If a firm enjoys economies of scale, _____.
(A) Its average total cost will increase as production increases.
(B) Its total costs will decrease as production increases.
(C) Its average total cost will decrease as production increases.
(D) Its marginal revenue will increase as production increases.
Ans: (C) Its average total cost will decrease as production increases.
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In the figure above, if the firm is regulated using a marginal cost pricing rule, the consumer surplus created is equal to the area of
A) ABG. B) ACF. C) BCFG. D) BCE. E) None of the above because there is no consumer surplus created.
When producing a good creates pollution, an external cost, and the government imposes a tax equal to the marginal external cost, then
A) the amount of output moves farther away from the efficient amount. B) transaction costs will be high. C) the efficient amount of the good will be produced. D) property rights must have already been established.
Over time, nations tend to converge to
A) the same balanced growth path and same income per capita. B) the same balanced growth path but varying income per capita. C) different balanced growth paths but the same income per capita. D) different balanced growth paths because of varying income per capita.
Entry of new firms will occur in a monopolistic competitive industry until:
a. marginal cost equals zero. b. marginal revenue equals zero. c. marginal revenue equals marginal cost. d. economic profit equals zero. e. economic profit is negative.