"A firm cannot experience both economies of scale and diminishing marginal product." Do you agree or disagree? Why?
What will be an ideal response?
Disagree. Diminishing marginal product is a short-run concept while economies of scale is a long-run concept. The former occurs when one input is fixed and the other when all inputs are variable. So, there is no reason why a firm cannot experience both.
You might also like to view...
Gross domestic product
a. is the sum of all exchanges of goods and services during a period. b. includes financial transactions such as the purchase of stocks or bonds traded during a period. c. is the sum of expenditures for both intermediate and final user goods. d. is the sum of the total spending on all final-user goods and services produced domestically during a period.
The short-run aggregate supply curve slopes
a. downward because firms can sell more, and hence, will produce more when prices are lower b. downward because firms find it costs less to purchase labor and other inputs when price are lower, and hence they produce more c. upwards because when the price level rises, output prices rise relative to input prices (costs), raising profit margins and increasing production and sales d. upward because firms find it cots more to purchase labor and other inputs when prices are higher, and hence they must produce and sell more in order to make a profit
Markets for illegal goods
What will be an ideal response?
Consider a market characterized by two firms that set the same price in the market, P = $10. Total market demand is QT = 100 ? 2P, of which the two firms share equally. Based on this information, we can conclude:
A. the HHI = 2,500 and the Rothschild index is 2. B. the HHI = 5,000 and the Rothschild index is 1. C. the HHI = 5,000 and the Rothschild index is 2. D. None of the answers are correct.