-shaped.

d) short-run average variable cost curve is U-shaped.

TRUE OR FALSE

____ 16. The law of diminishing marginal returns provides an explanation for why Average Cost eventually increases as output is expanded in the short run.

____ 17. The marginal product is the increase in output per additional unit of input.

____ 18. As output increases, marginal cost increases, reaches a maximum, and then falls.

____ 19. The marginal product curve rises when the marginal cost curve rises.

____ 20. If a firm is producing an output level at which marginal revenue exceeds marginal cost in the short run, the firm will increase profits by reducing its output level.


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