question
A fall in demand in a perfectly competitive market that is in a long-run equilibrium will do which of the following?
answer
Cause firms to cut back production in the short run and some to leave the industry in the long run.
question
Consider two services provided in perfectly competitive markets. The price of the most expensive service costs 50 percent higher than the price of the less expensive service. Both markets are in long-run equilibrium. What could possibly explain the higher price?
answer
the more expensive service must have a higher minimum average cost than the less expensive service
question
Suppose that it is difficult to charge and have consumers pay a price for a particular good. The good however does have positive marginal utility and a very low marginal cost. Competitive markets will produce:
answer
too little of the good.
question
A change in technology that (once implemented) makes each unit of labor more productive is likely to ______________ the marginal cost of production at each level of output (assuming all wages remain the same).
answer
Decrease(Not first decrease then increase)
question
Advanced* Frank's Fajitas can produce 45 fajitas per hour with five workers and one grill. One more worker will increase output by 6 fajitas per hour. If one more worker is hired, the average variable cost of production at Frank's Fajitas will:
answer
Increase
question
Given average and marginal costs and the market price, a profit-maximizing firm will produce a level of output where the output is equal to the amount where:
answer
price equals marginal cost
question
A firm is producing at the point of diminishing marginal product. It increases its output. Average cost ______________.
answer
could either be increasing or decreasing
question
Which of the following will we be likely to see in a market with firms with economies of scale?
answer
Most of the firms will tend to be large. NOT Costs will decrease as the industry expands.
question
Average cost will be a minimum at a level of firm output that is:
answer
greater than where diminishing returns begin.
question
In which of the following instances will marginal revenue will be negative?
answer
a firm faces a downward sloping demand curve and produces where demand is inelastic.
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