If there are no fixed costs in the long run, how can it be said that economies of scale arise from spreading fixed costs over more units of output?
A. Costs of quasi-fixed inputs get spread over more units of output which drives down average cost in the long run.
B. Long-run average cost falls because all fixed costs are sunk.
C. Average fixed costs decline continuously as output rises.
D. Economies of scale is a short run phenomenon, and so diminishing returns is the root cause of scale economies.
Answer: A
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Suppose the demand curve for a good is given by the equation Q = 100 - P and the supply curve is given by the equation Q = 0.25P, where P represents the price of the good (measured in dollars per unit) and Q represents the quantity of the good (measured in units per week).
(i) Find the equilibrium price and quantity for this market. (ii) Suppose quantity demanded for the good rises by 10 units at every possible price while at the same time quantity supplied falls by 5 units at every possible price (with the exception that quantity supplied can not drop below zero units at any price). Find the new equilibrium price and quantity in this market. (iii) Given the change in demand, how large would the fall in supply need to be (given the same 10 unit rise in demand) in order for the price to decrease instead of increasing as in part (ii)?
An increase in aggregate demand results in
A) a higher unemployment rate and a lower price level. B) a decrease in real GDP and a decrease in the price level. C) a lower unemployment rate and a lower price level. D) an increase in real GDP and a decrease in the price level. E) a lower unemployment rate and a higher price level.
Any point on the aggregate demand schedule must also be
A) a point that clears the market for real money balances. B) a combination of real interest rates and income where aggregate desired expenditures is in balance. C) a point where money demanded is equal to money supplied. D) all of the above.
Once a division manager sees that production goal for a time period is likely to be met
a. he has an incentive to increase the pace of production b. he has an incentive to decrease the pace of production c. he does not have an incentive to change the pace of production d. he has an incentive to produce other products