The primary purpose of the Cobb-Douglas power function is to:
a. allow one to make estimates of cost-output relationships
b. allow one to make predictions about a resulting increase in output for a given increase in the inputs
c. aid one in gaining accurate empirical values for economic variables
d. calculate a short-run linear total cost function
e. a and b
b
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If the production possibilities curve is a downward-sloping straight line, that would indicate
a. that society cannot decide which good it prefers b. an absence of scarcity c. constant opportunity cost d. inefficiency e. specialization
Monopolies are inefficient because they (i) eliminate barriers to entry. (ii) price their product at a level where marginal revenue exceeds marginal cost. (iii) restrict output below the socially efficient level of production
a. (i) and (ii) only b. (ii) and (iii) only c. (iii) only d. (i), (ii), and (iii)
In the long run the monopolistic competitor ________ at peak efficiency and the perfect competitor ________ at peak efficiency.
A. operates; operates B. operates; does not operate C. does not operate; operates D. does not operate; does not operate
Assume that Nation A's production possibilities are either 30 units of bricks or 50 units of wheat. Nation B's production possibilities are 20 units of bricks and 40 units of wheat. Which of the following is true?
A. The high-cost producer of bricks is Nation A. B. Nation A is the least-cost producer of wheat. C. According to the principle of comparative advantage, Nation B should specialize in the production of bricks. D. The opportunity cost of wheat production is lower in Nation B.