Which of the following statements best summarizes the law of diminishing marginal returns?
A) In the short run, as more labor is hired, output diminishes.
B) In the short run, as more labor is hired, output increases at a diminishing rate.
C) In the short run, the amount of labor a firm will hire diminishes as output increases.
D) As more labor is hired, the length of time that defines the short run diminishes.
B
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A loud band plays a concert late at night in a neighborhood park. The noise produced by the band that keeps the neighbors not attending the concert awake is
A) only a private cost. B) only an external cost. C) both a private cost and an external cost. D) neither a private cost nor an external cost. E) a private benefit because the neighbors get to hear the band.
Keynesian economists think general equilibrium is not attained quickly because
A) the real interest rate adjusts slowly. B) the level of output adjusts slowly. C) the real wage rate adjusts slowly. D) the price level adjusts slowly.
In peak-load pricing, once capacity is reached, the firm's short-run marginal cost curve becomes ________.
A) downward sloping B) vertical C) negative D) horizontal
An inferior good is
a. any good of low quality b. one that consumers buy less of as the price rises c. one that consumers buy less of as their income rises d. one that has few substitutes e. any good made with inexpensive labor