Economists describe short-run decisions as "constrained" decisions, while long-run decisions are described as "planning" decisions. Referring to a firm's short-run average cost function and long-run average cost function, explain this
What will be an ideal response?
In the short run, at least one of the inputs in the firm's production function is fixed in amount. As such, the manager's decision-making process is constrained by the available amount of the fixed input. In contrast, in the long run, all of the inputs in the production function can be varied. In this case, the manager can decide not only how much of each variable input to employ, but how much of the inputs that are fixed in the short-run should be employed as well, i.e., the manager can plan for future production needs.
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The substitution effect from a fall in the price of a gallon of gasoline is shown in the above figure by the movement from
A) point A to point C. B) point A to point B. C) point B to point C. D) point A to point B and then to point C.
GAAP
What will be an ideal response?
A policymaker against stabilizing the economy would be likely to believe
a. policymakers should "do no harm". b. there are no obstacles to the practical application of policy in real life. c. policy lags are short enough that implementing policy changes in response to recession is not too risky. d. policy mitigates the magnitude of economic fluctuations.
The principle that if the amount of labor and other inputs is held constant, then the greater the amount of capital in use, the less an additional unit of capital adds to production is called the principle of:
A. decreasing output per unit of capital. B. diminishing returns to capital. C. increasing returns to capital. D. increasing average capital productivity.