Consider a Wal-Mart supercenter and a 7-Eleven store. In the long run,
A) Wal-Mart or 7-Eleven may have economies of scale depending on how many customers are served.
B) Wal-Mart will definitely have lower average costs because supercenters serve many more customers.
C) The 7-Eleven store will definitely have lower average costs because their small stores are cheaper to build.
D) Wal-Mart's average total cost will decline faster than the 7-Eleven store and experience diseconomies of scale.
E) The 7-Eleven store's average total cost will be lower than Wal-Mart's and always experience economies of scale.
A
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Suppose the market-clearing price of milk is $3.00 per gallon, but consumer groups persuade the government to set and enforce a maximum price cap at $2.00 per gallon. The newly legislated price tends to
A) create a surplus of milk. B) increase the demand for milk. C) reduce the supply of milk. D) do all of the above. E) do none of the above.
Economic efficiency in a free market occurs when
A) producer surplus is maximized. B) price is as low as possible. C) consumer surplus is maximized. D) the sum of consumer surplus and producer surplus is maximized.