What is minimum efficient scale? What is likely to happen in the long run to firms that do not reach minimum efficient scale?
What will be an ideal response?
Minimum efficient scale is the lowest level of output at which all economies of scale have been exhausted—that is, where the long-run average cost curve stops sloping downward. In the long run, firms that don't reach minimum efficient scale will have higher average costs than competitors that do reach minimum efficient scale, so they will probably be driven out of business. However, firms that justify selling at premium prices due to product differentiation can survive.
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Which of the following would be the most likely result of a binding price ceiling imposed on the market for rental cars?
a. frequent rental programs such as "Rent nine times and the tenth rental is free!" b. enhanced maintenance programs to promote the high quality of the cars c. free gasoline given to people as an incentive to a rent a car d. slow replacement of old rental cars with newer ones
Taxes on labor encourage which of the following?
a. labor demand to be more inelastic b. mothers to stay at home rather than work in the labor force c. workers to work overtime d. fathers to take on second jobs
Toll roads force people to pay to drive on that road. This is a solution to
A. externalities. B. opportunity costs. C. free riders. D. negative incentives.
The three central questions for efficient organizational design include all EXCEPT
a. does the decision maker have the relevant information? b. is the decision maker in a supervisory role? c. who is making the decision? d. does the decision maker have an incentive to make a good decision?