A firm's average cost increases as it increases its output by expanding its plant and hiring additional workers (its only inputs to production). The firm's owner blames the increase in per-unit costs on the law of diminishing marginal productivity. The owner's reasoning is:
A. incorrect because all inputs are varied in the example.
B. correct because some inputs are fixed in the long run.
C. correct because marginal productivity must decrease in the short run.
D. incorrect because economies of scale are present.
Answer: A
You might also like to view...
In the foreign exchange market, how does a change in the expected future U.S. exchange rate affect the demand for dollars?
What will be an ideal response?
What does the investment demand curve show?
What will be an ideal response?
Refer to Figure 11-18. Starting from point D, a movement along isoquant2 to point F
A) increases the total cost of production with no change in output. B) increases output but not the total cost of production. C) increases both the total cost of production and output. D) increases the total cost of production and decreases output.
Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is:
A. not an economic problem because it's an hour that Chris has no matter what he does. B. not an economic problem because neither activity costs money. C. an economic problem because the tuition Chris pays covers the cost of both the gym and the library. D. an economic problem because Chris has only one hour, and engaging in one activity means giving up the other.