Which of the following is the best explanation of why the law of diminishing returns does not apply in the long run?
A. All factors of production are fixed in the long run.
B. The MPP does not change in the long run.
C. In the long run, firms can increase the availability of space and equipment to keep up with the increase in variable inputs.
D. In the long run, firms have enough time to find the most qualified workers.
Answer: C
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When aggregate planned expenditure exceeds real GDP, there are unplanned ________ in inventories, and firms ________ production, so that real GDP ________
A) increases; increase; increases B) increases; decrease; decreases C) decreases; decrease; decreases D) decreases; decrease; increases E) decreases; increase; increases
The market structure called monopolistic competition is named using both monopoly and perfect competition. Why?
a. There are few firms in the market all producing identical products. b. There is just one firm whose product can be easily differentiated. c. There are a huge number of firms selling identical products at the same price. d. There are many firms with easy entry and exit but each firm sells a unique product. e. Firms spend very little on advertising and promotion and thus are price takers.
If the market price is above the equilibrium price:
a. A surplus will occur and producers will produce less and lower prices b. Producers will make extremely high profits c. A surplus will result and consumers will bid prices up d. A shortage will occur and producers will produce more and lower prices
The income profile of the children enrolled in Head Start is such that it
A. mirrors the income profile of those in poverty. B. suggests that enrollees are poorer than even those in poverty. C. suggests that enrollees are wealthier than the general population. D. mirrors the income profile of the general population.