A Decrease in Long-Run Average Costs Resulting from Decreases in Output

question 340

Multiple Choice

A decrease in long-run average costs resulting from decreases in output is

• A) attributed to constant returns to scale.
• B) attributed to economies of scale.
• C) attributed to the law of diminishing marginal product.
• D) attributed to diseconomies to scale.

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Definitions:

Shirking

The behavior of employees who work less hard or less efficiently when they feel that their efforts are not being adequately monitored or rewarded.

Principal-Agent Problem

A dilemma in which one party (the agent) is supposed to act in the best interest of another party (the principal) but may act in their own interest instead.

Compensating Wage Differences

The variation in wage rates to offset the attractiveness or unattractiveness of jobs, based on factors such as job difficulty or risk.

Piece Rates

Piece rates refer to a pay system where workers are paid a fixed rate for each unit of production completed, incentivizing higher productivity and efficiency.