Explain briefly the following concepts:
(a) Increasing returns to scale.
(b) Decreasing returns to scale.
(c) Constant returns to scale
Increasing returns to scale: An increased in input usage results in a greater percentage change in output.
Decreasing returns to scale: An increased in input usage results in a smaller percentage change in output.
Constant returns to scale: An increased in input usage results in an equal percentage change in output.
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For supply-side inflation to occur in the long run
A) the long-run aggregate supply curve has to shift to the left. B) the aggregate demand curve has to shift to the left. C) the long-run aggregate supply curve has to shift to the right. D) the aggregate demand curve has to shift to the right.
Which of the following is an advantage of a sole proprietorship?
a. the ability to pool resources b. limited liability c. double tax exemption of the firm's earnings d. ease of organization e. ease of raising funds
One reason that private solutions to externalities do not always work is that
a. government intervention negates the benefits of positive externalities. b. some people benefit from externalities. c. interested parties incur costs in the bargaining process. d. charities are not well organized.
Assume that consumers consider rice and potatoes to be substitutes, so that when the price of rice rises, consumers purchase less rice and more potatoes. When the CPI is computed following the increase in the price of rice, it takes into account
a. the increase in the price of rice. b. the decrease in the quantity of rice purchased and the increase in the quantity of potatoes purchased. c. Both (a) and (b) are correct. d. None of the above is correct.