Explain the difference between increasing marginal returns and economies of scale
What will be an ideal response?
Increasing marginal returns apply to the case where a firm has increased only the amount of labor it uses while keeping capital fixed. If increasing marginal returns occur, an additional worker is more productive than the previous worker hired. In this case, the marginal product of the new worker exceeds the marginal product of the previous worker. Economies of scale apply when a firm increases both the amount of labor it uses and the amount of capital it uses. If there are economies of scale, when a firm increases labor and capital by the same percentage, its output increases by a larger percentage.
You might also like to view...
Most economists believe that there are positive externalities associated with education. If they're right, the market for education fails to provide an efficient or socially optimal allocation of resources because the equilibrium
a. price and quantity would be too high b. price would be too low and quantity would be too high c. price and quantity would be too low d. price would be too high and quantity would be too low e. price and quantity would be just right
A sound legal system that protects individuals and their property,
a. cannot be expected until markets are already working well. b. is vital to the smooth operation of markets. c. is normally found in most economies of the world. d. is helpful for the rich, but harmful to the economic well-being of others.
Suppose that sharply lower coffee prices lead to a decrease in the demand for tea. Tea price decreases, and the tea producers experience short-run economic losses. If the tea industry is a price-taker market, after sufficient time is allowed for the market to adjust fully to the decrease in the demand for tea, one would expect the tea industry's output to
a. increase and economic losses to persist. b. decline and economic losses to persist. c. decline and economic losses to disappear. d. increase and economic losses to disappear
The money multiplier formula _____.
(A) Is used by the Board of Governors to decide interest rate cuts. (B) Determines the amount of new money that will be created with each demand deposit. (C) Determines the amount of funds loaned by the Federal Reserve Bank to its members. (D) Is used by the Fed to determine the amount of currency in the economy.