A firm currently employs five units of capital. When the firm adds a sixth unit of capital, it is able to reach a lower average cost for a greater quantity of output
What does this tell you about the shape of the long-run average cost curve and are economies of scale occurring? Explain briefly. Does this necessarily imply increasing or decreasing returns to scale in production or is it ambiguous? Explain briefly.
Because the average cost is decreasing as the firm increases output, the long-run AC is falling and the firm is experiencing economies of scale. Returns to scale is ambiguous. While IRTS imply EOS, EOS can occur even in the presence of DRTS or CRTS.
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Changes in the expected rate of inflation will:
A. cause the SRAS curve to become vertical. B. not shift but create a movement along the SRAS curve. C. shift the SRAS curve downward or upward. D. cause the SRAS curve to become upward-sloping.
If we compare the Baby Boom generation of workers to the number of workers who came before and will come after them, we realize that, all other things equal, the Baby Boomer's labor:
A. supply will be relatively greater at any wage. B. supply will be relatively lower at any wage. C. demand will be relatively greater at any wage. D. demand will be relatively lower at any wage.
________ is about the number of firms, and ________ is about the variety of products.
A. Perfect competition; monopoly B. Monopoly; oligopoly C. Oligopoly; monopolistic competition D. Monopolistic competition; oligopoly
Floating exchange rates
A. float according to the laws of supply and demand. B. are fixed by speculators in foreign exchange markets. C. are rarely used in foreign exchange transactions. D. All of the choices are true characteristics.