The sum of the marginal propensity to consume and the marginal propensity to save is always equal to
A) zero. B) 0.5. C) 1. D) 100.
C
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Indicate whether the statement is true or false
A corporation has been steadily losing money on one of its product lines, plastic flamingo lawn ornaments. The firm produces plastic flamingos in a factory that cost $20 million to build 10 years ago. The firm is now considering an offer to buy that factory for $15 million. Which of the following statements about the decision to sell or not to sell is correct?
a. The firm should turn down the purchase offer because the factory cost more than $15 million to build. b. The $20 million spent on the factory is a sunk cost; that cost should not affect the decision. c. The $20 million spent on the factory is an implicit cost, which should be included in the decision. d. The firm should sell the factory only if it can reduce its costs elsewhere by $5 million.
What is the shape of the AS in the short run and the long run?
A. AS is relatively flat in both the short and long runs. B. AS is relatively flat in the short run but steeper in the long run. C. AS is relatively steep in both the short and long runs. D. AS is relatively steep in the short run but flatter in the long run.
Why are long-run costs always less than or equal to short-run costs?
a. In the long run, technological change can occur, leading to lower costs over time. This means that long-run costs will always be less than or equal to short-run costs at the same level of output. b. In the long run, employees are more productive so the firm's costs will be lower. This means that long-run costs will always be less than or equal to short-run costs at the same level of output. c. In the long run, all inputs are flexible so the firm can minimize all costs. This means that long-run costs will always be less than or equal to short-run costs at the same level of output. d. In the long run, firms can choose how much output to produce based on demand, which will lead to lower costs. This means that long-run costs will always be less than or equal to short-run costs at the same level of output.