Assume that you observe the long-run average cost curve of ACME Bookstores, a national chain. Starting from the point on the curve where output is zero and moving to the right, which of the following lists the behavior of long-run average costs in the
correct sequence (that is, which will be observed first, second, etc.)?
A) minimum efficient scale; economies of scale; constant returns to scale; diseconomies of scale
B) economies of scale; constant returns to scale; diseconomies of scale; minimum efficient scale
C) constant returns to scale; economies of scale; minimum efficient scale; diseconomies of scale
D) economies of scale; minimum efficient scale; constant returns to scale; diseconomies of scale
Answer: D
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According to Okun's law, when cyclical unemployment is positive, the output gap:
A. equals zero. B. is positive. C. equals the rate of cyclical unemployment. D. is negative.
The principle that individuals and firms pick the activity level where the incremental benefit of that activity equals the incremental cost of that activity is known as the:
A. marginal principle. B. principle of opportunity cost. C. principle of diminishing returns. D. spillover principle.