Show that increasing returns to scale can co-exist with diminishing marginal productivity. To do so, provide an example of a production function with IRTS and diminishing marginal returns
What will be an ideal response?
A number of production functions work. A general Cobb-Douglas production function with
a + b >1 while a < 1 and b < 1.
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Explain how it is possible for marginal utility to fall while total utility is still on the rise?
What will be an ideal response?
After a permanent increase in the money supply
A) the exchange rate overshoots in the short run. B) the exchange rate overshoots in the long run. C) the exchange rate smoothly depreciates in the short run. D) the exchange rate smoothly appreciates in the short run. E) the exchange rate remains the same.
When the MPC = 0.80, the multiplier is
A) 5.00. B) 0.25. C) 4.00. D) 7.50.
Other things being equal, if the reserve ratio is raised from 10 percent to 20 percent
A. minimum potential value of the money multiplier falls from 10 to 20. B. minimum potential value of the money multiplier rises from 0.10 to 0.20. C. maximum potential value of the money multiplier rises from 10 to 20. D. maximum potential value of the money multiplier falls from 10 to 5.