At one time, sea lions were depleting the stock of steelhead trout. One idea to scare sea lions away from the Washington coast was to launch fake killer whales, which are predators of sea lions. The cost of making the first whale is $16,000 ($5,000 for materials and $11,000 for the mold). The mold can be reused to make additional whales, and so additional whales cost $5,000 each. Based on these numbers, the production of fake killer whales exhibits:
A. constant returns to scale.
B. diminishing marginal product.
C. increasing returns to scale.
D. decreasing returns to scale.
Answer: C
You might also like to view...
The numerical value of the MPC is typically
A. less than 1. B. equal to 1. C. greater than 1. D. unpredictable.
If transfer payments increase then we would most likely conclude what about government spending as a result of this increase?
A. We cannot reasonably conclude anything about government spending. B. Since transfer payments have gone up this has caused government spending to decrease. C. Since transfer payments have gone up this has caused government spending to increase. D. Government spending would not change if transfer payments increase.
Pricing is made difficult by
A) firms having multiple products. B) concerns about the response of competitors. C) concerns about consumer linkages of price and quality. D) all of these choices make pricing difficult.
Which of the following provides the best explanation for diseconomies of scale?
a. the firm is too small to take advantage of specialization. b. large management structures may be bureaucratic and inefficient. c. if there are too many employees, the work place becomes crowded and people become less productive. d. average fixed costs are rising.