Explain how "learning by doing" and transportation costs each affect the long-run average cost curve
What will be an ideal response?
Learning by doing results in increased productivity of an input. Thus, for each scale of operation, the cost of producing each unit of output decreases because the amount of inputs needed to produce a unit of output decreases. Thus, the short-run and, therefore, long-run average cost curves shift down. Including transportation costs in the long-run average cost function causes the LRAC curve to shift up, all else constant. In addition, if average transportation costs increase with the scale of production because goods have to be shipped over greater distances, this will cause the quantity at which long-run average costs are minimized to decrease as well.
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In the short run, if the economy is at full employment, then the quantity of real GDP
A) is equal to potential GDP, and the unemployment rate is equal to the natural unemployment rate. B) does not necessarily equal potential GDP, but the unemployment rate is equal to the natural unemployment rate. C) is equal to potential GDP, but the unemployment rate does not necessarily equal the natural unemployment rate. D) is equal to potential GDP, but the unemployment rate is less than the natural unemployment rate. E) exceeds potential GDP, and the unemployment rate is less than the natural unemployment rate.
Foreign direct investment implies that the investor obtains ________ share in a foreign company's ownership
A) less than 1 percent B) less than 5 percent C) less than 10 percent D) none of the above