A firm doubles the quantity of all resources it employs and, as a result, total output doubles. Which of the following is correct?
A. The law of diminishing returns is proven wrong.
B. The example is for the short run rather than the long run.
C. The long-run average total cost is horizontal.
D. There are increasing returns to scale.
Answer: C
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Explain why selling output at a price below that at which marginal revenue equals marginal cost (MR = MC) might serve to deter entry of a potential competitor
What will be an ideal response?
Answer the following statement(s) true (T) or false (F)
1. The Federal Reserve’s policies with respect to the money supply have a direct effect on short-run nominal interest rates. 2. Even when the Fed changes the money supply by changing one of its policy variables, it has little effect on the money market equilibrium. 3. When interest rates on short-term financial assets such as CDs or U.S. Treasury bills are low, the opportunity cost of holding money is high. 4. A decrease in the demand for money will shift the money demand curve to the left. 5. The higher the price level, the lower the demand for money.
The WTO and GATT promote trade by:
A. reducing tariffs. B. eliminating quotas. C. reducing agricultural subsidies. D. All of these.
The real-income and the substitution effects reinforce each other by
A. decreasing the consumption of good A when the price of good A increases. B. increasing the consumption of good B when the price of A falls. C. decreasing the consumption of good A when the price of good B falls. D. increasing the consumption of both goods A and B when income increases.