59. Consider the following statements when answering this question.
I. With convex isoquants, a firm's expansion path cannot be negatively sloped.
II. If a firm uses only two factors of production, one of whose marginal product becomes negative when its use exceeds a certain level, then a cost-minimizing firm's expansion path will have vertical or horizontal segments. Both I and II are true.
Assume that a firm's production process is subject to increasing returns to scale over a broad range of outputs. Long run average costs over this output will tend to decline.
A firm's short-run average cost curve is U‑shaped. Which of these conclusions can be reached regarding the firm's returns to scale? The short-run average cost curve reveals nothing regarding returns to scale.
62. The LAC and LMC curves in the diagram below are consistent with a production function that exhibits
Increasing returns to scale for small levels of output, then constant returns to scale, and eventually decreasing returns to scale as output increases.
63. The cost-output elasticity equals 1.4. This implies that: there are diseconomies of scale.
64. The cost-output elasticity is used to measure: economies of scale.
65. Use the following two statements to answer this question:
I. Increasing returns to scale cause economies of scale.
Economies of scale cause increasing returns to scale.
I is true, and II is false.
66. At the current level of output, long-run marginal cost is $50 and long-run average cost is $75. This implies that: there are economies of scale.
67. Cost-output elasticity is used to measure economies of scale.
68. Cost-output elasticity can be written and calculated as MC/AC.
69. When there are economies of scale, MC < AC, so cost-output elasticity is less than 1.
70. At every output level, a firm's short-run average costs equals or exceeds its long-run average costs because there are at least as many possibilities for substitution between factors of production in the long run as in the short run.
71. Consider the following statements when answering this question.
I. A technology with increasing returns to scale will generate a long-run average cost curve that has economies of scale.
II. Diminishing returns determines the slope of the short-run marginal cost curve, whereas returns to scale determine the slope of the long-run marginal cost curve.
Both I and II are true.
72. Generally, economies of scope are present when joint output is greater from a single firm producing two goods than could be achieved by two different firms each producing a single product (assuming equivalent production inputs in both situations).
73. When a product transformation curve is bowed outward, there are _______________ in production.
economies of scope
74. Economies of scope refer to
multiproduct firms.
75. A firm produces leather handbags and leather shoes. If there are economies of scope, the product transformation curve between handbags and shoes will be
bowed outward (concave).
76. Two firms, each producing different goods, can achieve a greater output than one firm producing both goods with the same inputs. We can conclude that the production process involves
diseconomies of scope.
77. When a product transformation curve for a firm is bowed inward, there are _____________ in production.
diseconomies of scope
78. Which of the following is true regarding the relationship between returns to scale and economies of scope? There is no definite relationship between returns to scale and economies of scope.
79. The equation below gives the degree of economies of scope (SC):
SC = (C(Q1) + C(Q2) - C(Q1,Q2)) / C(Q1,Q2)
where C(Q1) is the cost of producing output Q1, C(Q2) is the cost of producing output Q2, and C(Q1,Q2) is the joint cost of producing both outputs. If SC is negative: there are diseconomies of scope.
80. Bubba Burgers has discovered there are economies of scope available to the restaurant. Which is most likely to be a response to this discovery? Bubba adds grilled chicken sandwiches to the menu.
81. Which of the following is NOT a reason for average costs to fall according to the learning curve? Competing firms leave the industry as the learning firm becomes more efficient.
82. Refer to Figure 7.2. A movement from A to B in the figure represents