In the food and kindred products industry, it is estimated that the elasticity of output with respect to labor is 0.43 and the elasticity of output with respect to capital is 0.48. These two measures indicate that the primary metals industry is characterized by
A) decreasing returns to scale.
B) constant returns to scale.
C) increasing returns to scale.
D) no returns to scale.
A
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Assuming that pizza is a normal good, if students' income at your college increases substantially, there would be:
A) a reduction in the demand for pizza. B) an increase in the quantity of pizza demanded. C) no change in the demand for pizza. D) an increase in the demand for pizza.
Leo is a welfare recipient who qualifies for two means-tested cash benefit programs. If he does not earn any income, he receives $225 from each program. For each dollar he earns (which his employer is required to report to the welfare agency), his benefit from each program is reduced by 75 cents until the benefit equals zero. When Leo's earnings are less than $300, each extra dollar he earns causes his total income (earnings plus benefits) to:
A. fall by 50 cents. B. fall by 25 cents. C. rise by 50 cents. D. rise by 75 cents.