Economies and diseconomies of scale explain:
A. the profit-maximizing level of production.
B. why the firm's long-run average total cost curve is U-shaped.
C. why the firm's short-run marginal cost curve cuts the short-run average variable cost curve
at its minimum point.
D. the distinction between fixed and variable costs.
Answer: B
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How does the adverse selection problem faced by insurance companies differ from the moral hazard problem they face? How might an insurance company deal with each problem?
What will be an ideal response?
Suppose a consumer's expected utility function given two possible states of nature A and B can be expressed in terms of dollars worth of food consumption, F, in both states as U(FA, FB) = [0.6 × ln(FA)] + [0.4 × ln(FB)]. For this utility function, MUA is (0.6/FA) and MUB is (0.4/FB). Without insurance, the consumer can consume 200 in state A but only 50 in state B. The consumer can purchase insurance at a premium of 50 cents per dollar of benefit. How much insurance will she purchase?
A. $50 B. $150 C. $250 D. $416.67
The value of an object on which a tax is levied is known as the
a. tax rate. b. tax impact. c. tax base. d. tax incidence.
When continued for several years, rapid growth in the money supply relative to the growth of real output will likely lead to an extended period of
a. low unemployment. b. high inflation. c. low nominal interest rates. d. high rates of real economic growth.