Q4. Consider the following statements and decide which are true. Record the correct combination from the possibilities listed below the list of statements.
|1.||Bob’s dad owns a news agency. He expects Bob to drop off pamphlets on his way home without pay because he argues that Bob has to get home anyway. That hour’s work is an implicit cost of the news agency.|
|2.||Accounting costs include both implicit and explicit costs.|
|3.||In the long run all factors are variable except for technology which is fixed.|
|4.||In production theory, the short run is a situation which considers the way output changes over relatively short periods of time.|
|5.||For the economist profits are equal to revenues minus all opportunity costs — variable or fixed.|
|6.||Ceteris paribus, the impact of the removal of a shift of workers at an oil refinery over a five year period would be an example of a short run production change.|
|7.||When McDonalds increases the scale of its operations, this is an example of the long run.|
Consider statements 8 –15 using the following graphs. Assume the short run for both graphs.
|8.||At points immediately to the right of B there are increasing returns to scale.|
|9.||At points immediately to the right of B, the marginal product of labour is increasing|
|10.||At point B, the average product of the variable factor is larger than the marginal product of the variable factor.|
|11.||The marginal product of labour is zero at point A.|
|12.||In Graph 2 the marginal product at D is lower than at C because of the Law of Diminishing Returns.|
|13.||In Graph 2, the average product at C is the same as it is at D.|
|14.||Graph 2 shows that there are constant returns to the labour input.|
|15.||Graph 2 exhibits constant returns to scale.|
See next page 6 for Q4 combinations.
Q4 Choose the combination of statements that you think contains the largest number of TRUE statements.
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