Use the following two statements to answer this question:
I. A growing firm's average cost of production will decline over time if output continually expands and economies of scale are present.
II. A firm's average cost of production can decline over time if learning occurs as cumulative output increases.
A) Both I and II are true.
B) I is true, and II is false.
C) I is false, and II is true.
D) Both I and II are false.
Question 2
Refer to Figure 4.1. The substitution effect of the price change in food on the quantity of food purchased is:
A) the change from F3 to F1.
B) the change from F3 to F2.
C) the change from F2 to F1.
D) the change from F1 to F2.
E) none of the above
