Explain why in the case of economies of scope the production possibility frontier is bowed outward. What will be an ideal response? ANSWER With economies of scope a firm uses less resources if it produces 2 goods jointly instead of producing the 2 goods in two firms separately. This means that the firm can […]
Date: September 9th, 2020
A firm is currently producing 1140 units of output according to the production function q = L4/3K1/2 and faces input prices equal to w = $20 and r = $80. In the short run, capital is fixed at 5 units. In the long run, the firm’s costs are A) lower because the firm substitutes towards […]
Date: September 9th, 2020
For a monopoly, marginal revenue is less than price because A) the firm is a price taker. B) the firm must lower price if it wishes to sell more output. C) the firm can sell all of its output at any price. D) the demand for the firm’s output is perfectly elastic. ANSWER B […]
Date: September 9th, 2020
The United States is the most inequitable country in the developed world. Indicate whether the statement is true or false ANSWER False. Efficiency means how many goods to produce, and equity means how the goods are allocated. They do not move in opposite directions. Even if one might say that the United States is […]
Date: September 9th, 2020
The learning curve is the relationship between A) returns to scale and cumulative costs. B) marginal costs and current output. C) marginal product of labor and current output. D) average costs and cumulative output. ANSWER D
Date: September 9th, 2020
The tangency points between the long-run average cost curve (LRAC) and the short-run average cost curves (SRAC) are A) always at the minimum of the SRACs. B) never at the downward portion of the SRACs. C) always at the maximum of the SRACs. D) not necessarily at the minimum of the SRACs. ANSWER D […]
Date: September 9th, 2020
Many universities have either a top football program OR a top basketball program. Very few have both. These results suggest the presence of A) economies of scope. B) diseconomies of scope. C) returns to scale. D) the law of diminishing marginal returns. ANSWER B
Date: September 9th, 2020
Learning by doing is represented by A) a decrease in the average total cost curve. B) an increase in the average total cost curve. C) no change in the average total cost curve. D) an increase in the average total cost curve and a decrease in the marginal cost curve. ANSWER A
Date: September 9th, 2020
For a monopoly, marginal revenue is less than price because A) the demand for the firm’s output is downward sloping. B) the firm has no supply curve. C) the firm can sell all of its output at any price. D) the demand for the firm’s output is perfectly elastic. ANSWER A
Date: September 9th, 2020
Short-run average cost exceeds long-run average cost only when there are economies of scale. Indicate whether the statement is true or false ANSWER False. Short-run average costs exceed long-run average costs because the firm is locked into a certain input mix in the short run that may not be cost minimizing when all inputs […]
Date: September 9th, 2020
