Carefully explain the difference between diseconomies of scale and diminishing returns
What will be an ideal response?
Diseconomies of scale means that, in the long run, average costs are rising, usually due to coordination problems or decreasing returns to scale. Diminishing returns means that, in the short run, marginal product is falling (or marginal cost is rising) because each additional worker is producing less than the one before him, due to the fact that capital (or some other factor of production) is fixed. There is no connection between these things.
You might also like to view...
Refer to Figure 15.7. Suppose the money supply increases. This will cause interest rates to ________ and cause a shift from point ________.
A. decrease; D to point C B. decrease; D to point A C. increase; A to point B D. increase; D to point A
The self-correcting tendency of the economy means that falling inflation eventually eliminates:
A. exogenous spending. B. recessionary gaps. C. expansionary gaps. D. unemployment.