(b) The manager institutes an incentive structure to ensure: (A) workers are in fact working at the expected potential. (B) workers are in fact working at their utility-maximizing effort level. (C) the firm produces on the production function. (D) the firm produces above the production function.

What is the term for what you give up to obtain an item?   Question 4 options:   opportunity cost   implicit cost   applied cost   variable cost

The market research department of EZPub estimated that 5,000 textbooks would be purchased in Canada at a price of $100.00 each. As it turned out, the Canadian demand was 6,000. The company is in a(n) ________ condition.   options:   A)  growth   B)  surplus   C)  shortage   D)  inflation   E)  depression

Increasing returns and imperfect competition: (a) The production function for the word processor is Y = X – 100 million if X is larger than 100 million, and zero otherwise. By spending $100 million, you create the first copy, and then $1 must be spent distributing it (say for the DVD it comes on). For each dollar spent over this amount, you can create another copy of the software. (b) The production function is plotted in Figure 6.5. Output is zero whenever X is less than 100 million. Does this production function exhibit increasing returns? Yes. We spend $100 million (plus $1) to get the first copy, but doubling our spending will lead to 100 million copies (plus 2). So there is a huge degree of increasing returns here. Graphically, this can be seen by noting that the production function “curves up” starting from an input of zero, a common characteristic of production functions exhibiting increasing returns. (Constant returns would be a straight line starting…

Per-unit production cost is:     A)  a determinant of aggregate demand.   B)  real output divided by inputs.   C)  units of output divided by total input cost.   D)  total input cost divided by units of output.