Costs and Price Essay

1603 Words Nov 27th, 2012 7 Pages
Week I Quiz Results/Answers ECO561
1. Revenue increases when * producer surplus increases
2. An increase in the price of an inelastic good * increases revenues

3. Price elasticity of Demand increases when * people become less price sensitive over time
4. The purpose of a market in a market system is to * bring buyers and sellers into contact
5. By specializing in the production of one good, a company is able to benefit from economies of scale which increases its revenue. Which of the following is an attribute of specialization? * Saving time by allowing a worker to focus on one task
6. The market system promotes progress by * providing incentive for technological advances
7. Productive efficiency is
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Thus, the cost of producing an additional unit reflects the additional cost of inputs needed for production (variable costs).

8. If a firm starts small and, over time, builds successively larger plant sizes or adds additional work space in an office, average total costs are most likely to * initial decrease then increase

9. Demand for resources, including labor, depend on its * productivity
While being profitable, available, and accessible are relevant to the demand for resources, the productivity of the resource in question determines how profitable the good or service will be.
10. The primary difference between increasing- and decreasing-cost industries lies in * the fact that the average total cost (ATC) of firms in increasing-cost industries will first decline and then eventually increase with output, while decreasing-cost firms experience progressively lower ATC with increased output
(By definition, an increasing-cost industry experiences a rising ATC as output increases, while a decreasing-cost industry enjoys a lower ATC as output increases.)

11. When adding labor or other factors of production, businesses may see their total product rise, but see their per-unit increase in return for each additional unit diminish. This phenomenon * is known as diminishing

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