Historically, empirical evidence showed that it was more cost effective to have a single generator of electricity serve a particular region's electricity needs than to have several smaller units compete against each other
More recently, technological advances have occurred in the generation of electricity that allow much smaller generating units to produce electricity for the same average cost as much larger units. Explain how this change would be reflected in the firm's long-run average cost curve and minimum efficient scale.
Historically, the production of electricity was characterized by significant economies of scale, i.e, the LRAC curve was downward sloping over the relevant range of output. This meant that the minimum efficient scale was relatively large. The more recent technological advances have had the effect of "flattening" the LRAC curve and substantially reducing the firm's minimum efficient scale.
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A student wrote: "A subsidy raises marginal social benefit above marginal social cost and eliminates the deadweight loss from underproduction." If you were the instructor, how would you correct this statement?
What will be an ideal response?
It is sometime useful to view each step in the supply chain as a(n)
A) single market. B) integrated process. C) horizontal process. D) vertical process.
A likely consequence of debt default is _____ .
a. a decrease in the federal cost of borrowing. b. an increase in unemployment due to growing uncertainty. c. a sudden decline in the market interest rates. d. an increase in the credit flows in an economy.
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