Suppose Argyle Sachs has to choose between building a smaller sweater factory and a larger sweater factory. In the following graph, the relationship between costs and output for the smaller factory is represented by the curve ATC1, and the relationship
between costs and output for the larger factory is represented by the curve ATC2.
a. If Argyle expects to produce 3,600 sweaters per month, should he build a smaller factory or a larger factory? Briefly explain?
b. If Argyle expects to produce 5,000 sweaters per month, should he build a smaller factory or a larger factory? Briefly explain.
c. If the average cost of producing sweaters is lower in the larger factory when Argyle produces 6,500 sweaters per week, why isn't it also lower when Argyle produces 4,000 sweaters per week?
a. Argyle's costs will be lower with a smaller factory.
b. Argyle's costs will be lower with a larger factory.
c. Economies of scale often take the form of a larger factory allowing for lower average cost for a large quantity, but actually higher average cost for a smaller quantity.
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Which of the following is true about the United States?
A. There have been recessions approximately every ten years. B. The pattern of recessions does not occur on a regular basis. C. Periods of economic growth and recessions occur in two-year patterns. D. Recessions always last less than one year. E. Recessions in the United States are generally more severe than they are in other countries.
This graph depicts a tax being imposed, causing demand to shift from D1 to D2. According to the graph shown, the tax caused:
A. an increase in consumption from Q1 to Q2.
B. a decrease in consumption from Q2 to Q1.
C. a decrease in the price consumers pay from P3 to P1.
D. a decrease in the price the suppliers receive from P3 to P1.
Which of the following is an example of unconventional monetary policy?
a. the Federal Reserve selling T-bills b. the Federal Reserve decreasing the discount rate c. the Federal Reserve purchasing mortgage-backed securities d. none of the above
Early settlers in the town of Dry Gulch drilled wells to pump as much water as they wanted from the single aquifer beneath the town. (An aquifer is an underground body of water.) As more people settled in Dry Gulch, the aquifer level fell and new wells had to be drilled deeper at higher cost. Compared to a town in which all residents collectively decide on how much water to use, water use will likely be ________ in Dry Gulch.
A. higher B. the same C. the same or lower D. lower