Which of the following statements about exchange is true?
a. If everyone starts off with the same quantities of each good, it would be impossible to realize gains from trade.
b. Exchange tends to move each good toward those individuals who value the good more highly.
c. Exchange always results in one party being made better off and the other being made worse off.
d. For trade to occur, everyone must start off with the same value of the good that is traded.
B
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Use consumer indifference curves and budget lines to illustrate the effects of an increase in income for a normal good and an inferior good (use two graphs). Be sure your diagrams are fully and correctly labeled.
What will be an ideal response?
When a firm is experiencing diseconomies of scale, it should
A. expect its average total cost to increase if it reduces the scale of its operations. B. expect its average total cost to decrease if it reduces the scale of its operations. C. lower its price to attract new consumers. D. expect its average total cost to remain unchanged if it changes the scale of its operations.