When the size of a factory (and all its associated inputs) doubles and, as a result, output more than doubles,
A. Economies of scale must exist.
B. The law of diminishing returns must not apply in the smaller factory.
C. Marginal costs must be declining.
D. The short-run ATC curve must be declining.
Answer: A
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A profit-maximizing firm will hire inputs until MRP = P of the input.
Answer the following statement true (T) or false (F)
In a market system, how are the terms of exchange established?
a. Industry associations set up acceptable price ranges for their goods, and firms within each industry are required to set price within its relevant range. b. The forces underlying supply and demand interact to set a price c. Federal and state legislation establish minimum and maximum prices. d. Consumer advocacy groups establish fair prices for items, and most firms comply because they don’t want to anger their customers.