When an increase in the scale of production leads to higher average costs, the industry exhibits
A. increasing returns to scale.
B. constant returns to scale.
C. decreasing returns to scale.
D. diminishing returns.
Answer: C
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At a price of $5, consumers buy 200 units of good X. When the price falls to $4, quantity demanded increases to 250 units. We can conclude that over this range, demand is:
A) elastic. B) unit elastic. C) inelastic. D) perfectly inelastic.
"Market power" is an expression used to indicate that a firm has
a. the power to sell a given output at whatever price it chooses. b. no freedom from the rigors of intense competition. c. a monopoly over the product it produces. d. enough market share to be somewhat insulated from competition.
Which of the following does not explain why data on income distribution and the poverty rate give an incomplete picture of inequality?
a. in-kind transfers b. economic life cycle c. transitory income d. All of the above contribute to an incomplete picture of inequality.
Consider an antique auction where bidders have independent private values. There are two bidders, each of whom perceives that valuations are uniformly distributed between $100 and $1,000. One of the bidders is Sue, who knows her own valuation is $200. What is Sue's optimal bidding strategy in a second-price, sealed-bid auction?
A. Submit a bid that is less than $150. B. Submit a bid of $150. C. Submit a bid of $200. D. Yell "mine" when the bid reaches $150.