If increasing returns to scale are present, the long-run average cost increases as more output is produced
Indicate whether the statement is true or false
False. Increasing returns to scale imply that with a doubling of inputs, output more than doubles. Since average cost is the ratio of total cost divided by output, this increase in inputs will cause the numerator to be just double the old value while the new denominator is more than double the old value. As a result, long-run average cost falls as more output is produced.
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Which of the following directly shifts the short-run aggregate supply curve?
A) a change in aggregate demand B) a change in the price level C) a change in resource prices D) all of the above
Distinguish the laws of demand and supply. How are the laws of demand and supply illustrated graphically?
The three fundamental economic questions of what, how, and for whom:
A) exist because of scarcity. B) are much more serious in a socialist system. C) are not serious in a capitalistic system. D) are not relevant in the industrialized world of today.
A per-unit government tax on producers of a good tends to
A) reduce the supply of the good. B) increase the supply of the good. C) cause an upward movement along the supply curve. D) not have any effect on the good's supply.