Principles of Microeconomics True or False and Fix it. 1)Decreasing returns to s

Question

Principles of Microeconomics

True or False and Fix it.

1)Decreasing returns to scale means that as you add a variable factor of production to a fixed factor of production, increasing average total costs.

2)Average fixed costs fall as output increases because the productivity of labor increases.

3)The opportunity cost of starting a new business is giving up one's free time.  

4)If marginal cost is rising, then average variable cost and average total cost must be rising as well.

5)A monopolist can never earn excess profits over the long run.

Essay Questions (please just be simple like ... simple intro, one body, conclusion. ) or just summary

Market Structures

What are the principal features of the perfectly competitive, monopolistically competitive, oligopolistic (both non-cooperative and cooperative oligopolies), and monopolistic market structures? Explain each in detail. In addition, explain how different market structures may result in different types of competitive behavior, prices, and profits.

Explanation / Answer

1.false. decreasing return to scale is an increasing all the factors of production causes a less than proportaionate increaese in the factors of production.

2.true. average fixed cost curve always falls as output increases.

3.true. opertunity cost is the next best forgone alternative. enterpreneurs makes decisions in terms oprtunity cost

4. true

5.true

perfect competition

a market is said to be perfectly competituive when

1. great number of buyers and sellers

2.homogenous product

3.perfect mobility of resources

4. perfect knowledge of the market

i perfect competition the price of the commodity determined by the intersection of demand and supply. they are always a pruice takers. sell their commodity at established price

in the market peride is short run-in this periode of time in which the market supply of the commodity is comletly fixed

short run equlibrium of the this market is based on total and marginal approach

in total the total profit=TR-TC

total profit are maximised when the poitive diffenecs between TR and TC is greatest

inmargienal approach where MR or P=MC and MC rising

long run

in the long ru all factors are varible. a firm will remain uin business in the long run only if its TR equal or greater than its TC. the optimum output=MR=LMC and LMC rising

monopoly

monopoly we mean that single firm selling commodity and no close substititutes. firm is the industry and faces negativly sloped demand curve. sell more of the commodity monopolist lower its price. monoploist MR<P and MR lies below the demand curve

in the short run equlibrium also in the total and marginal approach

output at which monopolist is the output either total profit is maximised or TC is minimised TR curve is inverted U shape

in the marginal approach MR-=MC. and the slope of MR curve is smaller than the slope f SMC

in the long run monopolist in the business only if or she can make profit by proving best level of output

it is LMC intersect MR from below

monopolistic competition

it is many fims selling closly related but not identical product. products are diffrentaited and sellers are some degree of control over the prices they charge and thus face a negativly sloped demand curve

shrt run

MR will lie below its demand curve. in eqilibrium output for the firm is given by the point where its SMC intersect ITs MR curve from below

long run

earned economic profit. in the short run firms enter in the industery in the long run. each firms demand curve shift downward

oligopoly

it is a market situation small nuber of buyers and sellers in the market and firms mutual interdependence.

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