Explain why the average cost curve for the long run differs from that for the short run
The average cost curve for the long run differs from that for the short run because, in the long run, input quantities generally become variable.
For example, in the short run, a chicken breeder can raise, at most, only the number of chickens that she can crowd into her coops' current capacity. She can build more chicken coops, but if it turns out that they are much larger than she needs, she cannot simply undo the excessive space and get her money back. But in the long run, when the coops need to be replaced, she can choose among new coops of different sizes.
Thus, in the long run, a firm will select the plant size that is most economical for the output level it expects to produce.
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Because there is an imbalance of information in a lending situation, we must deal with the problems of adverse selection and moral hazard. Define these terms and explain how financial intermediaries can reduce these problems
What will be an ideal response?
One "problem" with applying the Jorgenson theory of investment to project investment is that
A) the MPK is known with certainty by business executives but the user cost is uncertain. B) the MPK is known with uncertainty by business executives but the user cost is certain. C) both user cost and the MPK are uncertain. D) it does not explain the accelerator.