There are currently N identical firms in a market. If it is a perfectly competitive market, the short-run market supply curve at any given price is A) N times the supply of an individual firm. B) N – 1 times the supply of an individual firm. C) N plus the supply of an individual firm. […]
Date: September 9th, 2020
Suppose that once a well is dug, water flows out of it continuously without any additional effort. Customers collect their water and pay a per gallon fee when they leave the site of the well. In the short run, the competitive firm in this market A) has no variable costs. B) has no fixed costs. […]
Date: September 9th, 2020
If the market price in a competitive market is below the minimum of average variable cost, the firm will shut down. Indicate whether the statement is true or false ANSWER True . At this price total fixed costs are smaller than the operating loss. It pays for the firm to shut down.
Date: September 9th, 2020
An exclusive right to sell a new and useful product, process, substance, or design for a fixed period of time is called a A) patent. B) barrier to entry. C) monopoly. D) research disincentive. ANSWER A
Date: September 9th, 2020
If a competitive firm has to pay a lump sum tax, it will produce less. Indicate whether the statement is true or false ANSWER False. A lump sum tax is not related to the amount of output produced. It will increase fixed cost and thus lower profit. However, marginal cost will not be affected […]
Date: September 9th, 2020
Suppose there are two perfectly competitive industries with similar numbers of firms but where one industry consists of N identical firms while the second consists of N firms with differing costs. Compared to the short-run supply curve of the industry with identical firms, the short-run supply curve of the differing cost industry will tend to […]
Date: September 9th, 2020
Patents A) will create a profit incentive to do research. B) might be welfare reducing if granted for too long a period. C) serve as a barrier to entry. D) All of the above. ANSWER D
Date: September 9th, 2020
In deciding whether to operate in the short run, the firm must be concerned with the relationship between price of the output and A) total cost. B) average variable cost. C) total fixed cost. D) the number of buyers. ANSWER B
Date: September 9th, 2020
A competitive firm’s supply curve is identical to its marginal cost curve. Indicate whether the statement is true or false ANSWER False. The statement is only partly correct. The supply curve is only that portion that lies above AVC.
Date: September 9th, 2020
Suppose that market demand for a good is Q = 480 – 2p. The marginal cost is MC = 2Q. Calculate the deadweight loss resulting from a monopoly in this market. What will be an ideal response? ANSWER First, solve for the competitive equilibrium by substituting MC for p in the demand equation and […]
Date: September 9th, 2020
