THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION

question 96

Essay

THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
Each member of a random sample of 20 business economists was asked to predict the rate of inflation for the coming year.Assume that the predictions for the whole population of business economists follow a normal distribution with standard deviation 2%.
-Why does the sample size play such an important role in reducing the standard error of the mean? What are the implications of increasing the sample size?

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Definitions:

Variable Cost

Variable cost pertains to a cost that changes in proportion with the level of activity or volume of production in a company.

Average Fixed Cost

The fixed costs of production divided by the quantity of output produced, which decreases as production increases.

Law Of Diminishing Returns

An economic principle stating that if one factor of production is increased while others remain constant, the overall returns will eventually decrease after a certain point.

Economies Of Scale

The situation when a firm’s average total cost of producing a product decreases in the long run as the firm increases the size of its plant (and, hence, its output).