03 Jun Question 1. The difference between the short-run and the
Question
1. The difference between the short-run and the long-run production function is:
a. three months or one business quarter.
b. the time it takes for firms to change all production inputs.
c. the time it takes for firms to change only their variable inputs.
d. more information is required to answer this question.
2. Which of the following statements about the short-run production function is true?
a. MP always equals AP at the maximum point of MP.
b. MP always equals zero when TP is at its maximum.
c. TP starts to decline at the point of diminishing returns.
d. When MP diminishes, AP is at its minimum point.
e. None of the above is true.
3. A firm using two inputs, X and Y, is using them in the most efficient manner when
a. MPX = MPY
b. PX = PY and MPX = MPY
c. MPX/PY = MPY/PX
d. MPX/MPY = PX/PY
4. Average fixed cost is
a. AC minus AVC
b. TC divided by Q
c. AVC minus MC
d. TC minus TVC
5. Diseconomies of scale can be caused by
a. the law of diminishing returns.
b. bureaucratic inefficiencies.
c. increasing advertising and promotional costs.
d. all of the above.
6. Which of the following cost relationship is not true?
a. AFC = AC – MC
b. TVC = TC – TFC
c. the change in TVC divided by the change in Q = MC
d. the change in TC divided by the change in Q = MC
7. When a firm produces at the point where MR = MC, and the price of its product is higher
that the cost per unit, the profit that it is earning is considered to be
a. maximum
b. normal
c. above normal
d. below normal
8. Which of the following is not characteristic of perfect competition?
a. A differentiated product
b. No barriers to entry
c. Large number of buyers
d. Complete knowledge of market price
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