The law of diminishing returns indicates that:
A. as extra units of a variable resource are added to a fixed resource, marginal product will
decline beyond some point.
B. because of economies and diseconomies of scale, a competitive firm's long-run average
total cost curve will be U-shaped.
C. the demand for goods produced by purely competitive industries is downsloping.
D. beyond some point, the extra utility derived from additional units of a product will yield the
consumer smaller and smaller extra amounts of satisfaction.
Answer: A
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When the marginal social cost of the production of Good A is greater than the marginal private cost of the production of Good A, then
A) a competitive, unregulated market produces less than the efficient quantity of Good A. B) a competitive, unregulated market produces the efficient quantity of Good A. C) a competitive, unregulated market produces more than the efficient quantity of Good A. D) the government should levy a tax on the production of Good A that is equal to the horizontal distance between the two marginal cost curves.
The Fed can attempt to decrease the federal funds rate by
A) lowering the reserve requirement, which increases the money supply. B) lowering the reserve requirement, which decreases the money supply. C) raising the reserve requirement, which increases the money supply. D) raising the reserve requirement, which decreases the money supply.
Michael spends $10 a month on Pez dispensers and Superman action figures. His marginal-utility-to-price ratio for the Pez dispensers is 40, while his marginal-utility-to-price ratio for Superman action figures is 47 . Explain why Michael is not maximizing his utility and how can he change his behavior to increase his utility?
A point lying inside (under) a production possibilities curve indicates that
a. the economy is saving money. b. there are no associated opportunity costs. c. more output could be produced with existing resources. d. technology limits production.