Question 1
When a decrease in the scale of production leads to higher average costs, the industry exhibits
◦ diminishing returns.
◦ increasing returns to scale.
◦ decreasing returns to scale.
◦ constant returns to scale.
Question 2
Which of the following is an example of economies of scale?
◦ As the computer industry has expanded, the number of professionally trained computer programmers has also increased, which has caused the salaries of computer programmers to increase.
◦ To attract firms to locate in its state, the state government reduced the tax rate that businesses must pay on its profits, thus lowering the costs to firms who locate in the state.
◦ A firm increases in size and is therefore able to lower its health insurance costs because as the size of the group insured increases, the premium per person decreases substantially.
◦ As the demand for calculators increased, the price of calculators actually fell.
A trilobite fragment (T) in a thin-section of an Ordovician limestone; E=echinoderm; scale bar is 2
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