The next 4 questionsrefer to the below statement.There ARE multiple correct answers to each. Select ALL that are correct.

Over the past 40 years, the American economy has been transitioning to a new era where a muchlarger share of economy's goods and services is produced under conditions of increasing-returns-to-scale.

1. Why has this been happening?

a. Because an increasing share of the economy's goods are knowledge-based, like pills.

b. Because several new innovationsthe microprocessor in particularhave changed many firms' production structure to one of very high fixed costs and low marginal costs in production.

c. Because the marginal product of labor has risen relative to that of capital, making firms' optimal expansion path trend more toward capital than labor over time.

d. Because government has taken over production in many industries and government knows how to run large enterprises more efficiently than privately-held companies do.

e. Because the number of global consumers has fallen dramatically, which requires that firms become smaller in order to avoid excess supply.

2.In this new era:

a. Prices can fall when demand rises because the more people who buy something the more we each contribute to paying the product's high fixed costs of production.

b. Goods will spread throughout the population fasterfrom the richest of us who get them first to the poorest of who get them lastwe benefit more equally, more quickly.

c. Globalizationand the 3 billion new global consumers it has broughtaids in the process of falling costs, falling prices and rising real purchasing power of income.

d. There will likely be a lot more innovation because firms have excess profits and competition forces firms to improve their products' quality or else lose out to rivals who do.

e. None of these are correct.

3.In this new era, government statisticians' estimates of true GDP growth are likely to be understated because:

a. Government statisticians are working with old computers that many mistakes.

b. The goods and services that go into GDP are measured at cost, not worth, and the gap between cost and worth is widens if prices fall when we buy more.

c. Some of the products we routinely use and love today are virtually freethe Internet, email, FaceTime, Google, eBay, YouTube, etc.and when P = 0, PQ = 0, even if Q is large.

d. Purchasing some goodssuch as smart phonesreduces our spending on other goods by an amount that's greater than the cost of the new good we are buying.

e. None of these are correct.

4.The economy's transition from decreasing-returns-to-scale in production to increasing-returns-to-scale brings with it:

a. Increased mergers and acquisitions, increased market concentration in the hands of a few firms, more oligopolies and tougher times for many small businesses.

b. More equal pay within a company, less income inequality in society, fewer corporate governance issues, and reduced anti-trust concerns.

c. Greater pricing power amongst surviving firms, higher profits relative to sales, and a higher rate of return on capital.

d. Greater incentives for firms to erect barriers to entry, so as to make their market power less contestable and protect their excess profits, leading possibly to more cronyismmutual rent-seeking behavior on the part of both politicians and corporate leadership.

e. Higher prices, slower growth, more competition, and smaller excess profits.