Suppose a firm's technology is represented by the function Q = F(L, K) = 5L0.25K0.75. Does this firm experience economies of scale, diseconomies of scale or neither?
What will be an ideal response?
Neither. Q = F(L, K) = 5L0.25K0.75 is a Cobb-Douglass production function with ? + ? = 1, which implies that the firm has constant returns to scale technology. As a result, the firm will experience neither economies nor diseconomies of scale. The firm's average cost will not change as output changes.
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Work disincentives in the system of Social Security have seen the number of persons in the program increase dramatically. What incentives could be put in place to reverse, or at least slow, this trend?
What will be an ideal response?
If a bank has $500 in excess reserves and the reserve requirement is 20 percent, then the maximum amount by which this individual bank can increase the money supply is _____
a. $100 b. $400 c. $500 d. $1,000 e. $2,500
The economic expansion that began in 1991
a. lasted approximately five years. b. lasted approximately twelve years. c. lasted approximately nine years. d. was the longest expansion in U.S. history. e. was the second longest expansion in U.S. history.
Money is created when banks _________.
Fill in the blank(s) with the appropriate word(s).