Firms in the long run do not experience diminishing marginal returns. Then why do some industries have upward-sloping long-run supply curves?
What will be an ideal response?
In the long run, firms can flexibly scale up or down their production facilities so they do not experience diminishing marginal returns. However, as an increased number of firms in an industry expand their production facilities, the prices of some inputs may rise quickly, as their quantities are limited. Also, some industries face inputs with varying degrees of quality or productivity. At low prices only low cost producers are able to produce; as price rises firms facing higher costs are able to start production.
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With rent controls set below the equilibrium rent, what mechanism might arise that moves the market closer to the efficient equilibrium?
A) decreased search costs B) black market activity C) increased advertising by landlords D) more favorable leases offered to tenants
Which of the following is a statement with positive economic analysis?
A) Lower wages increase employment and reduce the unemployment rate. B) Slower money growth reduces inflation. C) A reduction in the size of the budget deficit will reduce interest rates. D) all of the above
What is the systems approach to problem solving? How is this concept applicable to logistics management?
Borrowers can (and sometimes do) default on their loans when
a. the dividend yield on their shares of stock reaches zero. b. they convert their bonds into perpetuities. c. they declare bankruptcy. d. they cannot find enough buyers of their bonds to sell all the bonds they wish to sell.