Suppose that Toyota buys a factory previous owned by Chrysler Motors. Economists would:
A. consider this to be an economic investment.
B. not consider this to be an economic investment because Toyota is less efficient than
Chrysler.
C. not consider this to be an economic investment because no new capital is created through
the purchase.
D. not consider this to be an economic investment because there is no way to know how it will
affect stock holdings in the two companies.
Answer: C
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If a firm has increasing returns to scale at all levels of output, the
A. slope of its long-run total cost curve is always negative. B. slopes of its short-run average cost curves are always negative. C. slope of its long-run average cost curve is always negative. D. slope of its production function is always negative.
In the efficiency wage model, an increase in productivity would
A. increase output but have no effect on the real wage. B. decrease the real wage but have no effect on output. C. have no effect on either output or the real wage. D. increase output but decrease the real wage.