Assume that a firm's production process is experiencing increasing returns to scale over a broad range of outputs. Long run average costs over this range of output will tend to:

• A) Fall to a minimum and then rise.
• B) Remain constant.
• C) Increase.
• D) Decline.

The long-run supply curve of an increasing cost industry is:

• A) Horizontal.
• B) Vertical.
• C) Upward sloping.
• D) Downward sloping.

The ratio of the wage rate to rental cost of capital is called:

• A) Slope of isoquant
• B) Slope of indifference curve
• C) Slope of isocost
• D) Slope of production function

Which of the following is not an example of joint production?

• A) textile industry—garments and shoes
• B) Automobile company--cars and trucks
• C) University--Teaching and research
• D) Chicken farm--poultry and eggs

The producer surplus for a market can be measured as:

• A) Area between the equilibrium price line and the supply curve to the left of equilibrium output.
• B) Vertical intercept of the supply curve.
• C) Area under the demand curve to the left of equilibrium output.
• D) Area under the supply curve to the left of equilibrium output.

A firm in a perfectly competitive market can not affect market price by changing the amount of output because:

• A) The firm supplies a different good than its rivals.
• B) The firm's output is a small fraction of the entire industry's output.
• C) The short run market price is determined solely by the firm's technology.
• D) The market price is determined (through regulation) by the government.

Suppose output of two automobile firms, one is producing cars and other is producing trucks, is less than the output of another automobile firm producing both cars and trucks jointly. We can conclude that the production process involves:

• A) Decreasing returns to scale.
• B) Economies of scope.
• C) Increasing returns to scale.
• D) Economies of scale.

The shape of long-run supply curve of a constant-cost industry is:

• A) Vertical.
• B) Horizontal.
• C) Upward-sloping.
• D) Downward-sloping.

A firm never operates:

• A) On the downward-sloping portion of its ATC curve.
• B) At the minimum of its ATC curve.
• C) At the minimum of its AVC curve.
• D) On the downward-sloping portion of its AVC curve.

Agricultural products are produced in perfectly competitive market because:

• A) All firms are producing perfect substitutes.
• B) Firms are price taker.
• C) There are large producers/firms of agriculture products.
• D) All of the given options are correct.

Which of the following measures Economies of scale?

• A) cost-output elasticity
• B) Producer surplus
• C) Slope of Isocost line
• D) Firm's expansion path

In the long run, if a firm is facing higher marginal cost than the average cost; then certainly per unit total cost will:

• A) Remain constant
• B) Rise
• C) Fall
• D) Be at minimum level

The sum over all units produced of the difference between market price of the good and firm’s marginal cost of production is:

• A) Producer surplus.
• B) Marginal revenue.
• C) Maximum profit.
• D) Total revenue.

Economies of scope refer to:

• A) Long run production function.
• B) Multiproducts firm.
• C) Changes in technology.
• D) Single product firm that utilize multiple plants.

In the long run, which of the following is considered a variable cost?

• A) Expenditures for wages.
• B) All of the given options.
• C) Expenditures for raw materials.
• D) Expenditures for capital machinery and equipment.

All of the following are characteristics of perfectly competitive markets EXCEPT:

• A) Firms are price taker.
• B) There are large numbers of firms.
• C) There are no significant barriers on entry and exit of firms.
• D) Firms are not producing homogenous products.

Which of the following is correct?

• A) The short run industry supply curve is the horizontal summation of each firm’s short-run average cost curve.
• B) The short run industry supply curve is the vertical summation of each firm’s short-run average cost curve.
• C) The short run industry supply curve is the vertical summation of each firm’s short-run supply curve.
• D) The short run industry supply curve is the horizontal summation of each firm’s short-run supply curve.

Suppose automobile company is producing cars and trucks. If there are economies of scope, the product transformation curve between cars and trucks will be:

• A) Bowed outward (concave).
• B) A rectangle.
• C) Bowed inward (convex).
• D) A straight line.

In the long run, if a firm is facing higher average cost than the marginal cost; then certainly per unit total cost will:

• A) Fall
• B) Remain constant
• C) Rise
• D) Be at minimum level

When the joint output of a single firm is greater than the output that could be achieved by two different firms each producing a single output is called as:

• A) Diseconomies of scale
• B) Economies of scale
• C) Economies of scope
• D) Diseconomies of scope