Which of the following statements is correct? A. Economic profits induce firms t
ID: 1206688 • Letter: W
Question
Which of the following statements is correct? A. Economic profits induce firms to enter an industry; losses encourage firms to leave. B. Economic profits induce firms to leave an industry; profits encourage firms to leave. C. Economic profits and losses have no significant impact on the growth or decline of an industry. D. Normal profits will cause an industry to expand. 20. The term productive efficiency refers to: A. any short-run equilibrium position of a competitive firm. B. the production of the product-mix most desired by consumers. C. the production of a good at the lowest average total cost. D. fulfilling the condition P = MC. Answer the next question(s) on the basis of the following output data for a firm. Assume that the amounts of all non-labor resources are fixed. 21. Refer to the above data. The marginal product of the sixth worker is: A. 180 units of output. B. 30 units of ouput. C. 15 units of output. D. negative.Explanation / Answer
Q19. The correct answer is option (A).
Reason - When firms in an industry are earning economic profit then existence of such economic profit attracts new firms to enter the industry. On the other hand, incurring of economic losses compels some existing firms to exit the industry.
Q21. Total product of 6 workers = 180 units
Total product of 5 workers = 165 units
Marginal product of 6th worker = Total product of 6 workers - Total product of 5 workers
= 180 units - 165 units
= 15 units
The marginal product of 6th worker is 15 units.
Hence, the correct answer is option (C).
Q23. Output (Q) = 500 units
Average varibale cost (AVC) = $2.00
Average fixed cost (AFC) = $0.50
TVC = AVC * Q = $2 * 500 = $1,000
TFC = AFC * Q = $0.50 * 500 = $250
TC = TFC + TVC = $250 + $1,000 = $1,250
The firm's total costs are $1,250.
Hence, the correct answer is option (B).
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