Distinguish the short run from the long run. Generally, what causes costs of production to vary with output in the short run? What generally causes costs of production to vary in the long run?
What will be an ideal response?
The short run is any amount of time in which at least one resource is fixed. In the short run there are some fixed costs. In the long run, nothing is fixed. There are no fixed costs in the long run. Costs of production vary with output in the short run because of increasing and diminishing returns. Costs of production vary with output in the long run because of economies and diseconomies of scale.
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Euro-optimists are convinced that with OCA criteria as guiding principles:
A) Eurozone members will never again be caught in the trap of fiscal irresponsibility. B) the euro will strengthen against other world currencies to the extent that even occasional debt issues will not affect it. C) greater market integration will bring about labor and capital mobility and increased trade that will serve to strengthen the Eurozone. D) the ECB will be able to loosen its stranglehold and provide sufficient liquidity for the Eurozone economies to thrive.
The figure above shows Sam's budget line. Which of the following would result in Sam's budget line shifting leftward and not changing its slope?
A) a decline in his preferences for both gasoline and coffee B) an equal percentage reduction in the prices of both a gallon of gasoline and a pound of coffee C) a decrease in Sam's income D) a fall in the ratio of the price of a gallon of gasoline to the price of a pound of coffee