Engineers for The All-Terrain Bike Company have determined that a 15% increase in all inputs will cause a 15% increase in output. Assuming that input prices remain constant, you correctly deduce that such a change will cause ________ as output increases.
A. average costs to remain constant
B. average costs to increase
C. average costs to decrease
D. marginal costs to increase
Answer: A
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If the menu cost theory is true, then firms that change prices less frequently than other firms are likely to be in
A) more competitive industries. B) service, rather than manufacturing, industries. C) growing, rather than declining, industries. D) less competitive industries.
Since the 1930s, the Fed's most important tool for controlling the money supply has been
A) setting the discount rate. B) setting reserve requirements. C) moral suasion. D) open-market operations.
The direction of change in the trade balance is uncertain because expansionary monetary policy may exert forces in the opposite direction. What are they?
A) An increase in income tends to lower the trade balance, whereas a fall in interest rates through depreciation tends to raise the trade balance. B) An increase in the supply of money raises interest rates, which lowers the trade balance, whereas the increase in the demand for money raises it. C) Exchange rates rise (depreciation) and expected exchange rates fall (appreciation). D) An increase in financial assets raises foreign inflows and raises the trade balance, whereas decreases in interest rates lower the trade balance.
Which of the following will always cause an increase in net exports?
A) a reduction in domestic output B) an increase in the real exchange rate C) an increase in government spending D) an increase in investment E) all of the above