QUESTION 8 A profit-maximizing firm in a competitive market will product output

Question

QUESTION 8

A profit-maximizing firm in a competitive market will product output where

total revenue equals to total costs.

marginal revenue equals to marginal cost.

total revenue equals to marginal cost.

marginal revenue equals to total costs.

QUESTION 9

When a perfectly competitive market is in long-run equilibrium

all firms make zero economic profit.

all firms make economic profit.

firms enter the market if incumbent firms are making an economic profit.

firms exit the market if incumbent firms are incurring an economic loss.

QUESTION 10

In a perfectly competitive market, long-run equilibrium occurs when

all firms are operating at their shutdown points.

economic profit and economic loss have been eliminated.

price equals total fixed cost.

no barriers to entry exist.

QUESTION 11

Which of the statements about the law of diminishing marginal returns is correct?

As the size of a firm’s plant increases, average cost eventually decreases.

As a firm uses more of a variable input, holding the quantity of fixed inputs constant, the marginal product of the variable input eventually diminishes.

As a firm makes more investment in capital, marginal product of capital eventually decreases.

As a firm hires more workers, total product eventually decreases.

QUESTION 12

Diminishing marginal returns refers to a condition where the ________ of an additional worker is less than the ________ of the previous worker.

marginal product; marginal product

marginal cost; marginal product

marginal product; average product

marginal benefit; marginal cost

QUESTION 13

The total product curve is a graph that shows the

minimum output that can be produced as technology advances.

maximum cost of producing a given amount of output using a given technology.

maximum profit from each unit of output sold.

maximum output that a given quantity of labour can produce.

QUESTION 14

Economies of scale are present when

the LRAC curve slopes downward.

marginal cost increases.

the LRAC curve is horizontal.

total cost remains constant as input increases.

QUESTION 15

The minimum efficient scale is the amount of output that a firm produces when

the average fixed cost curve reaches its lowest level.

diseconomies of scale begin.

the average variable cost curve reaches its lowest level.

the long-run average cost curve reaches its lowest level.

total revenue equals to total costs.

marginal revenue equals to marginal cost.

total revenue equals to marginal cost.

marginal revenue equals to total costs.

Explanation / Answer

8. The correct answer is: b)

Reason: at equilibrium, MR = MC and MC is rising.

9. The correct answer is: a)

Reason: in the long run, price is equal to the minimum of average cost such that all firms earn normal profit.

10. The correct answer is: b)

Reason: price is equal to the minimum of average cost such that theet are no economic profit or losses.

11. The correct answer is: b)

Reason: Accordingy to the Law, as more and more units of the variable factor is used on a fixed unit, the return from the additional unit decreases.

12. The correct answer is: a)

Reason: the return from the additional labor is always less than that from the previous one.

13. The correct answer is: d)

Reason: total product is a relationship between the maximum output that can be produced for a given level of input.

14. The correct answer is: a)

Reason: LRAC is generally U-shaped. So when the LRAC declines, there is said to be economies of scale.

15. The correct answer is: d)

Reason: production is at the efficienct level when the LRAC reaches its minimum.

Thanks!

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.