If a pharmaceutical firm is researching ways to improve its heartburn medicine and discovers a technique that will improve its allergy medicine, one could conclude that economies of scope exist in that industry. Indicate whether the statement is true or false ANSWER True . Economies of scope imply that the cost of producing two […]
Many universities have either a top football program OR a top basketball program. Very few have both. These results suggest the presence of A) economies of scope. B) diseconomies of scope. C) returns to scale. D) the law of diminishing marginal returns. ANSWER B
Learning by doing is represented by A) a decrease in the average total cost curve. B) an increase in the average total cost curve. C) no change in the average total cost curve. D) an increase in the average total cost curve and a decrease in the marginal cost curve. ANSWER A
For a monopoly, marginal revenue is less than price because A) the demand for the firm’s output is downward sloping. B) the firm has no supply curve. C) the firm can sell all of its output at any price. D) the demand for the firm’s output is perfectly elastic. ANSWER A
Short-run average cost exceeds long-run average cost only when there are economies of scale. Indicate whether the statement is true or false ANSWER False. Short-run average costs exceed long-run average costs because the firm is locked into a certain input mix in the short run that may not be cost minimizing when all inputs […]
Marginal Revenue is A) the increase in total revenue from selling one more unit of output. B) equal to P(1+1/ε). C) equal to P when the price elasticity of demand is infinite. D) All of the above. ANSWER D
If a market is controlled by one perfect price discriminator who is able to charge each consumer the highest price that consumer is willing to pay, the seller will produce output until the price paid by the last consumer is equal to the marginal cost of making the good. That is, the price of the […]
Why do many people choose to not read the manuals included with their new computer? A) They perceive that learning by doing decreases costs faster than learning by reading. B) They perceive that learning by doing is more enjoyable than learning by reading. C) They perceive that learning by reading is not sophisticated. D) They […]
At the current level of output, a firm’s marginal cost equals 16 and marginal revenue equals 10. The firm A) is producing the profit-maximizing amount. B) should produce more. C) should produce less. D) Not enough information. ANSWER C
Short-run costs are never equal or lower than long-run cost. Indicate whether the statement is true or false ANSWER False. Since the long-run curve “envelopes” all short-run curves there is always a level of output where short-run cost are equal to long-run cost. However, short-run cost can never be lower than long-run cost.
