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31. What is implied when the total cost of producing Q1 and Q2 together is less than the total cost of producing Q1 and Q2 separately?
a) Economies of scale.
b) Diminishing average fixed costs.
c) Diseconomies of scale.
d) Economies of scope.

32. The minimum average cost of producing alternate levels of output, allowing for optimal selection of all variables of production is defined by the:
a) Long run average total cost curve.
b) Short run average fixed cost curve.
c) Short run marginal cost curve.
d) Long run marginal cost curve.

33. As the usage of an input increases, marginal product
a) initially increases then begins to decline.
b) initially decreases then begins to increase.
c) consistently decreases.
d) consistently increases.

34. Which of the following is (are) basic feature(s) of a perfectly competitive industry?
a) Buyers and sellers have perfect information.
b) There are no transaction costs.
c) There is free entry and exit in the market.
d) all of the above.

35. For given input prices, isocosts closer to the origin are associated with
a) lower costs.
b) the same costs.
c) higher costs.
d) initially lower then higher costs.

36. In the long-run, perfectly competitive firms produce a level of output such that:
a) P = MC.
b) P = minimum of AC.
c) both a and b.
d) none of the above.

37. Economies of scale exist whenever:
a) average total costs decline as output increases.
b) average total costs increase as output increases.
c) average total costs are stationary as output increases.
d) both b and c.

38. Long-term contracts are not efficient if
a) a firm engages in relationship-specific exchange.
b) specialized investments are unimportant.
c) the contractual environment is simple.
d) managers shirk.
e) a and c, only.

39. The demand for labor by a profit-maximizing firm is determined by
a) MPL = MC.
b) VMPL = MC.
c) MPL = W.
d) VMPL = W.

40. The disadvantage of vertical integration is that
a) relationship-specific exchange may cause holdup.
b) long-term contracts may be inflexible.
c) the principal-agent problem causes shirking.
d) firms no longer specialize in what they do best.
e) none of the above.

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Solution Summary

The solution answers a number of questions related to several economic concepts.

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Answer 31: (D)
By definition of Economies of Scope

Answer 32: (A)
By definition of Long run average cost curve

Answer 33: ...

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