If an airport decides to expand by building an additional passenger terminal, and in doing so it
Question:
If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, then the expansion would provide ________ to the airlines.
A) economies of scale
B) diseconomies of scale
C) higher average costs but lower total costs
D) higher marginal costs but lower total costs
In the short run, why does a production function eventually display diminishing returns to labor?
A) As the number of workers increases it becomes difficult to monitor them.
B) As a firm hires more workers the skills and the work ethic of the additional workers will eventually decline.
C) As the number of workers increases, eventually the gains from the division of labor and specialization are used up.
D) The opportunity cost of hiring additional workers must eventually rise.
If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit, then
A) marginal revenue is less than price.
B) total revenue equals total cost.
C) average total cost is at a minimum.
D) price exceeds average total cost
Which of the following describes a difference between allocative efficiency and productive efficiency in a perfectly competitive market?
A) Allocative efficiency is achieved only in the long run. Productive efficiency is achieved only in the short run.
B) Allocative efficiency is achieved only in the long run. Productive efficiency is achieved in the short run and the long run.
C) Allocative efficiency is achieved only in the short run. Productive efficiency is achieved only in the long run.
D) Allocative efficiency is achieved in the short run and the long run. Productive efficiency is achieved only in the long run
A constant cost, perfectly competitive market is in long-run equilibrium. At present, there are 1,000 firms each producing 400 units of output. The price of the good is $60. Now suppose there is a sudden increase in demand for the industry's product which causes the price of the good to rise to $64. In the new long-run equilibrium, how will the average total cost of producing the good compare to what it was before the price of the good rose?
A) The average total cost will be higher than it was before the price increase since the increase in demand will drive up input prices.
B) The average total cost will be lower than it was before the price increase because of economies of scale.
C) The average total cost will be higher than it was before the price increase because of diseconomies of scale arising from the increased demand.
D) The average total cost will be the same as it was before the price increase.
