If average productivity falls, will marginal cost necessarily rise? How about average cost?
A. If average productivity is falling, average cost must be falling; if marginal productivity is falling, marginal cost must be falling. But there is no necessary relationship between average productivity and marginal cost.
B. If average productivity is falling, average cost must be rising; if marginal productivity is falling, marginal cost must be rising. But there is no necessary relationship between average productivity and marginal cost.
C. If average productivity is falling, both average and marginal costs must be falling; if marginal productivity is falling, both average and marginal costs must be falling as well. In other words, saying that average productivity and marginal productivity are falling has the same repercussions for costs.
D. If average productivity is falling, both average and marginal costs must be rising; if marginal productivity is falling, both average and marginal costs must be rising as well. In other words, saying that average productivity and marginal productivity are falling has the same repercussions for costs.
Ans: B. If average productivity is falling, average cost must be rising; if marginal productivity is falling, marginal cost must be rising. But there is no necessary relationship between average productivity and marginal cost.
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_________________ banks are examined by the Office of the Comptroller of the Currency.
Fill in the blank(s) with the appropriate word(s).
Tobacco production is one of the more heavily subsidized industries in the United States. Suppose that as a result of intense lobbying from health-related concerns, Congress repeals the tobacco firms' subsidies. Which of the following scenarios would likely occur?
A) The tobacco firms' supply curve would shift rightward, as it would now be cheaper to produce each level of output. B) The tobacco firms' supply curve would shift leftward, since it would now cost more to produce each level of output. C) The tobacco firms would not experience any shift in their supply curves; subsidies don't affect output. D) There would be a movement along the supply curve for tobacco, but the supply curve would not shift.