As output increases
A) average variable cost becomes smaller and smaller.
B) the difference between average total cost and average variable cost decreases.
C) marginal cost increases continuously.
D) the difference between average total cost and average variable cost becomes greater and greater.
Answer: B
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When do insurance companies encounter the problem of moral hazard?
a. When simply having insurance causes people to take more risks than they would otherwise. b. When they do not have enough information to distinguish between people who are "good risks" and those who are "bad risks." c. When the price of insurance premiums fully reflects all available information. d. When the insurance company suffers large losses because a major catastrophe has affected a large number of people simultaneously.
For most goods and services the income elasticity of demand is
A) negative. B) positive. C) invisible. D) inverse.
One of the reasons why firms pollute the air is that
A. use of the air is not easily excludable. B. use of the air is costless to society. C. use of the air is excludable. D. moral hazard creates incentives to pollute the air.
The law of demand states that price and ______________ are _____________ related, ceteris paribus
A) demand; inversely B) quantity demanded; inversely C) demand; directly D) quantity demanded; directly E) ?quantity supplied; directly