Explain how a firm can have constant returns to scale in production and economies of scale in cost
What will be an ideal response?
A firm can have constant returns to scale in production at every output level. If the firm doubled all inputs the output would double. However, the firm may have a decreasing average cost. As more inputs are used and output increases, the average cost declines, which is known as economies of scale.
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In the absence of recurring fixed costs, a monopolist will always produce a positive output quantity.
Answer the following statement true (T) or false (F)
In 2012, consumers in Dexter consumed only books and pens. The prices and quantities for 2012 and 2013 are listed in the table above. The reference base period for Dexter's CPI is 2012. What is the cost of the CPI basket in 2012?
A) $430 B) $335 C) $320 D) $540
The table above gives the quantity of money and money demand schedules. Suppose that the interest rate is equal to 6 percent. The effect of this interest rate in the money market is that
A) the money market is in equilibrium. B) people buy bonds and the interest rate falls. C) people sell bonds and the interest rate falls. D) bond prices fall and so the interest rate falls.
What is meant by the term "free market"?
What will be an ideal response?