A Very- Long- Run Consideration That Could Change a Firm's

question 29

Multiple Choice

A very- long- run consideration that could change a firm's production function is

• A) size of the plant.
• B) an improvement in education that increases the quality of the economy's labour force.
• C) increasing returns to scale of operation.
• D) diminishing returns.
• E) rising cost of the factors of production.

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of consumers increases.

Convex Preferences

A preference structure where a consumer prefers mixtures or averages of two goods or bundles to extreme amounts of one good or bundle.

Utility Function

A mathematical representation in economics that quantifies the satisfaction or happiness an individual gains from consuming various bundles of goods and services.

Income Effect

Shifts in income for individuals or within the economy and their consequences on the volume of goods or services demanded.