1a. If a firm in an industry achieves the minimum efficient scale at a low cost,
ID: 1114309 • Letter: 1
Question
1a. If a firm in an industry achieves the minimum efficient scale at a low cost, then:
a. competition in the industry is likely to decrease
b. competition in the industry is likely to increase
c.the price charged by the firm is likely to be high
d.the demand for the firm’s product is likely to be less
e.the profit earned by the firm is likely to be high
1b) which of the following is true of a monopoly in the short run?
a. it can charge whatever price it wants
b. it charges more than what consumers are willing to pay
c. it is constrained by marginal cost in setting price
d. it is constrained by consumer demand in setting price
e. it always earns an economic profit
1c)as the wage rate decreases, the amount of time spent on market work:
a. decreases because of the income effect
b. decreases if the income effect dominates the substitution effect
c. decreases if the substitution effect dominates the income effect
Explanation / Answer
Answer.) 1a.) a. competition in the industry is likely to decrease
A firm’s minimum efficient scale (MES) is the lowest scale necessary for it to achieve the economies of scale required to operate efficiently and competitively in its industry.
1b.) d. it is constrained by consumer demand in setting price
Monopoly's pricing decision is subject to the constraint imposed by consumer demand.
1c.) b. decreases if the income effect dominates the substitution effect
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