Microeconomics Principles and Policy 12Th Edition Baumol Test Bank Full Chapter PDF

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12th Edition Baumol Test Bank

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Chapter 7—Production, Inputs, and Cost: Building Blocks for Supply Analysis
TRUE/FALSE
1. The short run is that period during which there are no fixed commitments.
ANS: F PTS: 1 DIF: Moderate NAT: Analytic

LOC: Costs of production
TOP: Short-Run Vs. Long-Run Costs: What Makes an Input Variable?
2. The long run is a period long enough so that one of the firm's commitments ends.

3. In the short run, a firm has fixed costs but never any variable costs.
ANS: F PTS: 1 DIF: Easy NAT: Analytic

4. In the short run the firm has at least one fixed input.
ANS: T PTS: 1 DIF: Easy NAT: Analytic

5. In the short run the firm has no more than one fixed input.

6. Fixed cost increases when output rises.

LOC: The Study of economics, and definitions in economics
7. Variable costs increase when output rises.

8. In the long run, more costs become fixed.
274
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or posted to a publicly accessible website, in whole or in part.
9. In most businesses there is only one way to produce output.

TOP: Production, Input Choice, and Cost with One Variable Input
10. Total physical product shows what happens to the quantity of an output when the firm changes the
quantity of an input.

11. Marginal physical product measures the increase in total output that results from a one-unit increase in
an input.

12. Average physical product measures the output per unit of input.

13. Average physical product measures the increase in total output that results from a one-unit increase in an
input.

14. Total physical product is maximized if marginal physical product is zero.
ANS: T PTS: 1 DIF: Moderate NAT: Analytic

15. The "law" of diminishing returns asserts that marginal returns will ultimately diminish when the quantity
of one input is increased.

275
16. Marginal revenue product equals the marginal physical product multiplied by the quantity demanded.

17. The "law" of diminishing returns rests on the "law" of variable input proportions.

18. If MRP > P, a firm should use less of that input.

19. Firms should use a resource up to a point where MRP = P.

20. When marginal revenue product of an input is less than its price, the producers should use less of the
input.

21. Production technology determines the relationship of total cost to outputs.

22. Marginal revenue product is essentially the additional revenue generating from selling one additional
unit of output.

23. A firm will tend to select the least costly input combination to produce its output.

276
TOP: Multiple Input Decisions: The Choice of Optimal Input Combinations
24. Most firms have very little flexibility in their choice of input proportions.

25. The least costly combination of inputs is influenced by the relative prices of inputs.

26. The rule that states that the marginal revenue product equal to price does not hold when there are more
than two inputs.
ANS: F PTS: 1 DIF: Difficult NAT: Analytic

27. If a firm is using optimal input proportions, it is minimizing its costs.

28. Cost minimization requires that a firm equate the ratio of marginal products of inputs to the ratio of input
prices.
ANS: T PTS: 1 DIF: Difficult NAT: Analytic

29. If MPPa/Pa > MPPb/Pb, then the proportions of these two inputs is optimal.

30. A rise in the price of an input can be expected to lead to a rise in its marginal physical product.

31. Input choices in the present are often affected by past decisions.

277
32. Input proportions are usually fixed by technological conditions alone.

33. If the price of one input changes, the firm will change its use of that input only.

34. If the price of one input changes, generally the firm will change its use of both inputs.

35. A total cost curve shows the largest amount of a product a firm can produce with a minimum cost.

LOC: Costs of production TOP: Cost and Its Dependence on Output
36. The marginal cost curve shows the per-unit cost associated with various levels of output.

37. The average cost curve shows the total cost divided by quantity produced for various levels of output.

38. Total fixed cost falls as output expands.

39. The average fixed cost curve increases as output increases.

40. The average total cost curve of a firm is U-shaped.

278
41. The principal determinants of total and average cost curves are the firm's technology and the prices of its
inputs.

42. The firm's average cost curve is the result of cost minimization in the use of fixed inputs.

43. For most industries, average costs decrease indefinitely as output expands.

44. Cost curves in the long run differ from cost curves in the short run.

45. The short-run average cost curve shows the lowest possible average cost corresponding to each output
level, assuming that all inputs are variable.

46. Economies of scale are also called increasing returns to scale.

LOC: Costs of production TOP: Economies of Scale
47. If significant economies of scale are present, large firms will be much more efficient producers than
small firms.

48. Economies of scale lead to declining long-run average cost curves.

49. The law of diminishing marginal returns is the same as increasing returns to scale.

279
50. The different points on a cost curve represent alternative production possibilities in the same time
period.

51. The behavior of historical cost curves says nothing about the cost advantages or disadvantages of a
single large firm.

52. A production indifference curve shows all combinations of input quantities capable of producing a given
quantity of output.

LOC: Costs of production TOP: Appendix: Production Indifference Curves
53. Higher production indifference curves correspond to larger amounts of one input in relation to a second
input.

54. Production indifference curves generally have a positive slope.

55. Product indifference curves bow inward toward the origin because of diminishing returns to substitution
of inputs.

56. The expansion path of product indifference curves shows the cost-minimizing combination of inputs.

57. Production indifference curves show the combination of inputs that produce a given output.

58. Firms choose the highest indifference curve they can obtain given the lowest possible budget line.

280
59. A change in input prices will change the location of the budget line.

60. A change in input prices has no impact on the budget line.

61. A change in one input price will cause the slope of the budget line to change.

MULTIPLE CHOICE
1. The short run is the time period during which

a. all of the firm's costs are fixed.
b. the value of the firm's assets starts to decay.
c. the firm can adjust all inputs freely.
d. some of the firm's input decisions are constrained by previous commitments.
ANS: D PTS: 1 DIF: Easy NAT: Analytic
2. In the long run,

a. all of the firm's input quantities are variable.
b. the firm can vary the quantities of some but not all inputs.
c. managers become less efficient.
d. the total cost of producing any given level of output is greater than or equal to the short-run
total cost of producing that level of output.
ANS: A PTS: 1 DIF: Moderate NAT: Analytic
3. In the short run,

a. all of the firm's input quantities, including plant size, become adjustable.
b. firms are not constrained by past decisions.
c. firms have relatively little opportunity to change production processes.
d. all of the firm's current commitments come to an end.
ANS: C PTS: 1 DIF: Moderate NAT: Analytic
281
4. Some costs cannot be varied no matter how long the period in question. These are called
a. overheads.
b. total costs.
c. fixed costs.
d. variable costs.
5. Which of the following observations is true?

a. In the long run, more costs become variable.
b. Fixed costs can be completely varied if the time period is sufficient.
c. Fixed costs arise when some types of inputs can be bought only in big batches.
d. Variable costs arise when inputs have a large productive capacity.
6. In which case will the transition from short run to long run involve the shortest chronological time?
a. a service that provides temporary secretaries to companies
b. an automobile factory
c. a farm
d. an electric utility
LOC: Costs of production economics
7. The case of production with a single variable input is analogous to

a. changing the use of land, labor, and capital in production by a constant absolute amount.
b. a controlled laboratory experiment in which the scientist permits one variable to change at a
time.
c. changing the use of land, labor, and capital in production by a constant percentage.
d. specialization in one particular product by a company.
ANS: B PTS: 1 DIF: Moderate NAT: Analytic
8. The total physical product of an input is the same thing as its

a. total revenue product.
b. marginal physical product times output.
c. output.
d. total consumer's surplus.
ANS: C PTS: 1 DIF: Easy NAT: Analytic
282
9. Which of the following experiments will yield observations that would allow one to calculate the
marginal physical product of labor?
a. increase the number of lumberjacks with chain saws and observe the change in output of cut
trees
b. increase the number of workers on an assembly line and record the change in output
c. Both a and b are correct.
d. Neither a nor b are correct.
10. Marginal physical product can tell a producer

a. at what point to stop adding inputs to the production process.
b. how much profit will be made at each level of production.
c. how much the last input added to the total amount of revenue.
d. how much the last input added to the total amount of production.
Table 7-1
Workers Toys
1 5
2 12
3 22
4 30
5 35
11. In Table 7-1, the marginal physical product of labor after the addition of the fourth worker is
a. 8.
b. 7.
c. 10.
d. 5.
ANS: A PTS: 1 DIF: Easy NAT: Analytic
12. In Table 7-1, the average physical product after five workers are hired is
a. 5.
b. 6.
c. 7.
d. 8.
283
13. In Table 7-1, the marginal physical product begins to diminish with the addition of the
a. second worker.
b. third worker.
c. fourth worker.
d. Marginal returns never diminish in Table 7-1.
14. The marginal physical product of an input is the

a. addition to output from using one more unit of an input.
b. extra amount of an input needed to produce one additional unit of output.
c. change in average physical product, given a change in the quantity of an input.
d. slope of the production indifference curve for an output made using the input.
15. In which zone does the total physical product reach it maximum value?
a. Increasing marginal return
b. Negative marginal return
c. Diminishing marginal return
d. Decreasing total physical product
Table 7-2
Plastic (in pounds) 5 6 7

Widgets 14 17 19
16. Table 7-2 contains information on widget production. The marginal physical product of the sixth pound
of plastic is ____.
a. (19/7) − (17/6)
b. 1/3
c. 2
d. 3
ANS: D PTS: 1 DIF: Moderate NAT: Analytic
17. Table 7-2 contains information on widget production. The average physical product of the seventh
pound of plastic is calculated as ____.
a. 9/25
b. 2
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c. 25/9
d. 19/7
18. A total product curve shows the

a. aggregate output of many firms in an industry.
b. amount of product consumers will take off the market.
c. maximum amount of product that it is technically possible to produce.
d. relationship between units of inputs and total output.
John Amaker owns orange groves and hires pickers for a two-week period as shown in Table 7-3.
Table 7-3
Pickers Oranges Picked

1 1,000
2 2,000
3 3,000
4 3,900
5 4,700
6 5,400
7 6,000
8 6,200
9 6,000
19. In Table 7-3, diminishing returns set in with picker

a. 3.
b. 4.
c. 5.
d. 6.
e. 9.
20. In Table 7-3, negative returns set in with picker

a. 6.
b. 7.
c. 8.
d. 9.
e. There are no negative returns in this table.
285
Figure 7-1
21. Of the graphs in Figure 7-1, which best represents marginal physical product?
a. 1
b. 2
c. 3
d. 4
22. In Figure 7-1, which graph best represents total physical product with diminishing returns?
a. 1
b. 2
c. 3
d. 4
23. USX, a steel company, reduced the number of man-hours required to produce a ton of steel from 10.8 in
1982 to 3.8 in 1990, thereby eliminating 55,000 jobs. Technically, this rise in productivity means the
a. marginal product of labor increased.
b. average product of labor increased.
c. average product of capital fell.
d. marginal product of capital fell.
ANS: B PTS: 1 DIF: Difficult NAT: Analytic
24. The "law" of diminishing returns is also referred to as

a. the "law" of diminishing returns to scale.
b. the "law" of variable input proportions.
c. diminishing average physical product.
286
d. the "law" of decreasing cost.
25. The "law" of diminishing returns

a. is deduced from the basic biochemical relationship of agricultural theory.
b. was constructed as the basis of observation during experiments on the impact of fertilizer on
output in the 1930s.
c. is based on regular observations of input-output relationships over the last two centuries.
d. is borrowed from physical laws related to conversion of matter and energy.
26. Which of the following statements is equivalent to the law of diminishing marginal returns?
a. A stitch in time saves nine.
b. You can't make an omelet without breaking eggs.
c. Too many cooks spoil the broth.
d. If you can't stand the heat, get out of the kitchen.
ANS: C PTS: 1 DIF: Moderate NAT: Reflective
27. The marginal revenue product of an hour of labor used in steel production is equal to
a. its marginal physical product times the hourly wage rate.
b. its marginal physical product times the price of steel.
c. the hourly wage rate.
d. its marginal physical product divided by the price of steel.
ANS: B PTS: 1 DIF: Easy NAT: Analytic
28. When the marginal revenue product of an input is less than its price, the
a. producer should expand the use of that input.
b. price of the input will automatically rise in a free market.
c. producer should reduce the use of that input.
d. marginal physical product of that input must be below its average physical product.
29. In August 1988, the Los Angeles Kings hired Wayne Gretzky for $15 million in cash. The hockey team's
decision must have been based on the expectation that
a. Gretzky's opportunity cost will exceed $15 million.
b. Gretzky's marginal revenue product will equal or exceed $15 million.
287
c. the team's total revenue will equal $15 million.
d. Gretzky's marginal revenue product will rise in the long run.
30. Marginal revenue product is the

a. additional revenue from one additional dollar increase in price.
b. change in the revenue product resulting from one additional unit of input.
c. additional revenue from one additional unit of input.
d. change in revenue resulting in one additional dollar in price.
31. Which of the following will not lead to increase in the marginal revenue product?
a. MPP increases without any changes in the price.
b. Price of the product increases without any changes in MPP.
c. MPP and price of the product increases.
d. MPP remains the same and price of the product falls.
32. If the firm's marginal physical product is 8, and its handicrafts sell for $70, at a labor cost of $150, the
firm is operating
a. short of an optimal input point.
b. at the optimum input point.
c. beyond the optimum input point.
d. There isn't enough information to determine if the input point is optimal.
33. Which of the following equations defines marginal revenue product?

a. MRP = P times Q.
b. MRP = total cost.
c. MRP = total revenue minus total cost.
d. MRP = MPP times price of the product.
34. The rule for the optimal use of any input says that
a. when MRP is less than price, it pays to expand resource use.
b. when MRP is greater than price, it pays to expand resource use.
288
c. when MRP equals price, resource use should be cut back.
d. resources should be used only if MRP exceeds price.
35. The optimal level of resource use comes when

a. MRP exceeds input price.
b. MRP is less than input price.
c. MRP equals input price.
d. use of the resource exhausts the producer's funds.
36. Which of the following indicates an input is being overused relative to the optimal level?
a. MRP = P of input.
b. MRP > P of input.
c. MRP < P of input.
d. MPP > P of output.
37. The optimum quantity of an input occurs when

a. diminishing returns set in.
b. marginal revenue product equals input price.
c. marginal physical product equals input price.
d. marginal revenue product equals output price.
38. Which of the following is the correct statement of the marginal rule for optimal input proportions? The
input proportion is optimal when
a. PA = PB.
b. MPPA = MPPB.
c. PA  MPPA = PB  MPPB.
d. PA/PB = MPPA/MPPB.
ANS: D PTS: 1 DIF: Difficult NAT: Analytic
39. A firm practices input substitution when it

a. retrains Joe the welder as a painter and Pat the painter as a welder.
b. buys extra machines for its workers to use.
289
c. allows fixed cost to become variable.
d. replaces unskilled labor with automated machinery.
40. Determining the optimal choice of input combinations generally does not involve
a. substitution of one input for another.
b. fixing the level of technology in the long run.
c. minimizing cost, given the prices of inputs.
d. assessing the productivity of various inputs.
41. If the marginal physical product of more labor is twice as high as the marginal physical product of more
machinery, a rational firm should
a. reduce the labor used and increase the machinery used if labor costs half as much as
machinery.
b. reduce the labor used and increase the machinery used if labor and machinery cost the same
amount.
c. reduce the labor used and increase the machinery used only if labor costs more than twice as
much as machinery.
d. reduce the labor used and increase the machinery used only if labor costs exactly twice as
much as machinery.
ANS: C PTS: 1 DIF: Difficult NAT: Analytic
42. At a given level of wheat output, one more unit of labor would produce 10 extra bushels, and one more
unit of seed would produce 30 extra bushels. A unit of labor costs $6, and a unit of seed costs $12. The
farmer should
a. produce less wheat.
b. buy only seed.
c. buy more seed and less labor.
d. buy less seed and more labor.
43. A firm is operating with an optimal combination of inputs. Suddenly the price of one input rises. The
firm should
a. buy less of that input and more of the other input.
b. change its input mix so that the marginal physical product of the input whose price has risen
falls and the marginal physical product of the other input rises.
c. buy less of whichever input now has the highest money price and more of the other input.
d. reduce its output.
290
44. A firm's optimal input proportions may change if

a. input prices change.
b. the relative marginal productivities of the inputs change.
c. the firm's optimal output level changes.
d. All of the above are correct.
ANS: D PTS: 1 DIF: Easy NAT: Reflective
45. A firm uses two inputs, A and B. At its optimal choice of input proportions,
a. MRP of A = MRP of B.
b. MRPA/PA = MRPB/PB.
c. MPP of A = MPP of B.
46. Where should a producer stop devoting more of his spending on labor if initially the MRP of the
additional dollar spent on labor is higher than the MRP of the additional unit spent on tools?
a. MRP/$ of additional labor falls below MRP/$ of additional tools.
b. MRP/$ of additional capital increases above MRP/$ of additional tools.
c. MRP/$ of additional labor becomes equal to MRP/$ of additional tools.
d. MRP/$ of the additional labor falls to zero.
47. If the MPP of labor is 60 and the price of labor per period is $20, the MPP of machinery is 75 and the
price of the machinery per period is $25, in order to achieve optimal input proportions the firm should
use
a. more labor and less machinery.
b. more machinery and less labor.
c. more labor with the same amount of machinery.
d. the current combination.
48. The firm can calculate all points on its total cost curve if it knows
a. its production function.
b. the prices of inputs and of output.
291
c. its average cost at its optimal output level.
d. the prices of inputs and its production function.
Table 7-4
6 346 490 600 692 775 846

5 316 448 548 632 705 775
4 282 400 480 564 632 692
CAPITAL 3 245 346 423 490 548 600
2 200 282 346 400 448 490
1 141 200 245 282 316 346
0 1 2 3 4 5 6
LABOR
49. Table 7-4 shows a production relationship. Assuming the capital stock is fixed at three units and the cost
per day of labor is $65, what is the most labor that it is efficient to hire if the product price is $1 per unit?
a. 2
b. 3
c. 4
d. 5
50. Table 7-4 shows a production relationship. The cost of one day of labor is $65 and the product price is $1
per unit. How much will the labor input increase if the capital stock were increased from 3 to 4?
a. from 3 to 4
b. from 4 to 5
c. from 4 to 6
d. stays the same
51. The production relationship in Table 7-4 indicates a process characterized by

a. decreasing returns to scale.
b. constant returns to scale.
c. increasing returns to scale.
d. increasing then decreasing returns to scale.
292
52. Table 7-4 shows a production relationship. Assuming the labor input is fixed at 4, what will be the
optimum capital input assuming an output price of $1 and a $90-per-day cost for one unit of capital?
a. 1
b. 2
c. 3
d. 4
53. To determine total cost, the businessperson must know

a. input quantity and output price.
b. output quantity and output price.
c. output quantity and input price.
d. input quantity and input price.
54. Marginal cost

a. is the increase in total cost resulting from production of one additional unit of output.
b. is the cost of the marginal unit of output.
c. and the average cost curve are U-shaped.
55. On Naomi's pig farm, Naomi hires all the labor used, grows all the grain fed to the pigs, and owns the
barn. The costs used to calculate the total cost curve include
a. only the cost of labor.
b. only the cost of labor and the cost of grain, which is completely consumed in the period in
which it is grown.
c. only the variable cost of growing grain.
d. the cost of labor, the cost of growing grain, and the opportunity cost of the barn.
56. A factory produces 1,000 radios a year, AVC = $10 and TFC = $5,000. The factory's TC
a. equals $15.
b. equals $5,005.
c. equals $15,000.
d. cannot be determined from the information given.
57. Marginal cost is the

a. change in total cost resulting from the purchase of one more unit of the variable input.
293
b. change in total cost resulting from the production of one more unit of output.
c. difference between total fixed cost and total variable cost.
d. difference between total cost and total expenditure.
58. Where marginal cost is less than average cost,

a. opportunity cost must have been excluded from the calculation of marginal cost.
b. marginal cost must be falling.
c. marginal cost must be rising.
d. marginal cost may be rising, falling, or constant.
Figure 7-2
59. In Figure 7-2 at an output of 500, marginal cost equals

a. 10.
b. 20.
c. 30.
d. 40.
LOC: Costs of production graphs TOP: Cost and Its Dependence on Output
60. In Figure 7-2, average cost at 500 units of output equals

a. 4,000.
b. 200.
c. 8.
d. 6.
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61. Al's Donuts produces about 600 dozen doughnuts daily. If flour prices increase 20 percent
a. only marginal cost will shift up.
b. only marginal cost and average total cost will shift up.
c. marginal cost, average variable cost, and average total cost will shift up.
d. marginal cost, average total cost, average variable cost, and average fixed cost will shift up.
Figure 7-3
62. Government provides many goods and services to the public because they are not provided by free
markets. Some economists believe bureaucrats who manage the programs have no interest in
maximizing net benefits (profits) but instead maximize the size of a program constrained only by the
need to have total benefits exceed total costs. Figure 7-3 shows total benefits and cost curves for a
program. What point is the efficient point, and what point will the bureaucrat choose?
a. A and B, respectively
b. B and D, respectively
c. D and C, respectively
d. D and A, respectively
Figure 7-4
295
63. Following a rash of airplane bombs, the airlines have been forced to increase security at a cost of $30
million per year. The number of inspectors and machines does not vary with the number of
passengers-the airlines must have sufficient staff available to handle the full-capacity load. Which graph
in Figure 7-4 best illustrates the impact of the security expenditures?
a. 1
b. 2
c. 3
d. 4
64. Average cost curves have the same shape as

a. total cost curves.
b. marginal cost curves.
c. total fixed cost curves.
d. average fixed cost curves.
65. Total fixed cost

a. increases as output increases.
b. declines as output increases.
c. is always zero.
d. remains constant even if the firm shuts down.
66. Which of the following observations is true?

a. TFC remains the same irrespective of units of output produced.
b. TVC remains the same irrespective of units of output produced.
c. TVC falls as the unit of output increases.
d. AFC increases as output increases further and further.
67. A roller coaster operator produces thrill-packed rides using electricity and a roller coaster. For the roller
coaster operator, electricity is
a. an opportunity cost.
b. a variable cost.
c. a fixed cost.
d. a sunk cost.
Figure 7-5
296
68. Which of the curves in Figure 7-5 could be a firm's average fixed cost curve?
a. (a)
b. (b)
c. (c)
d. (d)
69. Which of the graphs in Figure 7-5 could be a firm's total fixed cost curve?
a. (a)
b. (b)
c. (c)
d. (d)
70. Which of the following is a fixed cost?

a. electricity
b. worker bonuses
c. mortgage on the building
d. steel to produce refrigerators
71. Total fixed cost

a. varies with the level of output.
b. has a downward-sloping curve.
c. has an upward-sloping curve.
d. is constant at all levels of output.
72. Which of the following is a fixed cost to farmer McDonald?

a. gasoline
b. fertilizer
c. insurance
d. seed
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73. Which of the following is a variable cost for an airline?

a. insurance
b. property taxes
c. jet fuel
d. rent of airport space
Figure 7-6
74. Which of the lines in Figure 7-6 represents a typical average fixed cost curve?
a. 1
b. 2
c. 3
d. 4
75. Which of the following is correct?

a. AC = AFC/Q
b. AC = AFC + AVC
c. AC = MFC + MVC
d. TFC + TMC = MFC + MVC
Figure 7-7
298
76. In Figure 7-7 at 100 units, AFC equals
a. 10.
b. 100.
c. 180.
d. 1,000.
ANS: A PTS: 1 DIF: Difficult NAT: Analytic
77. In Figure 7-7 at 100 units, FC equals

a. 1,000.
b. 1,800.
c. 800.
d. 80.
78. In Figure 7-7 at 100 units, AVC equals

a. 8.
b. 800.
c. 100.
d. 1,000.
Figure 7-8
299
79. "Overfishing" impairs the ability of fish stock to replenish itself, so the stock of fish declines. Fishermen
then attempt to increase output by adding more boats and fishing longer. Which average cost curve in
Figure 7-8 depicts the "overfishing" situation?
a. 1
b. 2
c. 3
d. 4
80. Of the graphs in Figure 7-8, which resembles marginal cost?

a. 1
b. 2
c. 3
d. 4
81. Of the graphs in Figure 7-8, which represents fixed cost?

a. 1
b. 2
c. 3
d. 4
82. Of the graphs in Figure 7-8, which represents total cost?

a. 1
b. 2
c. 3
d. 4
Figure 7-9
300
83. Of the graphs in Figure 7-9, which represents total fixed cost?
a. 1
b. 2
c. 3
d. 4
84. Of the graphs in Figure 7-9, which represents average fixed cost?
a. 1
b. 2
c. 3
d. 4
Figure 7-10
85. In Figure 7-10, the curve B is

a. average fixed cost.
b. average total cost.
c. average variable cost.
d. marginal cost.
301
86. In Figure 7-10, the curve labeled C is

a. average fixed cost.
b. average total cost.
c. average variable cost.
d. marginal cost.
87. The typical average cost curve

a. continually declines as output increases.
b. is horizontal.
c. continually increases as output increases.
d. first declines to a minimum and then increases as output increases.
88. The average cost curve

a. is the vertical summation of the AFC and the AVC curves.
b. lies below the AVC curve.
c. lies below the AFC curve.
d. is the vertical summation of the MC and AVC curves.
Figure 7-11
89. Figure 7-11 shows an average cost curve with points on it that correspond to three quantity levels. Which
of the following statements must be wrong?
a. The firm's technology may show increasing marginal returns as production increases from
A to B.
b. The firm may have positive fixed costs.
c. As production expands from A to B to C, the firm may become increasingly difficult to
302
manage efficiently.
d. The firm's average fixed cost may rise as production increases from B to C.
90. Average cost curves decline because

a. fixed cost is spread out over larger amounts of production.
b. it becomes cheaper to produce an infinite amount of goods.
c. additional units of production are inferior.
d. variable costs increase with each additional amount of production.
91. Which of the following formulas defines average cost?

a. AC = TC/Q
b. AC = MRP = MFC
c. AC = MPP/Q
d. AC = TC − Q
92. A firm's AC will eventually begin to rise because

a. managers' salaries rise with output.
b. bottlenecks may be reached for some inputs.
c. MFC begins to rise near capacity.
d. the range of negative returns is reached.
93. In the typical AC curve, the downward-sloping part is attributable to

a. spreading fixed costs over larger outputs and increasing returns to the variable inputs.
b. declining administrative costs as output increases.
c. falling fixed costs.
d. rising total product.
Table 7-5
Stereos produced 0 1 2 3 4 5 6
Total cost (in $) 200 325 410 475 550 660 825
94. Table 7-5 shows short-run total cost figures for a stereo manufacturer. The manufacturer's short-run
fixed cost is
a. 0.
b. $75.
303
c. $200.
d. $400.
95. Table 7-5 shows short-run total cost figures for a stereo manufacturer. The short-run average variable
cost of producing five stereos is
a. $92.
b. $110.
c. $132.
d. $460.
96. Table 7-5 shows short-run total cost figures for a stereo manufacturer. At what output level does
short-run average total cost reach a minimum?
a. 2
b. 3
c. 4
d. 5
97. If a firm has a U-shaped long-run average cost curve,

a. its fixed cost rises as output rises.
b. it must have increasing returns to scale at low levels of production and decreasing returns to
scale at high levels of production.
c. it must have increasing returns to each input at low levels of production and decreasing
returns to each input at high levels of production.
d. the firm can maximize its output by operating at the point of minimum long-run average
cost.
ANS: B PTS: 1 DIF: Moderate NAT: Reflective
Figure 7-12
304
98. Which of the graphs in Figure 7-12 shows a marginal physical product curve that exhibits first
increasing, and then diminishing, marginal returns to sunlight?
a. (a)
b. (b)
c. (c)
d. (d)
Figure 7-13
99. Figure 7-13 shows the average total cost curves of four firms that produce milk. Some of the dairies are
more productive. AR = P is the long-run price of milk. How many of these dairies will remain in the
industry in the long run?
a. all of them
b. only 2
c. only 3
d. cannot determine with information given
100. AC is lower in the long run than in the short run because
a. prices often fall, allowing savings on purchases.
b. inputs can be combined more efficiently in the long run.
c. over time the prices of all inputs tend to decrease.
d. AFC falls with output over all ranges of output.
101. Everything else equal, the AC curve will shift downward if

a. input prices rise.
b. input MPPs rise.
c. output rises.
d. output falls.
305
102. Everything else equal, the AC curve will shift when
a. the price of the product rises.
b. technical change raises the MPP of one input.
c. output is increased.
d. increasing returns to scale are present.
103. One reason why critics argue that large firms should not be broken up is that in some cases
a. large firms have a concentration of economic power.
b. large firms are less-efficient producers.
c. many smaller firms would be less-efficient producers.
d. there is no economic reason to break up large firms that may have some control over the
market.
104. The long-run average cost curve

a. is a composite of short-run AC curves.
b. shows the lowest possible short-run AC corresponding to each output level.
c. depends on the firm's planning horizon.
Table 7-6
Number of ovens 2 2 2 2 2 2 2 2
Labor hours used 1 2 3 4 5 6 7 8
Loaves of Bread Produced 20 34 55 70 82 91 94 92
105. Table 7-6 shows a baker's daily production relationship for bread. Diminishing returns to labor begin
when the baker goes from
a. one hour of labor to two hours of labor.
b. three hours of labor to four hours of labor.
c. six hours of labor to seven hours of labor.
d. seven hours of labor to eight hours of labor.
106. A firm uses workers and seed to grow lettuce. Its lettuce output rises from 100 tons to 200 tons when the
number of workers increases from 25 to 75. Its production process shows
b. diminishing returns to labor.
c. increasing long-run average cost.
d. decreasing short-run average variable cost.
306
ANS: B PTS: 1 DIF: Moderate NAT: Reflective
107. If economies of scale exist for a particular production relationship, long-run average costs will
a. rise.
b. fall.
c. first rise and then fall.
d. be unaffected since there is no direct relationship between the two.
108. Whether or not a production process shows economies of scale depends on

a. the number of inputs used.
b. technology.
c. technology and input prices.
d. technology and output prices.
109. When economies of scale exist,

a. production costs per unit increase as output expands.
b. production costs per unit decline as output expands.
c. total production costs decrease.
d. total production costs increase.
110. When economies of scale are present,

a. costs per unit decline as output expands.
b. the government feels responsible for breaking up the firm.
c. firms always make handsome profits.
d. costs fall as the size of the product is increased.
111. Economies of scale

a. require inputs' MPP to fall as output increases (everything else equal).
b. pertain to the long run only.
c. refer to increased output generalized by an increase in the quantity of a single input.
d. imply that the AC curve will fall continuously as output increases in the short run.
112. A firm's production process shows constant returns to scale. It can produce 5,000 widgets at a total cost
of $2,500 and 10,000 widgets at an average cost of
a. $10,000.
307
b. $5,000.
c. $2,000.
d. $0.50.
113. Economies of scale is another term for

a. increasing returns to scale.
c. increasing marginal physical productivity.
d. decreasing returns to scale.
114. If a firm has increasing returns to scale at all levels of output, the
a. slope of its long-run total cost curve is always negative.
b. slopes of its short-run average cost curves are always negative.
c. slope of its long-run average cost curve is always negative.
d. slope of its production function is always negative.
115. If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing
b. decreasing returns to scale.
c. constant returns to scale.
d. increasing costs per unit of output.
116. If a firm increases inputs by 15 percent and output increases by 12.5 percent, the firm is experiencing
117. If in some range of production average cost is falling, the firm is experiencing
308
118. If in some production range average cost is rising, the firm is experiencing
Figure 7-14
119. Of the long-run AC curves in Figure 7-14, which displays increasing returns to scale for all levels of
output?
a. 1
b. 2
c. 3
d. 4
120. A Detroit business advertises, "The more we sell, the lower the price, and the lower the price, the more
we sell." This firm is experiencing
c. increasing returns to scale.
d. abnormal demand patterns.
ANS: C PTS: 1 DIF: Moderate NAT: Reflective
121. An airline industry study recently reported, "Evidence is abundant that larger firms are not more efficient
or less costly simply because they are larger. In fact, other things equal, the largest carriers tend to have
a higher level of unit costs, possibly caused by the difficulties of managing an airline of large size." This
means that
a. there are increasing returns to scale in the airline industry.
b. the airline industry has constant returns to scale.
c. the larger airlines are not profitable.
d. airlines are experiencing decreasing returns to scale.
309
ANS: D PTS: 1 DIF: Difficult NAT: Reflective
122. A cost curve drawn with years on the horizontal axis and costs per unit on the vertical axis would be a(n)
a. analytical cost curve.
b. long-run cost curve.
c. historical cost curve.
d. theoretical cost curve.
123. Cost minimization is the process of making optimal use of all of the inputs whose quantities are
a. set in the short run.
b. set in the intermediate run.
c. set in the long run.
d. variable in the short and long run.
124. The major incentive for cost minimization is the

a. power of shareholders in the company.
b. fear of top management by workers.
c. discipline imposed by the market system.
d. impact on U.S. corporations of taxing by the government.
125. Production indifference curves bow inward toward the graph's origin because of
a. the law of diminishing returns to a single input.
b. the law of diminishing marginal returns to scale.
d. minimizing costs in the short run.
126. Production costs for a given output will be minimized when the
a. budget line and the product indifference curve meet in the vertical axis.
b. budget line crosses the product indifference curve.
c. budget line begins to bend back on itself.
d. product indifference curve and the budget line are tangent.
127. If on a given product indifference curve a firm is using an insufficient (nonoptimal) amount of one of its
inputs
a. output will be below optimal.
310
b. the MRP of the input will be below its price.
c. costs will not be minimal.
d. relative input prices need to change.
Figure 7-15
128. For a firm at equilibrium, at point A in Figure 7-15

a. the price of labor is high relative to the price of machines.
b. the MPP of labor is greater than the MPP of machines.
c. the MPP of labor is less than at point B.
d. output is higher than at point B.
129. In Figure 7-15, we would expect a move of the budget line from A to B if
a. the price of machines falls.
b. the price of labor falls.
c. output falls.
d. the product price rises.
Figure 7-16
311
130. In Figure 7-16, as we move from A to B,
a. the relative price of machines falls.
b. total cost falls.
c. output increases.
d. labor becomes less productive relative to capital.
Figure 7-17
131. Which of the following statements must be true when a firm makes choices that put it at point A in
Figure 7-17?
a. The firm is minimizing its cost of producing 100 units of output.
b. The ratio of the marginal physical products of labor and of land equals the ratio of the prices
of labor and of land.
c. The firm first decided how much output to produce and then decided how to produce it.
d. All of the above are true.
312
ESSAY
1. Differentiate between the short run and the long run.
ANS:
The short run is a period of time during which some of the firm's cost commitments will not have ended.
In the short run, firms have relatively little opportunity to change production processes so as to adopt the
most efficient way of producing their current outputs, because plant sizes and other input quantities have
largely been predetermined by past decisions.
The long run is a period of time long enough for all of the firm's current commitments to come to an end.
Over the long run, all inputs, including plant size, become adjustable.
PTS: 1 DIF: Easy NAT: Analytic LOC: Costs of production
2. "If it were not for the law of diminishing marginal returns, the world's wheat could be grown in a flower
pot." Explain.
ANS:
The law of diminishing returns states that beyond some level of variable input, such as labor, additional
amounts of input add diminishing (but not necessarily negative) amounts of output, other inputs held
constant. So, holding land constant, additional amounts of labor or fertilizer yield diminishing additional
wheat output. If there were no such law, additional amounts of the variable input would yield constant or
increasing marginal output, so additional land would never be needed.
PTS: 1 DIF: Moderate NAT: Reflective LOC: Costs of production
3. The following table depicts the production relationship between units of labor and output of pepper on
Pietrov's Pepper Farm.
Labor Peppers Labor Peppers

1 10 6 75
2 25 7 77
3 45 8 78
4 60 9 77
5 70 10 75
Graphically show the three zones of production corresponding to increasing, decreasing, and negative
marginal product, noting the point of diminishing returns.
ANS:
Zone 1 shows rising marginal physical product through worker 3 (Figure 7-18). Beyond L = 3,
diminishing returns set in. Zone 2, positive but diminishing MPP, ends with L = 8. Beyond L = 8, MPP is
negative, representing Zone 3.
Figure 7-18
313
PTS: 1 DIF: Moderate NAT: Analytic LOC: Costs of production
4. "A producer wanting to employ optimal quantity of inputs should choose the point where diminishing
returns sets in." True or false?
ANS:
False. The correct rule is marginal revenue product = input price. It pays to go beyond diminishing
returns so long as MRP is at least as great as input P, which normally requires going past the point of
diminishing returns.
5. Graph typical total, average, and marginal cost curves and explain how their shapes are influenced by the
law of diminishing returns. Graph TC on a separate graph, AC and MC on a second graph.
ANS:
TC rises slowly at first and then more quickly once diminishing returns set in (Figure 7-19). Marginal
cost, which is the slope of total cost, will be positive but decreasing initially; it will increase at the point
of diminishing returns. Average cost will fall at first but eventually will increase. The point of increase is
at a larger level of output than the point of diminishing returns. Average cost continues to decline beyond
the point of diminishing returns because, at least for a while, declining average fixed cost reduces AC by
more than diminishing returns increase AC.
Figure 7-19
314
6. Aunt Rose owned a dress shop on 81st Street and Broadway in Manhattan, selling limited-edition
dresses to wealthy clients. One day, her landlord tripled her rent. What effect would this have on her
dress price in the short run, assuming she is following the rules of profit maximization?
ANS:
Assuming she continues to operate, the higher rent will not affect dress prices in the short run. Rent is
unrelated to the production cost of dresses; that is, it is a fixed cost. Only costs that enter into direct costs
influence price. Fixed costs do not alter price or output of dresses in short-run profit maximization.
7. How long is the long run?
ANS:
In the long run, all inputs are variable. This is a different period of time for different firms. For electric
power utilities, the long run is likely to be more than 10 years, given the long time it takes to build a
generating plant. For a roadside seller of apples, the long run may be very short, as it takes little time to
increase the size of the apple cart.
8. What is the shape of average cost curve? Provide the reason for that particular shape.
ANS:
Average cost curve is roughly 'U' shaped.
It has two reasons. Average cost includes average fixed costs and average variable costs. The first reason
pertains to the fixed cost as fixed costs are divided over more products when production expands average
cost falls. The second reason relates to changing input proportions. As the firm increases the quantity of
one input while keeping other inputs constant, the law of diminishing marginal returns tells us that MPP
will first rise. As a result, average costs will decrease. Average cost will increase when the size of the
firm increases.
315
9. "Assuming the long-run average cost curve is U-shaped, a firm will always seek to operate at the lowest
point on the long-run average cost curve." True or false?
ANS:
False. The optimal point in the long run depends on the demand for the firm's product. If demand is
small, the firm will prefer a relatively small plant and will operate to the left of minimum LRAC. A firm
anticipating a large demand may find it optimal to produce beyond minimum LRAC. Later, there will be
a tendency to operate at minimum LRAC when a firm faces competition, but there is no such discipline
on the firm in this chapter.
10. Labor is available at a wage of $10. The last worker hired by Cal's Corn Farm added 20 ears of corn,
which Cal has priced at four ears for $1. What advice would you give Cal?
ANS:
Don't hire that last worker. Marginal revenue product, which is MPP  P, is only $5, which is less than
the input's $10 price.
11. Explain why the long-run average cost is typically U-shaped.
ANS:
As firms grow, they can take advantage of mass production economies. However, large firms are more
difficult to manage. This eventually causes an upturn in average cost even if there continues to be
mass-production economies. Note that the long-run shape has nothing to do with diminishing returns,
which is a short-run law.
12. Peter Piper picks a peck of pickled peppers using 10 units of labor and two pepper-picking machines.
The last worker hired picked 100 peppers, and the last machine added 1,000 peppers. If labor can be
hired at $5 a pepper picker and machines cost $5,000, what advice do you have for Peter Piper?
ANS:
Optimal use of two variable inputs calls for equality of MPP/P for all inputs. The last worker added MPP
= 100 and cost $5, for a ratio of 20. The last machine added MPP = 1,000 and cost $5,000, for a ratio of
0.2. Peter Piper should substitute more labor in place of machines, since workers are producing far more
peppers per dollar of input cost.
13. If the MRP per dollar is greater for labor than that for tools, a producer should spend more money on
labor than originally planned and less on tools. How long can he continue this switch in spending? Why?
ANS:
316
By the "law" of diminishing returns, when the producer buys more and more labor time, the initially
higher MRP of labor will decline. As he spends less and less on tools, tools will become scarcer and
more valuable and their initially lower MRP will rise. So, as the producer transfers more money from
tools to labor, the MRPs per dollar for the inputs will get closer and closer to one another, and they will
eventually meet. That, then, is when the proportions of spending allocated to the two inputs will have
reached the optimal level. At that point, there is no way he can get more for his money by changing the
proportions of those inputs that he hires or buys.
14. The United Auto Workers union is largely responsible for the historically high pay of American auto
workers by negotiating pay raises above those obtained by workers in other industries. In addition to
increasing the pay of auto workers, what other long-run effect would this high pay have on the use of
auto workers?
ANS:
Over the long run, firms will adjust the proportion of labor to capital based on the ratio of MPP to input
P. Unless worker productivity increases are at least as great as wage increases, the firm will shift away
from labor and toward greater use of capital equipment such as robotics.
PTS: 1 DIF: Difficult NAT: Analytic LOC: Costs of production
15. Draw a long-run average cost curve that first exhibits increasing returns to scale (economies of scale),
then constant returns to scale, and finally decreasing returns to scale (diseconomies of scale). Label each
region.
ANS:
Initially, LRAC declines as output increases when there are EOS (IRS). LRAC becomes flat when there
are CRS. Finally, LRAC rises once DOS (DRS) set in. See Figure 7-20.
Figure 7-20
317
16. An investigator challenges in court a hospital wishing to expand. The investigator shows that over time,
average hospital size has increased but so has average cost. The investigator concludes that there is no
advantage to allowing hospitals to grow larger. Do you accept the investigator's case? Why? Why not?
ANS:
The investigator has used time series data, which is not the appropriate way to relate cost to size.
Historical costs do not compare large and small firms at the same point in time. The investigator needs to
obtain the cost curve, showing large and small hospitals and their costs in the current year.
PTS: 1 DIF: Difficult NAT: Analytic LOC: Costs of production
17. "Optimal input curve analysis is useless. Since firms never know the demand for their product with
certainty, they will rarely operate at the optimal input combination." Agree or disagree?
ANS:
Disagree. Optimal input analysis is a guide to correct decision making. Firms may not be able to estimate
precisely MPP or production functions; a part of business acumen is instinct. Nevertheless, the outcomes
should closely resemble the predictions from a model of optimal input usage if the firm is to be
successful.
18. Give a short concise definition for the following terms and explain their relationship to the study of
economics.
a. marginal physical product
b. marginal revenue product
c. law of diminishing returns
d economies of scale
ANS:
a. Marginal physical product is the increase in total output resulting from a one-unit increase
in the use of an input, holding other input amounts constant. MPP gives a measure of the
productivity of a particular input, which may be used in deciding on the optimal use of the
input.
b. Marginal revenue product is the additional money revenue that a firm receives when it
increases the quantity of some input by one unit and is calculated as MPP times the price per
unit of output. The firm determines optimal input where MRP is equal to the price of the
input.
c. The "law" of diminishing returns holds that as additional units of a variable input are added
to a fixed mix of all other inputs, marginal physical product will eventually decline. The
diminishing returns play a crucial role in MRP, since the decline in MPP reduces MRP and
leads to a definite point beyond which the firm will not expand.
d. Economies of scale are experienced by a firm if a doubling of inputs more than doubles
output. This tells the firm that long-run average costs are declining.
19. The table below gives data on output for a firm in the short run. The firm is able to hire labor and its TPP
is given. Compute the APP, MPP, and MRP for labor if the price of the good is fixed at $12 per unit.
318
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When the weather is wet or cold the Ascalaphi repose on the stems
of grass, with their wings placed in a roof-like manner, with the head
downwards, and are then very successful in concealing themselves
by the positions they assume, and by sidling round the stems to
escape from enemies. Some information as to their metamorphosis
has been obtained, though knowledge of this point is far from
complete even as regards our European species of the typical genus
Ascalaphus. For a long time it was supposed that a larva mentioned
by Bonnet in his writings was that of Ascalaphus, but Brauer[386] is
of opinion that such is not the case, and as he has described the
metamorphoses of A. macaronius he is no doubt correct. The eggs
(Fig. 303, A), forty or fifty in number, are laid in two parallel rows on
the stems of grass. The larvae (Fig. 304, larva of Helicomitus ?) are
in general appearance somewhat like those of Myrmeleon; they are
carnivorous in their habits, like the ant-lions, and have similar
extraordinarily developed mandibles. Efforts to rear the young larvae
failed, but they were kept alive for some time by supplying them with
Aphidides found on Centaurea jacea. The cocoon is globular, and
the change from the nymph state to the imago is made in the
cocoon, the structure of the mandibles of the pupa being peculiar,
and specially adapted to the purpose of opening the cocoon.[387]
The larvae of Ascalaphides, although so like the ant-lions in
appearance, do not form pitfalls for the capture of their prey, but lurk
under leaves on the ground, or under stones; they do not move
backwards, but progress forwards in an ordinary manner; the habit of
backward movement that we noticed in Myrmeleon being probably
correlative with the habit of forming pitfalls. Hagen states[388] that the
larvae of Ascalaphides and Myrmeleonides, in addition to their
peculiarities of form and mandibular structure, are distinguished from
those of other Hemerobiidae by the hind legs having the tibia and
tarsus united without articulation. Westwood[389] has recently given
an account of the young larvae of a Ceylonese Ascalaphid of
doubtful species, but possibly Helicomitus insimulans; these were
observed by Mr. Staniforth Green to have the very peculiar habit of
sitting together in a long row on the stem of a plant, with the jaws
widely extended and the body of each one covered by the head of
the individual next it (Fig. 303, B). The little creatures waited patiently
in this position until a fly walked between the mandibles of one of
them, then these formidable weapons immediately closed, and did
not relax their hold until the fly was sucked dry. If Westwood is
correct, the young larva of this species differs much from the adult
one, the back of the head being broad and the setigerous processes
of the body very much more developed. Nearly thirty genera of
Ascalaphides are known.[390] In the genus Haplogenius we find an
exception to the usual rule that the wings in repose are held in a
roof-like manner, it having been noticed by Bates that in the species
in question the wings are held expanded as in the dragon-flies.
Fig. 304.—Larva of Helicomitus insimulans (?). (After Westwood.)
Guilding has described[391] a very peculiar mode of oviposition on

the part of Ulula macleayana in the island of St. Vincent; the eggs
are said to be deposited by the female in circles on the extremity of a
twig, and nearer the base of this there is placed a kind of barrier to
repel intruders. "The female may be seen expelling from her ovary
these natural barriers with as much care as her real eggs." Guilding's
description was accompanied by drawings of the eggs, barriers and
larvae, but unfortunately these were never published, and no further
information has been obtained on the subject. Hagen[392] suggests
that the barriers may be somewhat similar to the long stalks on
which the eggs of Chrysopa (Fig. 314) are placed.
Sub-Fam. 3. Nemopterides.—Head more or less produced and
beak-like. Hind wings of peculiar form, being elongate and
somewhat strap-like.
Fig. 305.—Nemoptera ledereri. Asia Minor. (After Selys.) A, The imago;

B, its head seen from in front and magnified.
Fig. 306.—Presumed larva of Nemoptera (Necrophilus arenarius). After

Roux. Pyramids of Egypt.
The Nemopterides are a small group of delicate, graceful Insects.

About thirty species are known. Knowledge of the group is still very
imperfect. A larva has been found of a most remarkable nature that
probably belongs to it; it was described under the name of
Necrophilus arenarius, and considered to be a fully-developed
Insect. This larva occurs in the tombs and pyramids of Egypt where
sand has accumulated. The perfect Insects of the genus Nemoptera
are, however, found in open places amongst bushes, and flit about in
a very graceful manner. Several species are found in Southern
Europe and the Mediterranean region (Fig. 305, N. ledereri), but
none come so far north as Central Europe. Formerly the genus
Nemoptera was considered to be allied to Panorpa on account of the
beak-like front of the head. The parts of the mouth are, however,
different from those of Panorpa, and it seems more probable that if
the Nemopterides have to be merged in any of the divisions of
Hemerobiidae, they will be placed in Chrysopides or Osmylides. The
species of the sub-family were for a long time believed to be peculiar
to the continental regions of the Old World, but a species has
recently been discovered in Northern Chili.[393]
Sub-Fam. 4. Mantispides.—Prothorax elongate; the raptorial

front legs inserted at its anterior part.
The members of this small group are readily recognised by the

peculiar structure of the front legs; these organs resembling those of
the Orthopterous family Mantidae, so that the earlier systematic
entomologists, deceived by this resemblance, placed the
Mantispides in the Order referred to.
Fig. 307.—Mantispa areolaris. Brazil. (After Westwood.)
The Mantispides possess four membranous wings, either sub-equal

in size or the posterior pair smaller than the front pair and not folded;
the veins of these wings are rather numerous, as are also the cells
they form; there is considerable difference amongst the species in
this latter respect, owing to the transverse veinlets differing in their
abundance. The antennae are short, not in the least thickened at the
tip. The head is not produced into a beak. The anterior legs, placed
quite at the front part of the thorax, have the coxae very long; the
femur is somewhat incrassate, and is armed on one side with spines;
the tibia is shaped and articulated so as to fold closely on to the
spines, and to thus constitute a formidable and perfect prehensile
organ, the tarsus being merely a small appendage.
Fig. 308.—Mantispa styriaca. A, Larva newly hatched, or first form; B,

mature larva. (After Brauer.)
Only a few species of Mantispa are found in Southern Europe; but

the group has representatives in most of the warmer regions of the
world, and will probably prove to be rather numerous in species. The
front legs are used for the capture of prey in the same way as the
somewhat similar front legs of the Mantidae. The transformations
have been observed by Brauer[394] in the case of one of the
European species, M. styriaca. The eggs are numerous but very
small, and are deposited in such a manner that each is borne by a
long slender stalk, as in the lacewing flies. The larvae are hatched in
autumn; they then hibernate and go for about seven months before
they take any food. In the spring, when the spiders of the genus
Lycosa have formed their bags of eggs, the minute Mantispa larvae
(Fig. 308, A) find them out, tear a hole in the bag, and enter among
the eggs; here they wait until the eggs have attained a fitting stage of
development before they commence to feed. Brauer found that they
ate the spiders when these were quite young, and then changed
their skin for the second time, the first moult having taken place
when they were hatched from the egg. At this second moult the larva
undergoes a considerable change of form; it becomes unfit for
locomotion, and the head loses the comparatively large size and
high development it previously possessed. The Mantispa larva—only
one of which flourishes in one egg-bag of a spider—undergoes this
change in the midst of a mass of dead young spiders it has gathered
together in a peculiar manner. It undergoes no further change of
skin, and is full fed in a few days; after which it spins a cocoon in the
interior of the egg-bag of the spider, and changes to a nymph inside
its larva-skin. Finally the nymph breaks through the barriers—larva-
skin, cocoon, and egg-bag of the spider—by which it is enclosed,
and after creeping about for a little, appears in its final form as a
perfect Mantispa. Thus in this Insect hypermetamorphosis occurs;
the larval life consisting of two different instars, one of which is
specially adapted for obtaining access to the creature it is to prey on.
It should be noticed that though this Insect is so destructive to the
young spiders, the mother spider shows no hostility to it, but allows
the destroying larva to enter her bag of eggs without any opposition;
she appears, indeed, to be so unconscious of the havoc that is going
on amongst her young that in one case she continued to watch over
and protect the egg-bag in which the destruction was taking place
during the whole of the period of the larval development and half the
period of pupation of the Mantispa.
The larval history of a second species of the Mantispides,

Symphrasis varia, is partially known;[395] this Insect lives parasitically
in the nests of a South American wasp, and each larva when full fed
spins a cocoon in one of the cells of the Hymenopteron.
Sub-Fam. 5. Hemerobiides.—Wings in repose forming an

angular roof over the body; the antennae moniliform or
pectinate, not clavate.
The Hemerobiides consist of several minor groups about whose

number and characters systematists are not very well agreed, and
about some of which very little is known. We merely mention the
latter, giving details as to some of the better known only.
1. The Dilarina are a small group found chiefly in the Old World,
where, however, they have a wide distribution. North and South
America have each one species. They are distinguished by their
antennae, which, in the male, are pectinate somewhat like those of
many Lepidoptera, this character being of extremely rare occurrence
in the Neuroptera; the abdomen of the female terminates in a long
ovipositor. The metamorphoses are not known.
2. Nymphidina: Australian Insects resembling Myrmeleonides, but

having antennae without club. Metamorphoses not known.
3. Osmylina: a group of delicate and elegant Insects of small or

moderate size, distinguished by the possession of three simple eyes
placed on the middle of the head just above the antennae. A species
of this group, Osmylus chrysops (maculatus of some authors), is an
inhabitant of Britain (Fig. 212); its larva is to some extent
amphibious. The metamorphoses have been observed by Dufour,
Brauer, and Hagen;[396] it lurks under stones in or close to the water,
or in moss, or on the stems of aquatic plants, and pierces and
empties small Insects with its sucking-spears, which are very
elongate. The young are hatched from the egg in the autumn and
hibernate before becoming full grown; when this moment arrives the
larva spins a round cocoon of silk mixed with sand. The pupa, or
nymph, in general appearance somewhat resembles the perfect
Insect, except that it is shorter and has the short wing-pads clinging
close to the body. Dufour denied the existence of abdominal
spiracles in either larva or imago, but, according to Hagen, they are
certainly present in both. It would appear that in the larva the
alimentary canal is not open beyond the chylific ventricle, and that its
terminal section is modified to form a spinning apparatus.
Fig. 309.—Osmylus chrysops. A, Larva; B, side view of head of larva
(after Brauer); C, pupa (after Hagen).
Osmylus and its allies, including Sisyra, are now frequently treated
as a separate sub-family, Osmylides, equivalent to the Chrysopides.
In it is placed a very anomalous Insect—Psectra dispar—of great
rarity. The male has only two wings, the posterior pair being the
merest rudiments, though the female has the four wings normally
developed. Individuals of the male have been found[397] in widely
separated localities in the Palaearctic region—Somersetshire being
one of them—and also in North America.
The genus Sisyra forms for some Neuropterists the type of a

separate group called Sisyrina, though by others it is placed, as we
have said, with the Osmylina, though it is destitute of ocelli. The
larvae of at least one species of this genus are aquatic, and have
been found in abundance living in Spongilla (Ephydatia) fluviatilis, a
fresh-water sponge; when discovered their nature was not at first
recognised, as they possess on each ventral segment a pair of
articulated appendages, looking like legs, but which are considered
to be more of the nature of gills. The sucking-spears of this Insect
are so long and slender as to look like hairs; whether the little animal
draws its nutriment from the sponge, or merely uses this latter as a
place of shelter, is not ascertained.
Fig. 310.—A, Larva of Sisyra fuscata, ventral aspect; B, an abdominal
appendage. (After Westwood.)
Fig. 311.—Larva of Hemerobius sp. from Kent. A, The larva bare; B,

the same, partially concealed by the remains of its victims, etc.; a
portion of the covering has been removed in order to show the
head.
4. Hemerobiina: a somewhat numerous group of small or more rarely

moderate-sized Insects, with moniliform antennae, no ocelli, a
complex and comparatively regular system of wing-nervures; the
veinlets are especially numerous at the margins, owing to the mode
of forking of the nervures there (Fig. 298, Drepanepteryx
phalaenoides). The larvae of most of the species of which the habits
are known live on Aphides, which they suck dry, and at least one
species, in all probability several, has the habit of covering itself with
the skins of the victims it has sucked; to these remains it adds other
small debris, and the whole mass completely covers and conceals
the Insect (Fig. 311, B). The larva is furnished at the sides with
projections which serve as pedicels to elongate divergent hairs, and
these help to keep the mass in place on the back of the Insect; some
fine threads are distributed through this curious mantle and serve to
keep it from disintegration, but whether they are fragments of
spiders' webs or are spun by the Insect itself is not quite clear.
Fig. 312.—Portions of wings of Drepanepteryx phalaenoides. A, Under-
face of basal parts of the two wings; a, base of front wing; b, of
hind wing. B, Portion of front wing, showing the apparent
interruption of nervures.
The genus Drepanepteryx consists of several species, and appears

to be best represented in the Antipodes; we have, however, one
species in Britain—D. phalaenoides (Fig. 298)—an extremely
interesting member of our fauna. This Insect has, like several of its
congeners, a moth-like appearance, and it has a peculiar structure
for bringing the hind and fore wings into correlation, the costa at the
base of the hind wing being interrupted and prominent, furnished
with setae (Fig. 312, A), and playing in a cavity on the under-surface
of the front wing. This character is of great interest in connexion with
analogous structures of a more perfect nature existing in various
moths. M‘Lachlan has described and figured[398] a more primitive,
though analogous, condition of the wings in Megalomus hirtus, also
a species of British Hemerobiina. Another very curious feature of D.
phalaenoides is shown in Fig. 312, B, there being a narrow space on
the hind part of the front wing from which the colour is absent, while
the nervures appear to be interrupted; they are, however, really
present, though transparent; the nature of this peculiar mark is quite
unknown, but is of considerable interest in connexion with the small
transparent spaces that exist on the wings of some butterflies.
Sub-Fam. 6. Chrysopides, Lacewing-flies.—Fragile Insects

with elongate, setaceous antennae.
Fig. 313.—Chrysopa flava. Cambridge.
Fig. 314.—Eggs of Chrysopa. A, Five eggs on a leaf; B, one egg, more

magnified. (After Schneider.)
Fig. 315.—Larva of Chrysopa sp. Cambridge. A, The Insect magnified;

B, foot more magnified; C, terminal apparatus of the claws, highly
magnified.
The lacewing-flies—also called stink-flies and golden-eyes—are

excessively delicate Insects, of which we possess about 15 species
in Britain. Their antennae are more slender and less distinctly jointed
than they are in Hemerobiides, and the Chrysopides are more
elongate Insects. The peculiar metallic colour of their eyes is
frequently very conspicuous, the eyes looking, indeed, as if they
were composed of shining metal; this fades very much after death.
Although not very frequently noticed, the Chrysopides are really
common Insects, and are of considerable importance owing to their
keeping "greenfly" in check.
Fig. 316.—Chrysopa (Hypochrysa) pallida, larva. (After Brauer.)
The eggs are very remarkable objects (Fig. 314), each one being
supported at the top of a stalk many times as long as itself; in some
species (C. aspersa) the eggs are laid in groups, those of each
group being supported on a common stalk. The larvae (Fig. 315) are
of a very voracious disposition, and destroy large quantities of plant-
lice by piercing them with sucking-spears, the bodies of the victims
being afterwards quickly exhausted of their contents by the action of
the apparatus connected with the spears. The larvae of two or three
species of Chrysopa cover themselves with the skins of their victims
after the manner of the larvae of Hemerobius; but most of the larvae
of Chrysopa are unclothed, and hunt their victims after the fashion of
the larvae of Coccinellidae, to which these Chrysopa larvae bear a
considerable general resemblance. These larvae have a remarkable
structure at the extremity of their feet, but its use is quite unknown
(Fig. 315, B, C). Some larvae of the genus make use of various
substances as a means of disguise or protection. Dewitz noticed[399]
that some specimens he denuded of their clothing and placed in a
glass, seized small pieces of paper with their mandibles and,
bending the head, placed the morsels on their backs; here the
pieces remained in consequence of the existence of hooked hairs on
the skin. Green algae or cryptogams are much used for clothing, and
Dewitz supposes that the Insect spins them together with webs to
facilitate their retention. According to Constant and Lucas[400] the
larvae of Chrysopa attack and kill the larvae of Lepidoptera and
Phytophagous Hymenoptera. The curious form we figure (Fig. 316)
has been hatched from eggs found by Brauer on Pinus abies in
Austria. The eggs were of the stalked kind we have described; the
young escaped from them in the autumn, twelve days after
deposition, but did not take any food till the following spring.
The Chrysopides are widely distributed over the earth's surface.

They form an important part of the fauna of the Hawaiian islands.
Sub-Fam. 7. Coniopterygides.—Minute Insects with very few

transverse nervules in the wings; having the body and wings
covered by a powdery efflorescence.
These little Insects are the smallest of the Order Neuroptera, and
have the appearance of winged Coccidae; their claim to be
considered members of the Neuroptera was formerly doubted, but
their natural history is quite concordant with that of the Hemerobiid
groups, near which they are now always placed. Löw has made us
acquainted with the habits and structure of an Austrian species,
Coniopteryx lutea Wallg., but for which he has proposed the new
generic name Aleuropteryx; the larvae are found on Pinus mughus at
Vienna feeding on Aspidiotus abietis, which they pierce with sucking-
spears, after the fashion of the Hemerobiides; when full fed they spin
a cocoon formed of a double layer of silk, in which metamorphosis
takes place in a manner similar to that of other Hemerobiidae. The
better-known genus Coniopteryx differs from Aleuropteryx in having
the sucking-spears short and nearly concealed by the front of the
head, which is somewhat prolonged.
Fig. 317.—Coniopteryx psociformis. Cambridge. (After Curtis.) A, The
insect with wings expanded, magnified; B, with wings closed,
natural size.
We may conclude this sketch of the Hemerobiid groups by remarking

that fossil remains of specimens of most of them have been detected
in the Tertiary strata, and that in the Secondary strata these groups
are represented by only a small number of fossils, which are referred
specially to Hemerobiina, Nymphidina, and Chrysopides.
Fig. 318.—A, Larva of Coniopteryx tineiformis (?). (After Curtis.) B,

Head and prothorax of larva of Coniopteryx sp.; C, upper surface
of head of larva of Coniopteryx (after Löw), much magnified.
CHAPTER XXI
NEUROPTERA CONTINUED—TRICHOPTERA, THE PHRYGANEIDAE OR

CADDIS-FLIES
Fam. XI. Phryganeidae—Caddis-flies.
(TRICHOPTERA OF MANY AUTHORS)
Wings more or less clothed with hair, nervures dividing at very

acute angles, very few transverse nervules; hind pair larger than
the front, with an anal area which is frequently large and in
repose plicately folded. Antennae thread-like, porrect, of many
indistinct joints. Mandibles absent or obsolete. Coxae elongate
and free but contiguous. Metamorphosis great; larvae caterpillar-
like, usually inhabiting cases of their own construction. Pupa
resembling the perfect Insect in general form, becoming active
previous to the last ecdysis. Wingless forms of the imago
excessively rare.
Fig. 319.—Halesus guttatipennis. Britain. (After M‘Lachlan.)
The caddis-flies are Insects of moth-like appearance, found in the

neighbourhood of water; their larvae live in this element, where they
may sometimes be found in abundance. Phryganeidae are not very
attractive Insects, and there are few of large size; Hence they have
been much neglected by entomologists, and very little is known
about the exotic forms of the family. The habitations constructed by
the larvae are, many of them, of a curious nature, and usually attract
more attention than do the creatures they serve to protect.
The Phryganeidae form the division or series Trichoptera; the two

terms are therefore synonymous; those entomologists who consider
these Insects to form a distinct Order use the latter appellation for it.
Fig. 320.—Hydroptila angustella ♀. Britain. (After M‘Lachlan.)
The perfect Insect, though the wings are usually ample, has but
feeble powers of flight, and rarely ventures far from the water it was
reared in; it has a moth-like appearance, and the wings in repose
meet, at an angle, in a roof-like manner over the back (Fig. 326, E).
The head is small, with the front inflexed; it has two large compound
eyes, and usually three ocelli; the antennae are slender, thread-like,
and occasionally attain a great length. The parts of the mouth are
very peculiar, the labrum and the palpi—especially the maxillary
palps—being well developed, while the lobes of the maxillae and
labium are amalgamated and therefore indistinct. The labrum is
more or less elongate, and is more mobile than is usual in
mandibulate Insects; it is held closely applied to the maxillae. These
latter are small, have usually only a single small free lobe; they are
united to one another and to the labium by membrane in such a
manner as to form a channel along the middle of the mouth, the
labrum forming the roof of this channel. The palpi are in some cases
(Sericostomatides) of a remarkable nature; their joints vary in
number from three to five, and differ sometimes in the sexes of the
same species. The lower lip appears as a plate supporting the labial
palpi, which are three-jointed and do not exhibit any peculiarities of
structure comparable with those we have mentioned as so frequently
existing in the maxillary palps. Difference of opinion exists as to the
mandibles, some entomologists declaring them to be entirely absent,
while others state that a small tubercular process that may be seen
in some species on each side of the labrum is their representative.
The prothorax is very small, the notum is the largest piece but is
quite short, the side-pieces are very small, and the sternum appears
to consist only of membrane. The mesothorax is much the largest
segment of the body; its sternum is large, but is nearly perpendicular
in direction, and is much concealed by the elongate, free front coxae,
which repose against it. The metathorax is intermediate in size
between the pro- and meso-thorax; its side-pieces are rather large,
but the sternum is membranous, with a heart-shaped piece of more
chitinous consistence in the middle, entirely covered by the middle
coxae. The side-pieces both of the meso- and meta-thorax are large,
and are closely connected; the middle and posterior coxae are very
large, elongate, and prominent, and the middle pair slope
backwards, so that their tips are in contact with the tips of the hind
pair. The abdomen is cylindric and rather slender; it looks as if
formed of eight segments in addition to the terminal segment; this
latter in the male usually bears remarkably modified appendages.
The first ventral plate is sometimes, if not always, entirely
membranous; indeed the texture of the segments is in general very
delicate, so that they shrivel up to an extent that renders their
comprehension from dried specimens very difficult. The legs are
always elongate, the coxae attaining in some forms a remarkable
length, and the tibiae and tarsi are armed with many spines; the tarsi
are five-jointed, slender, frequently very elongate, terminated by two
large claws and an apparatus, placed between them, consisting of a
pair of hair-like processes with a membranous lobe.
Fig. 321.—Front view of head of Anabolia furcata after removal of

labrum. o, Ocellus; an, base of antenna; au, eye; cm, cardo; st,
stipes; l, external lobe; pt, support of palpus; pm, palpus of
maxilla; g, condyle of articulation of the absent mandible; ha,
channel of haustellum; h, haustellum; sp, apex of channel of
haustellum (not explained by Lucas); ch, chitinous point of
external lobe of second maxilla; pl, labial palp. (After Lucas.)
The structure of the mouth-parts of the Phryganeidae has given rise

to much difference of interpretation; it has recently been investigated
by R. Lucas[401] in connexion with Anabolia furcata (Fig. 321). He
agrees with other observers that mandibles are present in the pupa,
but states that no rudiment of them exists in the imago. He calls the
peculiar structure formed by the combination of the maxillae and
labium a haustellum. He looks on the Trichoptera as possessing a
mouth intermediate between the biting and sucking types of Insect-
mouths. He considers that the Phryganeidae take food of a solid, as
well as of a liquid, nature by means of the haustellum, but the solid
matter must be in the form of small particles, and then is probably
sucked up by the help of saliva added to it. Lucas says also that in
the larvae certain parts of the salivary glands serve the function of
spinning organs, and it is from these that the salivary glands of the
imago are formed; those salivary glands of the larva that are not
spinning glands disappearing entirely.
Fig. 322.—Anabolia nervosa. A, Larva extracted from its case; B, one

of the dorsal spaces of the abdominal segments more strongly
magnified.
The eggs are deposited in a singular manner; they are extruded in a

mass surrounded by jelly; there may be as many as one hundred
eggs in such a mass. This is sometimes carried about by the female
after its extrusion from the interior of the body, but is finally confided
to a suitable place in stream, spring, or pool. It is said that the female
occasionally descends into the water to affix the egg-mass to some
object therein, but this requires confirmation, and it is more probable
that the egg-mass is merely dropped in a suitable situation. As soon
as the larvae are hatched they begin to provide themselves with
cases; they select small pieces of such material as may be at hand
in the water, and connect them together by means of silk spun from
the mouth. Particulars as to these tubes we will defer till we have
considered the larvae themselves. These have the general
appearance of caterpillars of moths; in order to move about they
must put their head and the three pairs of legs at the front of the
body out of their tube or case, and they then look very like case-
bearing caterpillars. The part of the body that usually remains under
cover is different in texture and colour, and frequently bears
outstanding processes, or filaments, containing tracheae for the
purpose of extracting air from the water. Some peculiar spaces of a
different texture may be seen on certain larvae (Fig. 322, B); these
may possibly be also connected with respiration. On each side of the
extremity of the body there is a rather large hook by which the
creature attaches its dwelling to its body, and there are also
frequently present three large bosses on the anterior abdominal
segment, which are supposed to assist towards the same end. The
hold it thus obtains is so firm that it cannot be dragged out by pulling
from the front; fishermen have, however, discovered a way of
extracting it by a strategic operation: the cases are, as a rule,
partially open behind, and by putting a blunt object in and annoying
the larva it is induced to relax the hold of its hooks and advance
forwards in the case, or even to leave it altogether. The firm hold of
the larva is maintained in spite of the fact that the body does not fill
the case. It is necessary that water should pass freely into and out of
the case, and that there should be some space for the respiratory
filaments to move in. The mouth of the case is open, and the
posterior extremity is arranged by the larva in such manner as to
allow a passage for the water; various ingenious devices are
adopted by different species of larvae with the object of protecting
the hind end of the body, and at the same time of permitting water to
pass through the case.
The mode of changing the skin, or the frequency with which this
occurs in the larval state of the caddis flies has not been recorded.
The duration of life in this stage is usually considerable, extending
over several months: indeed in our climate many species pass the
winter in this stage, completing the metamorphosis in the following
spring or summer; and as one generation each year appears to be
the rule, it may be assumed that the larval condition in such cases
lasts from seven to ten months. During this stage the Insects are
chiefly vegetable feeders, some being said to feed on minute algae;
animal diet is not, however, entirely avoided, and it is said by Pictet
that not only do some of the Phryganeidae eat other Insects, but that
they also sometimes devour their companions.
Fig. 323.—A, Pupa of Phryganea pilosa. (After Pictet.) B, Mandibles of
pupa of Molanna angustata.
At the end of the larval period of existence the creature closes its
case by a light web spun at each end, taking care not to prevent the
ingress and egress of the water; it sometimes adds a stone or piece
of stick, and having thus protected itself, changes to a nymph.
During the first part of this metamorphosis the creature is completely
helpless, for there is so great a difference between the external
structures of the larva and nymph as to make the latter a new being,
so far as these organs are concerned. The changes take place in the
interior of the larval skin, and as they are completed this latter is
shed piecemeal. The resulting pupa or nymph greatly resembles the
perfect Insect, differing consequently very much from the larva.
Pictet, who paid special attention to the nymph condition of these
Insects, concludes, however, that many of the organs of the nymph
are actually formed within the corresponding parts of the larva, and
has given a figure that, if trustworthy, shows that the legs of the
nymph, notwithstanding the great difference between them as they
exist in the larva and in the perfect Insect, are actually formed within
the legs of the larva; each nymphal leg being rolled up in the skin of
the corresponding larval leg, in a spiral, compressed manner, and
the only articulations that can be detected in the leg being those of
the tarsus. The head of the nymph is armed in front with two curious
projections that are, in fact, enormously developed mandibles (Fig.
323, B); they serve as cutting implements to enable the nymph to
effect its escape from its prison; they are cast off with the nymph-
skin, the perfect Insect being thus destitute of these organs. The
abdomen of the nymph differs from that of the perfect Insect in
possessing external respiratory filaments; the nymphs of some
species have also the middle legs provided with swimming-hairs,
that do not exist in the imago.

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ANS: F PTS: 1 DIF: Moderate NAT: Analytic

ANS: F PTS: 1 DIF: Moderate NAT: Analytic

ANS: F PTS: 1 DIF: Easy NAT: Analytic

ANS: T PTS: 1 DIF: Easy NAT: Analytic

ANS: F PTS: 1 DIF: Easy NAT: Analytic

6. Fixed cost increases when output rises.

ANS: F PTS: 1 DIF: Moderate NAT: Analytic

7. Variable costs increase when output rises.

ANS: T PTS: 1 DIF: Easy NAT: Analytic

8. In the long run, more costs become fixed.

9. In most businesses there is only one way to produce output.

ANS: F PTS: 1 DIF: Moderate NAT: Analytic

ANS: T PTS: 1 DIF: Easy NAT: Analytic

ANS: T PTS: 1 DIF: Easy NAT: Analytic

ANS: T PTS: 1 DIF: Easy NAT: Analytic

ANS: F PTS: 1 DIF: Easy NAT: Analytic

14. Total physical product is maximized if marginal physical product is zero.

ANS: T PTS: 1 DIF: Moderate NAT: Analytic

ANS: T PTS: 1 DIF: Moderate NAT: Analytic

ANS: F PTS: 1 DIF: Moderate NAT: Analytic

ANS: T PTS: 1 DIF: Easy NAT: Analytic

18. If MRP > P, a firm should use less of that input.

ANS: F PTS: 1 DIF: Moderate NAT: Analytic

19. Firms should use a resource up to a point where MRP = P.

ANS: T PTS: 1 DIF: Easy NAT: Analytic

ANS: T PTS: 1 DIF: Moderate NAT: Analytic

21. Production technology determines the relationship of total cost to outputs.

ANS: T PTS: 1 DIF: Moderate NAT: Analytic

ANS: F PTS: 1 DIF: Easy NAT: Analytic

ANS: T PTS: 1 DIF: Easy NAT: Analytic

ANS: F PTS: 1 DIF: Moderate NAT: Analytic

ANS: T PTS: 1 DIF: Moderate NAT: Analytic

ANS: F PTS: 1 DIF: Difficult NAT: Analytic

27. If a firm is using optimal input proportions, it is minimizing its costs.

ANS: T PTS: 1 DIF: Moderate NAT: Analytic

ANS: T PTS: 1 DIF: Difficult NAT: Analytic

ANS: F PTS: 1 DIF: Easy NAT: Analytic

ANS: T PTS: 1 DIF: Difficult NAT: Analytic

ANS: T PTS: 1 DIF: Difficult NAT: Analytic

32. Input proportions are usually fixed by technological conditions alone.

ANS: F PTS: 1 DIF: Difficult NAT: Analytic

ANS: F PTS: 1 DIF: Difficult NAT: Analytic

ANS: T PTS: 1 DIF: Difficult NAT: Analytic

ANS: F PTS: 1 DIF: Easy NAT: Analytic

ANS: F PTS: 1 DIF: Moderate NAT: Analytic

ANS: T PTS: 1 DIF: Easy NAT: Analytic

38. Total fixed cost falls as output expands.

ANS: F PTS: 1 DIF: Easy NAT: Analytic

39. The average fixed cost curve increases as output increases.

ANS: F PTS: 1 DIF: Easy NAT: Analytic

40. The average total cost curve of a firm is U-shaped.

ANS: T PTS: 1 DIF: Easy NAT: Analytic

ANS: T PTS: 1 DIF: Moderate NAT: Analytic

ANS: F PTS: 1 DIF: Difficult NAT: Analytic

ANS: F PTS: 1 DIF: Moderate NAT: Analytic

ANS: T PTS: 1 DIF: Easy NAT: Analytic

ANS: F PTS: 1 DIF: Easy NAT: Analytic

46. Economies of scale are also called increasing returns to scale.

ANS: T PTS: 1 DIF: Moderate NAT: Analytic

ANS: T PTS: 1 DIF: Moderate NAT: Analytic