If a production process exhibits diminishing returns, then as output rises:
A. total fixed cost will eventually increase.
B. total revenue will eventually decrease.
C. marginal cost will eventually increase.
D. average total cost will eventually decrease.
Answer: C
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When the federal funds rate equals the discount rate
A) the supply curve of reserves is vertical. B) the supply curve of reserves is horizontal. C) the demand curve for reserves is vertical. D) the demand curve for reserves is horizontal.
Suppose two coffee snobs who must have their coffee and cream in exact proportions (each cup is 10 coffee per 1 unit cream) are invited to a weekend long event (during which they can easily consume 8 cups of coffee). Suppose Snob A is given 8 units of cream and Snob B is given 80 units of coffee. The post trading result (one in which any trade that makes both parties better off than their initial
allocation) will guarantee each person a. nothing b. at least 1 cup of properly made coffee. c. at least 2 cups of properly made coffee. d. exactly 4 cups of properly made coffee.
Assume that Germany can produce 10 million bottles of beer or 4 million bottles of vodka. Further assume that Russia can produce 7 million bottles of beer or 3 million bottles of vodka. As a result, which of the following is true with regard to absolute and comparative advantage?
a. Germany has the absolute advantage in beer and the comparative advantage in beer. b. Germany has the absolute advantage in beer and the comparative advantage in vodka. c. Russia has the absolute advantage in beer and the comparative advantage in beer. d. Russia has the absolute advantage in beer and the comparative advantage in vodka.
Changes in the growth rate of potential output and deviations of actual output from potential output are two logical explanations for:
A. increasing wage inequality. B. short-term economic fluctuations. C. the decline in the natural rate of unemployment. D. skill-biased technological change.