If marginal revenue equals marginal cost, the firm is maximizing profits as long as A) the resulting profits are positive. B) marginal cost exceeds marginal revenue for greater levels of output. C) the average cost curve lies above the demand curve. D) All of the above are required. ANSWER B
Date: September 9th, 2020
Explain why individual firms in competitive markets face more elastic demand curves than the market as a whole. What will be an ideal response? ANSWER In a competitive market, if an individual firm increases its price it will lose all of its customers, as consumers simply buy from another firm. However, if the price […]
Date: September 9th, 2020
If a competitive firm’s marginal profit is positive at an output of 1000 units, A) at 1000 units, MR = MC. B) it should produce more than 1000 units. C) it should produce less than 1000 units. D) at 1000 units, MR < MC. ANSWER B
Date: September 9th, 2020
The introduction of satellite television systems would cause the Lerner Index for cable television to A) become smaller. B) increase. C) change in accordance to the increase in market power of cable TV providers. D) be unchanged. ANSWER A
Date: September 9th, 2020
If a firm makes zero economic profit, then the firm A) has no incentive to stay in the industry. B) is better off exiting the industry. C) is indifferent between staying and exiting the industry. D) will shut down. ANSWER C
Date: September 9th, 2020
If the demand curve a monopolist faces is perfectly elastic, then the ratio of the firm’s price to the marginal cost is A) 0. B) 1. C) 2. D) None of the abovethe answer cannot be determined. ANSWER B
Date: September 9th, 2020
A small business owner earns $60,000 in revenue annually. The explicit annual costs equal $10,000. The owner could work for someone else and earn $25,000 annually. The owner’s accounting profit is ________ and owner’s economic profit is ________. A) $20,000; $5,000 B) $50,000; $25,000 C) $25,000; -$5,000 D) $45,000; -$5,000 ANSWER B
Date: September 9th, 2020
As other firms enter a monopoly’s market, the monopoly’s market power A) is unaffected. B) declines. C) increases. D) increases according to the Lerner Index but decreases according to the price/marginal cost ratio. ANSWER B
Date: September 9th, 2020
A monopoly sets a price of $50 per unit for an item that has a marginal cost of $10. Assuming profit maximization, the implicit demand elasticity is A) -0.2. B) -0.8. C) -1.25. D) -5.0. ANSWER C
Date: September 9th, 2020
If a firm is operating at an output level where losses are minimized, the firm A) has no incentive to stay in the industry. B) is better off exiting the industry. C) is maximizing profits. D) will shut down. ANSWER C
Date: September 9th, 2020
