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. […]
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
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 […]
If everyone’s utility is given equal weight and a change in resource allocation results in one person’s gain exceeding another person’s loss, we can say that the new allocation A) is Pareto superior to the original one. B) increases social welfare. C) decreases social welfare. D) is efficient. ANSWER B
If society were to maximize the utility of its worst-off member, the final allocation would most likely be A) relatively egalitarian. B) on the contract curve. C) Pareto efficient. D) one in which one person gets everything. ANSWER A
Suppose in a democratic society, all voters prefer choice G over choice B; however, when the two choices are presented along with a third choice, R, B wins the election. This violates the assumption of A) transitivity. B) non-dictatorship. C) independence of irrelevant alternatives. D) completeness. ANSWER C
Explain the difference between fixed costs in the short run and fixed costs in the long run. What will be an ideal response? ANSWER In the short run fixed costs are sunk; in the long run, fixed costs are avoidable.
Economies of scale in nuclear power plants exist because of A) more efficient plant management. B) a better understanding of the plant’s idiosyncrasies, or learning-by-doing. C) nuclear power technology changes. D) both A and B. ANSWER D
A cake is to be shared by two people. Both desire the largest piece possible. One of the two will cut the cake. Under which of the following situations will the cutter adopt a Rawlsian social welfare function? A) The person cutting the cake chooses the first piece. B) The person not cutting the cake […]
If the costs of labor and capital increase in the same proportion, the isocost line will A) stay the same. B) shift outward in a parallel fashion. C) rotate inward around the point where only capital is employed in production. D) shift inward in a parallel fashion. ANSWER B
