Which of the following is a reason for economies of scale? A) ...

[michelleunicorn]

Which of the following is a reason for economies of scale?
 
  A) Fixed costs are spread out as volume increases.
  B) The law of diminishing returns does not take effect.
  C) Input productivity increases as a result of greater specialization.
  D) There is greater savings in transportation costs.

Question 2

Jill consumes nothing but soup and cola. It is possible that both soup and cola are necessities for Jill.
 
  Indicate whether the statement is true or false

[cascooper22]

Answer to Question 1

C

Answer to Question 2

False. The weighted sum of income elasticities must add up to one. This implies that at least one income elasticities must be >1. Intuitive response  if income rises, the weighted percentage increase in consumption cannot exceed the percentage increase in income without violating the budget constraint.