The relationship between MC and AC can best be described as
A) when AC increases, MC starts to increase.
B) when MC increases, AC starts to increase.
C) when MC decreases, AC decreases.
D) when MC exceeds AC, AC increases.
D
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If the Fed carries out an open market operation and buys U.S. government securities, the federal funds rate ________ and the quantity of reserves ________
A) rises; increases B) falls; increases C) rises; decreases D) falls; decreases E) rises; does not change
Suppose the economy is initially in long-run equilibrium. For each of the shocks listed below, explain the short-run effects on output and the price level
(a) A stock market crash reduces consumers' wealth. (b) Businesses decide to hold larger inventories. (c) The government cuts defense spending. (d) Foreign countries buy more U.S. goods.
When the price of a good changes, the substitution effect can be found by comparing the equilibrium quantities purchased
A) on the old budget line and the new budget line. B) on the original indifference curve when faced with the original prices and when faced with the new prices. C) on the new budget line and a hypothetical budget line that is a shift back to the original indifference curve parallel to the new budget line. D) on the new indifference curve.
During the last 30 years computers have changed most production processes. Use an isocost-isoquant diagram to show the effect the spread of computers have had on labor during the last 30 years.
What will be an ideal response?