Economies of Scale and Scope

Question 1

A reduction in average costs translates

Answer 1

to an immediate increase in profit

Question 2

With economies of scale or scope

Answer 2

decision making may require more complex cost functions

Question 3

The law of diminishing marginal returns states

Answer 3

that as you try to expand output, your marginal productivity eventually declines

Question 4

Bottlenecks areas when

Answer 4

systems become more complex or the fixed nature of some factor

Question 5

Diminishing marginal productivity implies

Answer 5

increasing marginal cost

Question 6

If more inputs are needed to produce each extra unit of output,

Answer 6

then the cost of producing extra units must increase

Question 7

Increasing marginal costs eventually lead

Answer 7

to increasing averaging costs

Question 8

The law of diminishing marginal returns is primarily

Answer 8

a short run phenomenon

Question 9

Fixed costs become

Answer 9

variable in the long run

Question 10

If long run average costs are constant to output

Answer 10

then you have constant returns to scale

Question 11

If long run average costs rise with output

Answer 11

you have decreasing returns to scale or diseconomies of scale

Question 12

If long-run average costs fall with output

Answer 12

you have increasing returns to scale or economies of scale.

Question 13

Learning curves means

Answer 13

that current production lowers future costs

Question 14

If the cost of producing two products jointly is less than the cost of producing separately

Answer 14

then there are economies of scope

Question 15

If the cost of producing two products together is higher than the cost of them separately

Answer 15

then there are diseconomies of scope