When long-run average costs decrease as output increases, there are
A) economies of scale.
B) diseconomies of scale.
C) constant returns to scale.
D) constant marginal costs.
Question 2
Pirates have been intensely attacking ships off the shore of Somalia this year. Boat owners have reportedly coughed up more than 30 million in ransom and insurance premiums have shot up. Why would insurance premiums increase dramatically?
I. Because the probability of pirate attack has increased
II. Because consumers' willingness to pay for insurance has increased because of these attacks
III. Because insurance claims have increased
A) I only
B) I and III only
C) III only
D) I, II, and III
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