When economies of scale exist, a decrease in the level of output will lead to:
a. a decrease in cost per unit.
b. an increase in cost per unit.
c. no change in cost per unit.
d. an increase in total cost.
b
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Alison consumes only tea and cookies and consumes them only in equal proportions. What is Alison's income elasticity of demand for tea?
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The government imposes a tax on an industry that produces goods creating a negative externality. Yet the industry produces more than the optimum quantity of output. This means
A) the tax is more than the external cost associated with the product. B) the tax is less than the external cost associated with the product. C) the company should advertise the product more. D) the company should increase the production of the product.
When the economy is operating at a point where aggregate demand equals short-run aggregate supply, it must be true that:
A. the short-run level of output is not the same as long-run potential output. B. aggregate demand also equals long-run aggregate supply. C. prices are higher than expected prices. D. None of these must be true.