When Firm A increased its production last year, its average total cost of production decreased. On the other hand, Firm B also increased its production last year, but its average total cost of production increased. Considering the given situation, which of the following statements is true of the two firms?
a. The size of the plant in Firm A is smaller than the size of the plant in Firm B.
b. Firm A is operating with increasing returns to scale, while Firm B is operating with decreasing returns to scale.
c. Firm A is operating with decreasing returns to scale, while Firm B is operating with increasing returns to scale.
d. Firm A invests more on labor and cheaper variable costs, while Firm B invests more in expensive machinery.
b
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If the quantity of gasoline supplied currently exceeds the quantity demanded,
A) there is a surplus of gasoline. B) gasoline is no longer a scarce good. C) the price of gasoline would tend to remain unchanged. D) all of the above are true. E) none of the above is true.
Explain the time-inconsistency problem. What is the likely outcome of discretionary policy? What are the solutions to the time-inconsistency problem?
What will be an ideal response?
Other things being equal, if the quantity of labor supplied is less than the quantity of labor demanded, wages will tend to fall
a. True b. False Indicate whether the statement is true or false
The "crowding out" effect states that government spending pushes up interest rates and reduces private investment spending
a. True b. False Indicate whether the statement is true or false