Your Friend Works at a Coffee Shop on Campus and Regularly

question 129

Multiple Choice

Your friend works at a coffee shop on campus and regularly gives away free coffee to you and your friends when you visit.In this example,your friend is the

• A) principal and the owner of the coffee shop is the agent.
• B) agent and the owner of the coffee shop is the principal.
• C) signaler and the owner of the coffee shop is the screener.
• D) screener and the owner of the coffee ship is the signaler.

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Definitions:

Long-run Average Total Cost

The cost per unit of output incurred when all factors of production, including physical capital, are variable.

Minimum Efficient Scale

The smallest level of production at which a firm can achieve the lowest long-run average total costs.

Constant Returns to Scale

A situation in which the proportionate increase in inputs leads to an equal proportionate increase in outputs, meaning costs and outputs scale equally as production expands.

Diseconomies of Scale

A situation where a business's cost per unit increases as it produces more items, due to inefficiencies that arise with scaling up production.