Decreasing returns to scale and diminishing returns differ in that
a. Diminishing returns is a long-run concept while decreasing returns to scale is a short-run concept.
b. Diminishing returns is a short-run concept while decreasing returns to scale is a long-run concept.
c. Diminishing returns is a both short and long-run concept while decreasing returns to scale is a short-run concept.
d. Diminishing returns is a long-run concept while decreasing returns to scale is a short and long-run concept.
b
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A basic principle of economics is that a country's standard of living depends on its
a. quantity of physical capital. b. abundance of natural resources. c. ability to produce goods and services. d. ability to thrive economically without having to interact with other countries.
Two identical firms have access to a spring. Their marginal cost of bottling water from the spring is a constant 10ยข per bottle. The market demand for bottled spring water is P = 250 - 20Q, where P is the price (in cents per bottle) and Q is the quantity demanded (in hundreds of bottles).
(i) Suppose the two firms form a successful cartel. How much bottled water will the firms produce, and what price will they charge? (ii) Suppose the firms behave as in the Bertrand model of oligopoly. How much bottled water will the firms produce, and what price will they charge? (iii) Suppose the firms behave as in the Cournot model of oligopoly. How much bottled water will the firms produce, and what price will they charge?