What are diseconomies of scale and why might they occur?
What will be an ideal response?
Diseconomies of scale mean that as the firm increases all its inputs by the same percentage, its output increases by a smaller percentage. As a result, the firms' long-run average cost rises. Diseconomies of scale can arise from the sheer size of a firm. As a firm grows larger, it becomes increasingly more difficult to manage. Communicating information up and down the management hierarchy as well as communicating between managers and workers on the same level becomes more costly. As a result, the firm experiences diseconomies of scale, that is, its long-run average cost increases as it expands the scale of its operation by producing yet more output.
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Which of the following is a legal barrier to entry?
i. public franchise ii. government license iii. patent A) iii only B) i and iii C) ii and iii D) i, ii, and iii E) i and ii
Suppose the domestic market demand function in a certain market where Q is measured in thousands of units is Qd = 20 - 2.5P, and the domestic market supply function is Qs = 2.5P - 7.5. Suppose further that the world price for the good in question is $3.40 per unit. If the government places a $1.20 tariff on imported units of this good, how much revenue does the tariff generate?
A. $3,200 B. $3,600 C. $5,400 D. $3,000
If we knew that the price of goods rose, on average, by 5 percent last year and by 4 percent this year, we would know
a. nothing about the rate of inflation b. that the inflation rate is rising c. that the inflation rate is falling d. that we are in a stagflation e. that we are in a recession
Which of the following statements is true about individuals and utility?
A. Individuals seek to maximize their income, not utility. B. Individuals will either minimize or maximize utility depending on the situation. C. Individuals rarely try to maximize their utility. D. Individuals seek to maximize utility.