Suppose that a firm produces both bottled water and carbonated soft drinks. It is cheaper for this firm to produce both goods than it would be if they were produced by two separate firms. Further, as this firm increases its production levels, the average costs of producing both bottled water and carbonated soft drinks fall. This firm experiences:
A. economies of scope and diseconomies of scale.
B. both economies of scope and economies of scale.
C. both diseconomies of scope and diseconomies of scale.
D. diseconomies of scope and economies of scale.
B. both economies of scope and economies of scale.
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Suppose two economic models give the same predictions --- but one is simplistic and unrealistic in its assumptions while the other is rich in detail and resembles the real world more closely. If the sole goal of the economist is to predict, then the economist should use the simple and unrealistic model.
Answer the following statement true (T) or false (F)
The substitution effect from a rise in the price of pizza
A) leads to a movement along the fixed budget line, due to a change in relative prices. B) increases the quantity demanded of pizza. C) decreases the quantity demanded of pizza. D) Both answers A and B are correct.
Describe the alternative methods of allocating scarce resources
What will be an ideal response?
Making a loan is generally:
A. less risky and less potentially rewarding than buying stock. B. less risky and more potentially rewarding than buying stock. C. more risky and less potentially rewarding than buying stock. D. more risky and more potentially rewarding than buying stock.