"The law of diminishing returns is the same as the decreasing returns to scale." Do you agree? Explain
What will be an ideal response?
The statement is incorrect. The law of diminishing returns states that as a firm uses more of a variable factor, with a given quantity of fixed factors, the marginal product of the variable factor eventually diminishes. In the long run all factors are variable, and decreasing returns to scale occurs when an increase in all factors by the same percentage results in a smaller percentage increase in output.
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Which of the following is true regarding the reserve requirements?
A) The Fed changes them frequently because they are a power monetary policy tool. B) The Fed does not change them much at all because taxation is a more impactful monetary policy tool. C) The Fed changes them frequently because doing so simplifies banking operations. D) The Fed does not change them much at all because doing so would make banking operations
Why was the stock market crash of 1929 a disaster for the economy?
(a) Through the "wealth effect," investors lost paper wealth and consequently reduced their spending on goods and services. This led to cutbacks in production and jobs. (b) Businessmen became pessimistic about the future and reduced spending on plants and equipment, thus causing reduced production and increased layoffs in the capital-goods sector of the economy. (c) The crash revealed a flawed structure of credit and weak system of banks and other financial institutions in the U.S. (d) All of the above are correct