Explain how a firm can have constant returns to scale in production and economies of scale in cost. What will be an ideal response? ANSWER A firm can have constant returns to scale in production at every output level. If the firm doubled all inputs the output would double. However, the firm may also […]
Date: September 9th, 2020
A social welfare function (SWF) A) depicts the preferences of the president of the country. B) combines various consumers’ utilities to provide a collective ranking of allocations. C) indicates the choices that are acceptable by most consumers. D) is the outcome of a majority voting decision rule. ANSWER B
Date: September 9th, 2020
If society were to maximize the utility of its best-off member, the final allocation would be A) perfect equity. B) on the contract curve. C) Pareto efficient. D) one in which one person gets everything. ANSWER D
Date: September 9th, 2020
If government chooses a policy that does not lead to a Pareto improvement, one may say that A) this policy creates only winners. B) this policy creates winners and losers. C) only poor people benefit from this policy. D) this policy only creates losers. ANSWER B
Date: September 9th, 2020
In the long run, the expansion path is A) horizontal. B) vertical. C) diagonal. D) Not enough information. ANSWER D
Date: September 9th, 2020
Comparing the distribution of wealth of the wealthiest 1% of the population in the United States before and after the recent Great Recession to what occurred before and after the Great Depression, A) the percentage of the wealth of the wealthiest 1% increased after the recent Great Recession, unlike what happened after the Great Depression. […]
Date: September 9th, 2020
Long-run average cost is never greater than short-run average cost because in the long run, A) capital costs equal zero. B) the firm can move to the lowest possible isocost curve. C) wages always increase over time. D) wages always decrease over time. ANSWER B
Date: September 9th, 2020
Explain why the long-run total cost curve, not the short-run total cost curve, shows the lowest cost of producing any level of output. Is there an exception? What will be an ideal response? ANSWER In the long run, all costs are variable so the firm can select the least-cost mix of all inputs to […]
Date: September 9th, 2020
“If the wage rate paid to one form of labor is twice the cost of another form of labor, the first type of labor must be twice as productive.” Comment. Indicate whether the statement is true or false ANSWER true . Firms minimize cost by setting the ratio of marginal productivity per unit cost […]
Date: September 9th, 2020
At a given point in time, the Rawlsian welfare function gives equal weight to each individual’s utility. Indicate whether the statement is true or false ANSWER False. The Rawlsian welfare function gives a weight of 1 to the utility of the worst-off person and a weight of zero to the utilities of all others. […]
Date: September 9th, 2020
