When Industry Expansion Causes Input Prices to Rise, We Call

question 54

Multiple Choice

When industry expansion causes input prices to rise, we call this

• A)external diseconomies of scale.
• B)the law of increasing costs.
• C)internal diseconomies of scale.
• D)increasing returns.
• E)diminishing returns.

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Definitions:

Optimal Labor Employment

The ideal quantity of labor that a firm employs where the marginal cost of hiring an additional worker equals the marginal revenue product.

Power Drills

Electric tools designed for drilling holes or driving fasteners into various materials.

Marginal Product

Marginal product is the additional output that is produced by using one more unit of a particular input, keeping all other inputs constant.

Optimal Labor Employment

The most efficient level of labor usage where the additional cost of employing one more worker equals the additional revenue generated.