The law of diminishing marginal product states that
A) output will continue to increase indefinitely if more variable factors of production are added to an existing stock of fixed factors.
B) successive equal-sized increases in labor, when added to fixed factors of production, will result in smaller increases of output.
C) a doubling all inputs will double output.
D) variable costs tend to decrease with output.
Answer: B
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In Adam Smith's competitive market economy, the question of what goods to produce is determined by:
a. the "invisible hand" of the price system. b. businesses. c. unions. d. the government, through laws and regulations.
Which of the following contains only normative statements?
a. The birth rate is reduced as economies urbanize, but that also leads to a decreased average age of developing countries' populations. b. An increase in the price of corn will decrease the amount of corn purchased. However, it will increase the amount of wheat purchased. c. A decrease in the price of butter will increase the amount of butter purchased, but that would be bad because it would increase Americans' cholesterol levels. d. None of the above contain only normative statements.
The base year in the consumer price index (CPI) is:
a. given a value of zero. b. always the first year in the current decade. c. established by law. d. a year chosen as a reference for prices in all other years.
The text argues that if avocado growers in Mexico can produce avocadoes cheaper than avocado growers in the United States, this will not reduce total jobs available in the United States. The logic underlying this argument is that
A. avocado growers in Mexico need the jobs more than Americans do. B. avocado growers in the United States will switch to specializing in a crop in which they hold the comparative advantage. C. avocado growers in the United States did not earn much anyway. D. avocado growers in the United States are welcome to emigrate to Mexico.