In Example 6.5 in the book, the authors use the observed production data from the U.S. carpet industry to show that small firms likely have constant returns to scale and that large firms likely have increasing returns to scale
Are returns to scale in this industry likely to continue increasing as these firms become even larger? A) Yes, the marginal products of labor and capital are known to be positive at all levels of output in the U.S. carpet industry, which implies continued increasing returns to scale.
B) Yes, increasing returns are always observed in other countries that produce carpeting on large scale.
C) No, the authors predict that returns to scale in carpet production will likely decline at some point.
D) The authors do not provide any comments on this issue.
C
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Indicate whether the statement is true or false
If the market price of a product is $14 and all sellers are price takers, then which of the following is correct?
A) Each seller's total revenue line is graphed as an upward-sloping straight line. B) The demand curve for each seller's product is a downward-sloping straight line. C) Each seller can earn more total revenue by raising the price he or she charges above $14. D) The demand curve for each seller's product is a downward-sloping but not necessarily a straight line. E) Each seller's total revenue is graphed as an upside-down U-shaped curve.
Suppose a decrease in price increases quantity demanded from 8 to 12. Using the mid-point formula, the percentage change in quantity demanded is:
A. 0.1, and is elastic. B. 40 = 400 percent. C. 0.40 = 40 percent. D. 0.40 = 40 percent.
Which of the following statements concerning efficiency is correct?
A. If a toll road is heavily used so that traffic movement is slowed, the price per vehicle should be reduced since the road is generating more revenue. B. Economists advocate high prices for abundant resources and low prices for scarce resources. C. If a toll road is heavily used and traffic movement is difficult, the price per vehicle should be increased to shift some traffic to less-crowded roads. D. All of these options are desirable in promoting efficient use of scarce road space.