Question

1) Decreasing returns to scale may occur as increasing the amount of inputs used A) increases specialization B) may cause coordination difficulties. C) always increases the amount of output produced D) increases efficiency. 2) Which of the following statements is NOT true? A) AFC = AC - AVC C) AVC = wage/MPL B) AC = AFC + AVC D) C=F-VC 3) The more elastic the demand curve, a monopoly A) will have a larger Lemer Index. will face a lower marginal cost. B) will lose more sales as it raises its price. D) will eam more profit. 4) Without price discrimination, a firm A) has no market power. B) cannot maximize profit. faces a tradeoff when pricing a good that has customers with different willingness to pay D) does not get any producer surplus, with all of the surplus going to consumers. 5) Which of the following reduces the effects of asymmetric information? A) building a reputation B) repeat purchases C) warranties D) All of the above. 6) Clifford lives by the motto "Eat drink and be merry today, for tomorrow doesn't matter." If today's consumption is represented by X and tomorrows consumption is represented by y, then which of the following best represents Clifford's utility function? A) U-x/y B) U = x - y U=X D) U=y 7) A small business owner earns $50,000 in revenue annually. The explicit annual costs equal $30,000. The owner could work for someone else and eam $25,000 annually. The owner's business profit is _and the economic profit is – A) $45,000,-$5,000 B) $25,000-$5,000 $20,000, $5,000 D) $20,000,-$5,000 8) In a Bertrand model with identical products A) marginal revenue is above marginal cost. price is equal to marginal cost. B) price is set above marginal cost. D) None of the above. 9) In a bargaining solution, a player's net surplus is A) always maximized. B) the amount of total surplus minus any deadweight loss. C) the difference between what the player receives in the final bargain minus what she would have gotten from the disagreement point. D) the amount of consumer surplus she receives minus any deadweight loss.

Answer 1

Question 1: Decreasing returns to scale may occur as increasing the amount of inputs used

Answer : OPTION B : may cause coordination difficulties

Law of returns focus on the effect of change in combination of input used on output produced. Decreasing returns to scale takes place when an increase in factors of production or inputs does not create an equivalent increase in production of output. Internal diseconomies can be experienced by firms. This will cause difficulties in coordination and management.