Assuming the existence of economies of scale, if a firm finds that it can reduce its unit cost by decreasing its scale of production, it means that
A) it has too much production capacity relative to its demand.
B) it should try to produce less.
C) the law of diminishing returns has not taken effect.
D) it has too much fixed overhead relative to its variable cost.
A
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Open-market purchases by the Fed
a. make the price level and value of money fall. b. make the price level rise, and make the value of money fall. c. make the price level and make the value of money rise. d. make the price level fall, and make the value of money rise.
Assume that an appliance manufacturer is employing variable resources X and Y in such amounts that the MRPs of the last units of X and Y employed are $100 and $60 respectively. Resource X can be hired at $50 per unit and resource Y at $20 per unit. The firm:
A. should hire more of both X and Y. B. should hire more of Y and less of X. C. is producing with the least-costly combination of X and Y but could increase its profits by employing more of X and less of Y. D. is using the least-cost combination of X and Y but could increase its profits by employing less of both X and Y.