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Chapter 8: Problem 13

Parkinson's law is an example of a) economies of scale b) diseconomies of scale c) Adam Smith's pin factory d) the firm's search for its most profitable output

Short Answer

Expert verified
Parkinson's law is an example of b) Diseconomies of scale, as both concepts deal with inefficiency in different ways. While Parkinson's Law focuses on time management and work completion, diseconomies of scale focus on the increased costs per unit of output when expanding production.

Step by step solution

01

Parkinson's Law asserts that work tends to expand to occupy the time allotted for it, often leading to inefficiency. In other words, if a task is given a longer-than-necessary deadline, the work will naturally spread out to fill that time. #Step 2: Compare Parkinson's Law with economies of scale#

Economies of scale describe how a company's cost per unit of output decreases as the company increases production. However, Parkinson's Law is about work expanding to fill the time, which does not directly relate to economies of scale. #Step 3: Compare Parkinson's Law with diseconomies of scale#
02

Diseconomies of scale occur when increasing production leads to higher costs per unit of output. While this may appear somewhat related to Parkinson's Law, as both concepts touch upon inefficiency, they are not the same. Diseconomies of scale focus on production costs, whereas Parkinson's Law focuses on time management and work completion. #Step 4: Compare Parkinson's Law with Adam Smith's pin factory#

Adam Smith's pin factory example demonstrates the efficiency gains arising from the division of labor. This concept is different from Parkinson's Law, which describes inefficiency caused by time allocation rather than by the organization of labor. #Step 5: Compare Parkinson's Law with the firm's search for its most profitable output#
03

The firm's search for the most profitable output is a process of finding the optimal production level where profits are maximized. This concept focuses on maximizing profits, while Parkinson's Law highlights the inefficiency caused by time management. #Step 6: Match Parkinson's Law with the correct option#

Upon comparing Parkinson's Law with each of the given options, we find that it best matches with diseconomies of scale (option b), as both concepts deal with inefficiency, albeit in different ways. Therefore, the correct answer is: b) Diseconomies of scale

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Most popular questions from this chapter

In general, as output rises you first attain _____. a) increasing returns, then diminishing returns, then negative returns b) diminishing returns, then negative returns, then increasing returns c) negative returns, then increasing returns, then diminishing returns d) increasing returns, then negative returns, then diminishing returns

Which statement is true? (LO8) a) A firm will operate in the short run when total revenue exceeds fixed costs. b) A firm will operate in the short run when total revenue exceeds variable costs. c) A firm will shut down when total cost equals total revenue. d) None of the above.

When total output is maximized, marginal output is ____. a) rising b) falling c) positive d) negative e) zero

Statement 1: AVC can never be higher than ATC. Statement 2: AVC and marginal cost are equal at an output of one _____. a) Statement 1 is true, and statement 2 is false. b) Statement 2 is true, and statement 1 is false. c) Both statements are true. d) Both statements are false.

Which statement is false? (LO8) a) When the firm shuts down, output is zero. b) When variable cost is zero, output is zero. c) When output is zero, total cost is zero. d) None of the above.
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