Question

1. Which of the following cost curves are continually upward sloping?

Group of answer choices

None of the choices correctly answers this question.

average total cost and long run average total cost

average total cost and average variable cost

marginal cost and average variable cost

total fixed cost and total variable cost

2. When a firm uses standardized inputs, it is most likely the firm will use _______ to obtain the inputs. When a firm uses specialized inputs and there are substantial bureaucratic costs, it is more likely to rely on _______ to obtain the inputs.

Group of answer choices

a contract, vertical integration

a spot exchange, vertical integration

a spot exchange, a contract

a contract, a spot exchange

vertical integration, a spot exchange

Answer 1

Answer-1. Correct option is 'A'

None of the choices correctly answers this question. Because the marginal cost curve (MC) is generally upward sloping, because diminishing marginal return implies that additional units are more costly to produce. This implies that more and more of the variable input must be used to produce each additional unit of output as the amount of output already produced rises.

Answer-2. Correct option is 'A'

When a firm uses standardized inputs, it is most likely the firm will use a contract to obtain the inputs. When a firm uses specialized inputs and there are substantial bureaucratic costs, it is more likely to rely on vertical integration to obtain the inputs. Standardization in manufacturing means producing a maximum variety of products from the minimum variety of material, parts, tools and processes. It is the process of establishing standards or units of measures by which extent quality, quantity, value, performance, etc. Vertical integration is an arrangement in which the supply chain of a company is owned by that company. Usually each member of the supply chain produces a different product or service, and the products combine to satisfy a common need.