Joshua Owns a Suit Store

question 79

Multiple Choice

Joshua owns a suit store.He currently sells around 10,000 suits per year.If he increases the size of his store so that he can display and sell even more suits,and his long-run average total cost remains unchanged,we know that Joshua is experiencing

• A) diseconomies of scale.
• B) diminishing marginal product.
• C) increasing marginal product.
• D) constant returns to scale.
• E) economies of scale.

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Definitions:

Contractionary Fiscal Policy

A decrease in government purchases, increase in net taxes, or some combination of the two aimed at reducing aggregate demand enough to return the economy to potential output without worsening inflation; fiscal policy used to close an expansionary gap.

Contractionary Monetary Policy

A monetary policy strategy used by central banks to reduce inflation and cool an overheating economy by raising interest rates and decreasing the money supply.

Nominal GDP

The total value of all goods and services produced in a country, measured in current prices without adjusting for inflation.

Aggregate Demand

represents the total demand for all final goods and services in an economy at a given time and price level.